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Currency hedges prop up Drax profits as output dips

Gains related to foreign currency hedging of £38 mln were the main driver of pre-tax profits of £14mln
Drax Group's Electricity output dropped 8%

A currency hedge boost helped power station operator Drax Group PLC (LON:DRX) swing into the black in 2018.

Pre-tax profits of £14mln came after hedging gains of £38mln.

That compared to pre-tax losses of £204mln recorded in 2017, which had including unrealised losses of £177mln.

Underlying earnings rose by 9% to £250mln.

Electricity output (net sales) dropped 8% to 18.3TWh ( terra watt hours), with 75% of generation from biomass and 25% from coal, compared to 65% biomass in 2017.

Four of Drax’s six generators have now been converted to run on biomass.

The group also recorded acquisition and restructuring costs of £28mln, including £21mln in connection with January's acquisition of ScottishPower's hydro generation business.

Will Gardiner, who became chief executive in January 2018, said Drax had grown its customer base in spite of challenges for the B2B Energy Supply business

Total operating profit increased to £60mln from a loss of £138mln in 2017.

Gardiner added 2019 will see the integration of the ScottishPower assets and there are many opportunities to operate as a coordinated portfolio of flexible, low-carbon and renewable generation.

“We also believe that existing and new gas generation has an important role to play in supporting the transition to a zero carbon, lower cost energy future and we continue to develop our projects in that area.”

The board proposes to pay a final dividend in respect of 2018 of £34mln, equivalent to 8.5p per share and representing a 12% increase on 2017.

The FTSE250-listed firm saw shares marginally down at 373.4p.



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