A general view of Drax power station in Drax, northern England in this file picture. Opened in 1974 and extended in the mid-1980s, the station generates a capacity of 3,960 megawatts, the highest of any power station in Western Europe, providing about 7% of the United Kingdom's electricity supply.

London - British power producer Drax Group Plc reported core earnings ahead of analysts' estimates as it generated more power from its coal-powered plants.

The company said earnings before interest, tax, depreciation, amortisation and unrealised gains or losses on derivative contracts (EBITDA) were ahead of market estimates, but slumped 23 percent to 230 million pounds (R4.2 billion) due to rising carbon costs.

Analysts on average were expecting EBITDA of 221.52 million pounds for the 12 months ended December 31, according to Thomson Reuters I/B/E/S.

Amid an acute shortage of coal and EU rules that limit carbon emission, burning coal has become increasingly uneconomic.

The British government too has levied a tax on emissions forcing utility companies to search for cheaper alternatives.

Noting the trend, Drax, which owns one of Europe's largest coal-fired power stations, made a partial switch to biomass last year in a bid to rein in costs at a time when rising coal prices were squeezing its profits.

Drax, which runs coal and biomass-fired power plants to supply electricity largely to retail clients, raised its full-year dividend to 17.6 pence per share from 10.9 pence per share a year earlier.

Shares in the company were up 1 percent at 815 pence at 10:29 SA time on the London Stock Exchange. - Reuters