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UK Drax profits fall as power prices drop, but buybacks are extended

Drax Group announced a 11% decline in its first-half core profit due to lower UK wholesale electricity prices. The ongoing energy market fluctuation continued to affect the British power company.

Drax, a company that has converted coal-fired plants to run on biofuels, supplies about 5% (or 5,000 MWh) of Britain's electric power.

The adjusted profit, or EBITDA fell to 460 millions pounds ($611million) in the first six months, down from 515million pounds during the same period in last year.

The group stated that it did not expect to change its adjusted EBITDA for the entire year, which is 899-910 millions pounds.

After a dramatic rise following Russia's invasion, wholesale power prices have dropped in Britain over the last two years.

Drax announced that it would extend its existing 300 million pound share-buyback programme for an additional 450 millions pounds over a period of three years.

Early trading saw shares jump 6.2% to 720p.

Earlier this year, the government extended subsidies - called contracts-for-difference (CfD) - for biomass units that were due to expire in 2027 to 2031.

The group expects to conclude a deal with the UK Government later this year, for subsidy of its four biomass units.

Drax's North Yorkshire power plant would be able, under this subsidy, to increase production when there's not enough electricity. This could help avoid the need for more gas, or to import power from Europe. Drax could reduce production when there's too much electricity in the UK grid. This would help to balance the system.

(source: Reuters)