Drax enjoys robust performance but expects virus impact

Drax, which has a power station in Selby, North Yorkshire, said 2020 full year adjusted earnings were currently in line with consensus inclusive of a £60m estimated potential impact from Covid-19.

The consequences of coronavirus are only now starting to become visible in its customers business, Drax said. It is expected to result in reduced demand and a potential increase in bad debt, which represents a major sensitivity, particularly in the SME market.

As a result, Drax has significantly increased its expectation of potential customer business failures and higher bad debt.

The group now expects a full year Adjusted EBITDA loss for its customers business.

Drax will pay a 2019 final dividend of 9.5p per share, a total of £37m.

Will Gardiner, CEO of Drax Group, said: "With our strong balance sheet, robust trading and operational performance, and resilient sustainable biomass supply chain, Drax is in a strong position to support its employees, business customers and communities during the Covid-19 crisis, while continuing to generate returns for shareholders.

"As an important part of the UK's critical national infrastructure, we recognise our responsibility to support the country's response to Covid-19.

"We have strong business continuity plans in place and are in close contact with the UK Government.

"Our dedicated teams across England, Scotland and Wales, supported by our US biomass colleagues and business partners, are working around the clock to generate and supply the flexible, low-carbon and renewable electricity the UK needs, not least to the 250,000 businesses, including care homes, hospitals and schools we supply.

"The Group is also providing support for communities and others affected by Covid-19.

"Nevertheless, it is still early in this pandemic. As Covid-19 continues to develop, we remain vigilant in looking to protect all our stakeholders and will report further if there are significant changes to our outlook for 2020."

The power producer said its strategic focus remains on biomass supply chain expansion and cost reduction.