Trading Statement

RNS Number : 3261U

Drax Group PLC

23 June 2009

 



THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL

23 June 2009

Drax Group plc

('Drax' or the 'Group')

Symbol:DRX

Trading Update

Prior to entering its close period on 1 July 2009, Drax announces the following trading update.

Trading performance and outlook

The UK market continues to experience low near-term dark green spreads, although our exposure is mitigated by our strong forward contracted position. If commodity prices remain at current levels, we anticipate that full year EBITDA for 2009 will be in line with market consensus.

For 2010 and beyond, commodity markets currently forecast a sharp recovery in prices and dark green spreads. We have taken the opportunity to accelerate hedging into 2010, locking into these margins in what remains a volatile and unpredictable trading environment. We have already sold approximately 80% of our output for 2010 at higher average margins than for 2009.

Positions under contract for 2009, 2010 and 2011

As at 12 June 2009, the positions under contract for 2009, 2010 and 2011 were as follows:

	2009	2010	2011
Power sales (TWh) comprising:	22.7	20.5	11.8
- Fixed price power sales (TWh) at an average achieved	20.0	14.4	6.1
price (per MWh)	at £50.4	at £54.6	at £60.3
- Fixed margin power sales (TWh)	2.7	6.1	5.7
CO2 emissions allowances hedged including UK NAP  allocation, market purchases, structured contracts, and benefit of biomass co-firing (TWh equivalent)	22.6	20.6	17.8
Solid fuel at fixed price/hedged including structured contracts (TWh equivalent)	21.4	21.1	11.4

Fixed price power sales include approximately 2.6TWh supplied to Centrica in the period 1 January 2009 to 12 June 2009 under the five-and-a-quarter year baseload contract with Centrica which commenced on 1 October 2007. 

Fixed margin power sales include approximately 2.7TWh in 2009 and 5.3TWh in each of 2010 and 2011 in connection with the contract. Under this contract the Group will supply power on terms which include Centrica paying for coal, based on international coal prices, and delivering matching CO2 emissions allowances amounting to approximately 4.8 million tonnes per annum. The contract provides the Group with a series of fixed dark green spreads which were agreed in the first quarter of 2006.

We will next update the market on the Group's contracted positions on 4 August 2009 when we announce our Half Year Results for the six months ending 30 June 2009.  

Distributions to Shareholders

Our distribution policy remains unchanged. For 2009, all excess cash from operations after meeting business requirements will be distributed, and from 2010 we will target a pay-out of 50% of underlying earnings, adjusted for non-cash accounting items.  Consistent with previous years, the level of interim dividend for 2009 will take account of the closing cash position, less working capital, capital expenditure and any other needs of the business. 

In a separate announcement issued today, we have announced our intention to raise approximately £100m via a placing of new ordinary shares. In order to help support our investment grade debt rating, the proceeds of the proposed placing will be applied to a part prepayment of our term debt.  

Conference Call

Management will host a conference call for analysts and investors at 9:00am (UK Time) today. After the call a recording will be made available.  Access details for both are set out below.

Event Title:	Drax Group plc: Trading Update
Event Date:	Tuesday 23 June 2009
Event Time:	9:00am (UK time)
UK Call In Number:	020 7162 0025
International Call In Number:	[phone]
UK Instant Replay
Start Date:	Tuesday 23 June 2009
Delete Date:	Thursday 23 July 2009
Dial In Number:	020 7031 4064
Passcode:	838977

Enquiries:

Chief Executive: Dorothy Thompson

Finance Director: Tony Quinlan

[phone]

Drax Investor Relations: Andrew Koss

[phone]

Media:

Drax External Affairs: Melanie Wedgbury

[phone]

Brunswick

Mike Harrison and Nick Claydon

[phone]

Website: www.draxgroup.plc.uk

This announcement does not constitute an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of any securities or investment advice in any jurisdiction, including without limitation, the United Kingdom, the United States, Australia, Canada, Japan or South Africa. No public offer of securities of Drax is being made in the United Kingdom, the United States or elsewhere.

In particular, the shares referred to in this announcement have not been and will not be registered under the US Securities Act of 1933, as amended, (the 'Securities Act') or with any securities regulatory authority of any State or other jurisdiction of the United States. The shares have not been approved or disapproved by the US Securities and Exchange Commission, any State securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:  

Certain statements in this announcement are forward-looking statements which are based on Drax's, expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, Drax undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in this announcement is subject to change without notice and Drax does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.

Any indication in this announcement of the price at which ordinary shares have been bought or sold in the past cannot be relied upon as a guide to future performance. No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of Drax for the current or future financial years would necessarily match or exceed the historical published earnings per share of Drax.

Website: HYPERLINK 'http://www.draxgroup.plc.uk' www.draxgroup.plc.uk

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