Power producer Drax saw earnings rise 73% in the first half of 2017, but made a net loss of £83m – partly due to the UK’s move to stop using coal for electricity generation.
The company, which runs coal-fired power stations in Yorkshire, saw earnings before interest, tax, depreciation and amortisation (EBITDA) increase from £70m in H1 2016 to £121m in H1 2017.
But profits before tax fell from £184m in H1 2016 to a loss of £83m, as it wrote down the value of its coal assets by £22m.
Other factors included one-off costs of £6m on the purchase of B2B energy supplier Opus Energy in February for £367m, together with refinancing (£24m) and amortisation costs (£9m) linked to the acquisition.
End in sight for coal
The write-down in coal value comes as the UK government looks to end coal-fired electricity production by 2025, though the results of industry consultation have yet to be announced.
Drax has already converted its coal-fired plants to be capable of running on biomass – burning compressed wood pellets.
In April the company spent £35m buying a US wood-pellet manufacturing plant owned by LaSalle Bioenergy out of receivership.
The plant will increase Drax’s pellet production by 50%, with the company now generating 68% of its electricity from biomass.
Biomass in spotlight
Biomass has come under the spotlight recently, with environmental campaigners claiming that ancient US hardwood forests are being felled to fuel European demand for clean energy.
According to a paper by Roger Drouin published by the Yale School of Forestry & Environmental Studies, “scientists and environmental groups are raising significant questions about just how green burning wood pellets really is”.
He adds that many “believe current industry practices are anything but carbon-neutral and threaten some of the last remaining diverse ecosystems in the southeastern US”.
'All biomass sustainable'
Drax said in its financial statement: “Through the period we maintained our rigorous and robust approach to sustainability, to ensure that all of the biomass we use is sustainable, low-carbon and fully compliant with the UK's mandatory sustainability standards for biomass. The biomass we use to generate electricity provides a 68% carbon emissions saving against gas.”
Drax has also announced that David Nussbaum has been appointed as a non-executive director with effect from 1 August 2017.
Mr Nussbaum is chief executive of ‘The Elders’, an independent group of global leaders set up by Nelson Mandela to work together for peace, justice and human rights. Prior to that he was chief executive of the World Wide Fund for Nature UK and chaired WWF's Global Climate and Energy Initiative.