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Drax posts 'robust' results despite £44m COVID-19 hit

Image: Drax.

Image: Drax.

Drax posts stable results for H1 2020 as its adjusted EBITDA jumps 30% despite an estimated £44 million COVID-19 hit.

The impact of COVID-19 has been felt most keenly in its Customers business, which has seen lower demand and an increase in bad debt provisions although this has predominantly been in SME business, it said.

Whilst Drax saw its adjusted EBIDTA rise and is clear that its full year EBIDTA – which includes an estimated £60 million impact of COVID-19 as outlined earlier this year – is in line with market consensus, its Customers business saw an estimated loss of £37 million in H1 2020, whereas in H1 2019 it made a £9 million profit.

Reduced demand alongside MtM loss on pre-purchased power and an increase in bad debt resulted in the loss. However, it has seen a “good performance” in the Industrial and Commercial market, Drax said, with new contracts having been signed with water companies providing five-year revenue visibility.

In the UK, Drax owns Haven Power and Opus Energy, both of which are focused on B2B energy supply.

Its power generation arm also saw positive results, with its adjusted EBITDA up 45% to £214 million compared to £148 million in H1 2019.

It attributed this to having seen little impact from COVID-19 due to having a “strong contracted position” that provided protection from the lower demand seen as well as the reductions in ROC prices being offset by increased system support services.

This saw a boost of 8% to £66 million, with Drax providing services in the Balancing Market as well as ancillary services and portfolio optimisation.

Earlier this year, Drax announced that it would be providing National Grid ESO with inertia, using one of the generating units at the Cruachan hydroelectric pumped storage plant as part of a six-year contract that commenced this month.

Lastly, its net debt dropped from £841 million recorded in its full year 2019 results to £792 million, although this is still a significant increase in comparison to its 2018 full year results, when its net debt came in at £319 million.

Drax said it remains on track for around 2.0x net debt to adjusted EBITDA by the end of 2020.

Will Gardiner, CEO of Drax Group said: “With these robust half-year results, Drax is delivering for shareholders with an increased dividend while continuing to support our employees, communities and customers during the COVID-19 crisis."

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