Drax loses power after Government cuts its subsidies

Yorkshire-based coal and biomass power company claims it has seen underlying earnings cut by around £30m following the removal of the Climate Change Levy exemption

Profits at the power station company Drax have fallen by two-thirds in the wake of tumbling energy prices and the loss of support from government subsidies.

Drax said that pre-tax profits for the year ending December had fallen  to £59m from £166m last year. 

The Yorkshire-based coal and biomass power company has been hurt by an overhaul of Government policy in the summer, which removed the Climate Change Levy exemption – cutting underlying earnings by around £30m, it said.  

The shares have fallen by a third since the overhaul was announced in July. On Tuesday they lost 20.1p to 238.2p. 

“This was a tough year for Drax and 2016 will be equally challenging,” the company stated. The full-year dividend is 0.6p, down from 7.2p. 

Drax also said it may decide to mothball its coal-fired power-generation units as part of a strategy review triggered by competition from cheap gas and renewable energy. 

Drax is awaiting a decision by the European Commission on whether it will allow state aid for its project to convert a third power unit to biomass.

Dorothy Thompson, the chief executive, said Drax wants to continue investing in biomass conversions and hopes eventually to run its entire power fleet on renewable energy.

“Now that we have become the leading biomass expert, that’s the core focus of where we’re looking to see future strategic options,” she said.

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