Credit Rating Update

RNS Number : 3733S

Drax Group PLC

15 May 2009

 



15 May 2009

Drax Group plc

('Drax Group' or 'Drax')

Symbol:DRX

Credit Rating Update

Standard & Poor's ('S&P') have today published their latest credit rating report with respect to Drax. In the report S&P have downgraded Drax Power's entity rating from BBB- to BB+ and Drax Group's debt rating from BBB to BBB-, the latter of which remains investment grade. Both ratings retain their negative outlook.

S&P recognise that Drax Power Station is a critical asset within the UK's electricity generation portfolio since it is the most efficient coal-fired power station in the UK, providing 7% of the country's electricity. Drax is a highly cash generative business, supported by healthy dark green spreads and strong contracted positions for 2010 and beyond. We expect it to remain so under all reasonable scenarios following the commencement of Phase 3 of the EU Emissions Trading Scheme in 2013. We are therefore disappointed with the S&P assessment that our business risk has increased to a level that merits a ratings downgrade. 

However, in practical terms, the maintenance of an investment grade debt rating is the more important assessment. Our current trading arrangements remain in place and we will continue to progressively hedge our output in line with our existing trading strategy.  Regarding business financing, we have low levels of debt which mature in December 2010 and we intend to refinance in advance of that date.

For further information please contact:

Andrew Koss, Investor Relations	[phone]
Melanie Wedgbury, Media Contact	[phone]
Mike Harrison / Nick Claydon, Brunswick	[phone]

Website:    www.draxgroup.plc.uk

Notes

1. An entity rating is an assessment of the creditworthiness of a company based on an evaluation of the business risks and financial risks facing that company. A debt rating is a more specific assessment of a particular debt issue, based on the terms and conditions of that debt and an evaluation of its likely recoverability in the event of default.
   
2. Drax currently has gross debt outstanding of £370m. Based on a share price of 485p, Drax's market capitalisation is approx. £1.65bn, implying a gearing level of 22%. Assuming full amortisation of the debt to £240m in December 2010, based on the same share price, this would imply a gearing level of 15%.

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