Drax set to power up shareholders’ dividend
Britain’s energy market is changing. Drax group CEO Dorothy Thompson
YORKSHIRE POWER generator Drax reported a good operating performance in 2017 and said it will raise its dividend payout for the year.
Drax, which operates a giant power station in North Yorkshire, is planning a £50m payout to shareholders, up from £10m in 2016 and £23m in 2015. The firm said it has changed the way it calculates shareholder rewards to ensure shareholder returns increase.
The group is targeting earnings before interest, tax, depreciation and amortisation of £425m by 2025, more than three times its core earnings in 2016.
Drax put its dividend policy under review in February after another year of lower profits hit by weak energy prices.
Group CEO Dorothy Thompson said the group is confident the dividend plans are sustainable and it expects the dividend to increase from this level.
“Britain’s energy market is changing,” she said.
“Drax has embraced these changes with a strategy which will help change the way energy is generated, supplied and used for a better future.
“Through our operations in retail, generation and biomass supply we expect to deliver a significant increase in highquality, visible, contracted earnings for the group.”
She said she is confident about the group’s strategy and its ability to deliver high-quality earnings, growth and value for shareholders.
“Since publishing our full-year results on February 16, trading conditions in the markets in which we operate have remained unchanged and operational performance has been good,” she added.
Analyst John Musk, at RBC Capital Markets, said: “We think it is difficult to judge the market reaction to this announcement, but overall see it as a slight negative. The 2025 EBITDA target is certainly well above our estimates but we await further clarity on the drivers to achieve this number.
“The dividend policy is the one piece of information that we think the market will focus on.
“While the starting point is slightly ahead of expectations we think the lack of a definitive trajectory may be a disappointment.
“With Drax only yielding 3.5 per cent it is the lowest of the peer group of UK utilities.”