Drax blames carbon price for falling profits

Further evidence that the second phase of the EU's carbon cap-and-trade scheme is having the desired effect emerged today, after the company that operates the UK's largest coal-fired power station cited the price of carbon as one of the factors behind its falling profits, and reiterated its commitment to cutting emissions.

Drax, whose power plant in Yorkshire is the single biggest source of carbon dioxide in the UK, today released results for the first half of 2008 showing pre-tax profits down 28 per cent on the same period last year to £206m.

The company identified the rising cost of both coal and the carbon credits it has to buy to cover its emissions under the European emissions trading scheme as the main reason for the falling profits.

According to the company's results, the cost of fuel excluding carbon allowances has climbed 34 per cent to £23.6 per MWh, while the cost including allowances has soared 72 per cent to £31.8 per MWh over the same period.

Drax chief executive Dorothy Thompson reiterated the company's commitment to reducing its carbon emissions and associated costs through the development of more efficient turbines and the installation of new biomass capabilities at the plant, adding that both projects were making "good progress".

Earlier this year, Drax announced that it had signed a £50m deal with French engineering firm Alstom to develop a biomass co-firing facility capable of burning 1.5 million tonnes of biomass a year alongside conventional coal and potentially cutting carbon emissions by up to two million tonnes a year.

It said today that its success in procuring organic matter to burn alongside the coal meant that it now expects the plant will deliver 500MW of power when it comes online in 2010, up from its previous estimate of 400MW.