Drax Profit Falls on Higher Costs; Plans More Biomass

By Paul Dobson

Aug. 5 (Bloomberg) -- Drax Group Plc, the owner of western Europe's biggest coal-fired power station, reported a 46 percent decline in first-half profit on higher costs for coal and carbon-dioxide emissions and said it plans to burn more energy crops.

Net income fell to 118.2 million pounds ($231.5 million), or 35 pence a share, from 220.1 million pounds, or 60 pence, a year earlier, the company said today in a statement. Drax will pay an ordinary dividend of 5 pence and a special dividend of 9.7 pence.

Earnings at Drax's 4,000-megawatt power station in Selby, northeast England, depend on the electricity price it can get in the wholesale market as well as costs for fuel and emissions. It's installing equipment to burn organic matter instead of coal to curb carbon-dioxide output, and also plans to provide 500 megawatts of production from biomass by June 2010, up from a previous target for 400 megawatts.

The drop in earnings reflected an increase in the average achieved power price and power sold ``which were more than offset by higher coal and carbon costs,'' the company said. It will boost the use of energy crops, because ``we have established biomass sources greatly in excess of our co-firing target.''

The power plant produced 13 terawatt-hours of power in the first half, 1 terawatt-hour higher than last year. It's upgrading turbines to burn less fuel per unit of power and cut emissions.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net