Drax overcomes “annus horribilis” in 2014

Drax shares, which have tumbled recently, rose 26.9p to 429.9p on news that the delivery of Europe’s largest decarbonisation project is on time and on budget and is producing eight per cent of the UK’s electricity.

Analyst Harold Hutchinson at Investec said: “That is no mean feat for the EU’s largest single carbon reduction project, equivalent to removing a round 9.5 per cent of the UK’s cars from the roads in terms of its emissions impact.

“2014 was an annus horribilis for Drax, with well-aired regulatory difficulties and a challenging commodity environment. The latter shows no signs of changing for now, while the former looks set to drag on in terms of EC clearance for the Early CfD contract. Despite all this, we remain positive, admittedly battered by share price declines, but convinced that the overall biomass conversion plan at Drax is integral to the UK’s decarbonisation plans.”

2014 earnings fell from £230m to £229m, but this was ahead of analysts’ estimates.

Drax chief executive Dorothy Thompson said that while 2014 was a very difficult year for the company and shareholders, key activities within the firm’s direct control “have gone very well indeed”.

Finance director ​Tony Quinlan ​added: “The commodity market was tough, the regulatory market has been very difficult to deal with, but we have dealt with the things we could deal with.”

The group is hoping to counteract tough markets with ​cost control measures, but there have been no job cuts.

​“In fact we have brought in additional staff in certain areas of the business​. We have kept a good control on costs,” said Ms Thompson.

Drax hopes to convert its third unit to biomass in early 2016, but this will be dependent on getting state aid. Whatever happens the third unit will be burning 85 per cent biomass by this autumn.