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Demand for energy falling as recession deepens

reposter | 03.03.2009 12:24 | Analysis | Energy Crisis | Globalisation | World

Falling demand for energy and tighter margins has started to bite into the record gains made by energy companies over the last couple of years. The papers are today reporting that the Drax group shares are trading near a record low on the announcement of a small drop in profits between 2007 and 2008 while demand for electricity in the UK apparently fell 4.3% in the last quarter of 2008 and looks set to continue to fall as the recession deepens.

Drax profits slips on narrower profit margins
By Bloomberg - 03 Mar 2009

Drax, the owner of western Europe’s biggest coal-fuelled power station, said profits slipped last year as it made less money selling energy.

The group's pre-tax profits dropped to £443m last year from £449m in 2007, the company told shareholders today.

Drax’s profits are reliant on the so-called UK clean dark spread, a measure of profit for coal-fired plants that allows for fuel and carbon-dioxide emission costs, and wholesale power prices.
Shares in Drax are trading near a record low on speculation profit margins will narrow further as the economic slowdown reduces energy consumption.

Chief executive Dorothy Thompson said: "During 2008, we delivered a good performance against a backdrop of extreme movements in commodity prices."

Drax still intends to build three biomass-fueled power stations in the UK with Siemens, generating as much as 15pc of the country’s renewable power in 2014. The plan has required a change to Drax’s dividend policy, allowing it to keep 50 percent of earnings starting 2010.

British power output fell 4.3pc in the fourth quarter and the worst recession since World War II is curbing demand as businesses cut production and jobs. Rival RWE said last month that below-average temperatures in the first months of this year countered a decline in power use by industry.



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  1. Good to have a drop in demand but — McQn