Drax takes H1 earnings hit from higher UK carbon taxes

29th Jul 2014 09:13

British power station operator Drax reported a hit to first-half earnings from carbon taxes, but said it was making good progress with switching to biomass fuel.Drax, which owns a single power station in North Yorkshire, said pre-tax earnings before interest, depreciation and amortisation in the six months to June 30th fell to £102m from £120m a year ago due to the UK government's rising charges for carbon emissions.Free carbon dioxide emissions allowances ended in 2012 and carbon tax from the UK carbon price support mechanism was introduced in April 2013.Underlying earnings fell to £38m from £70m, underlying earnings per share dropped to 9.4p from 17.3p and total dividends per share dipped to 4.7p from 8.7p a year ago.Drax said increasing carbon costs would continue to affect earnings until it boosts biomass generation But it said it was on track to fuel half the coal-fired station's output from biomass by 2016, providing 4% of the UK's power. Energy from biomass now makes up more than a fifth of the station's production.Drax has succeeded in overturning a government decision to refuse an investment contract to convert its second power generation unit to biomass, but the government has appealed against that and the contract is subject to the outcome of the appeal and EU state aid clearance.Chief Executive Dorothy Thompson said: "The regulatory landscape still presents uncertainties, but positive progress is being made and we hope most of the key issues will be clarified in the coming months. Our underlying business case remains strong."Shares in Drax rose 0.5p or 0.07% to 687p at 10:43 in London.PW