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Drax Group plc Trading Update Conference Call - Final.

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DOROTHY THOMPSON, CEO, DRAX GROUP PLC: Good morning everyone and thank you for dialing in to our trading update conference call. For those who do not know me, I'm Drax's Chief Executive, Dorothy Thompson. And I'm here on the call with Drax's Finance Director, Tony Quinlan, who you would have met for the first time at our biomass strategy announcement, and Andrew Koss, Head of Investor Relations.

I propose that I start by running through a brief summary of my observations on the trading update which we released this morning. And then I will open up the call to take questions.

So if I start with the trading performance and outlook, I am very pleased to report that we continue to trade in line with expectations as we outlined at the time of our interim management statement in October, despite the continued volatility in commodity prices. Commodity prices have indeed been incredibly volatile throughout the year, with the sharp increase in oil prices to a peak of $147 a barrel in July, also driving gas, coal and carbon prices higher.

UK power prices were also driven higher by capacity constraints with the introduction of the Large Combustion Plant Directive, or LCPD, on January 1 this year, compounded by specific plant outages elsewhere in the UK. The net effect was a rise in dark green spreads which prompted our profit upgrades in May, June, and again in October.

Since July we've seen a dramatic fall in oil and other commodity prices. Until October dark green spreads were holding up relatively well, particularly for the last quarter of this year where capacity concerns continue to keep power prices high.

However, since our last announcement in October, we have seen spreads contract. In the remaining months of 2008 power prices fell as plants returned to service, allaying fears of the capacity shortfall. And, as we entered the colder winter period, it became clear that there has been a 2 to 2.5 gigawatt reduction in peak electricity demand, 5% of total demand in these mildish winter days, reflecting the economic climate as well as the consumer response to high prices. This has been sustained and generally stable over the last two months.

Looking further ahead for 2009 and beyond, we have also seen a contraction in dark green spreads, driven principally by steeper falls in forward UK gas prices combined to forward combined -- compared to forward coal prices, but also impacted by the depreciation of sterling against the US dollar and euro. However spreads do remain healthy and are still at levels higher than 12 months ago.

Despite the recent tightening of spreads, we still firmly believe in a looming capacity gap in the UK as 13 to 14 gigawatt of plant retire over coming years, comprising opted-out coal and oil plants, as well as Magnox plants. This will put upward pressure on spreads going forward.

We stated our commitment at the biomass strategy announcement to return all surplus cash from operations to our shareholders for 2008 and 2009, and we continue to actively manage the working capital as well as keeping our capital and operating expenditure plans under continuous review to optimize cash flow...

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