Final Results Part 1 of 2

Drax Group PLC
08 March 2006


                                 Drax Group plc


            Preliminary Results for the year ended 31 December 2005


(London - 8 March 2006) Drax Group plc, the UK independent power generator,
announces its preliminary results for the year ended 31 December 2005 and
reports on key developments to date.


Highlights:


   • Refinancing and listing - successfully completed in 15 December 2005
   • Net sales in 2005 of 23.2TWh (22.9TWh 2004)
   • EBITDA of £239million, £19million higher than the forecast included in
    the Listing Particulars
   • Gross margin was 63% higher than in 2004, primarily due to higher power
    prices. The average capture price in 2005 was £33.9/MWh (£22.5/MWh 2004)
   • As at 3 March 2006, 75% of expected output in 2006 had been contracted
    at an average price of £46.9/MWh and 47% of expected 2007 output had been
    contracted at an average price of £49.2/MWh
   • In the 11 weeks following the enhancement of the Group's credit status
    on refinancing and listing, volume of forward power sales has increased by
    49% reflecting improved trading counterparty interest
   • Base dividends to be paid later in the year in line with stated policy
   • First additional distribution also expected later in 2006


Year ended 31 December 2005 compared to year ended 31 December 2004
                                             Year ended 31 December
                                                  2005        2004
                                             £ million   £ million      Movement
Revenue from generation (1)                        849         549         +55%
Total revenue                                      929         624         +49%
Gross margin (2)                                   389         239         +63%
EBITDA (3)(4)                                      239          90        +166%
EBITDA (after exceptional items)(5)                385          90
Operating Profit                                   354          55
Profit/(loss) before tax                           264         (42)


(1)     Revenue from generation excludes revenues associated with power
purchases of £80 million (2004: 75 million).

(2)     Gross margin is defined as total revenues less total fuel costs of £540
million (2004: £385 million).

(3)     EBITDA is profit before interest, tax, depreciation and amortisation,
exceptional items and unrealised losses on derivative contracts.

(4)     Exceptional items in 2005 comprise income of £19 million due to the
reversal of provisions relating to impairment of tangible fixed assets and £311
million as a result of three distributions received from the Administrators of
TXU, partially offset by a charge under the Group's Long Term Incentive Plan of
£38 million, and costs incurred with respect to the Refinancing and Admission of
£29 million. Unrealised losses on derivative contracts were £117 million in
2005. There were no exceptional items in 2004.

(5)     EBITDA (after exceptional items) is profit before interest, tax,
depreciation and amortisation.


Commenting on the results, Dorothy Thompson, Chief Executive of Drax, said:

'I am very pleased with the 2005 Drax results. During the year the company
undertook a substantial financial restructuring, including listing the Drax
Group shares on the London Stock Exchange, whilst continuing to deliver strong
improvements in operational and financial performance. We have made significant
progress since listing to build our forward power sales and expect to deliver
significant cash distributions during 2006 as we benefit from good performance
against a background of robust commodity markets.'


Management Presentation and Conference Call

Management will host a presentation for analysts and institutional investors at
9:00am (UK Time) today, 8 March 2006, in the Ayres Room at the offices of
Deutsche Bank, Winchester House, 1 Great Winchester Street, London, EC2N 2DB.


A copy of the presentation will be made available from 7am (UK time) on
Wednesday 8 March for download at www.draxgroup.plc.uk (>>Financial Results
2005).

Event Title:                        Drax Group plc: Full Year Results
Event Date:                         Wednesday 8 March 2006
Event Time:                         9am (UK time)


UK Call In Number:                  020 7162 0125
International Call In Number:       [phone]
US Call In Number:                  [phone]

Webcast details
Live Event Link:
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UK Instant Replay

Start Date:                         8 March 2006
Delete Date:                        8 April 2006
Dial In Number:                     020 7031 4064
Freephone number (UK only):         0800 358 1860
Passcode:                           694875

US Instant Replay

Start Date:                         8 March 2006
Delete Date:                        8 April 2006
Dial In Number:                     [phone]
Freephone number:                   [phone]
Passcode:                           694875

Video Webcast

Start Date:                         8 March 2006
Delete Date:                        8 June 2006
Archive Link:
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For further information please contact:


                        On the day                      Thereafter

Dorothy Thompson,
Chief Executive         [phone]            [phone]

Andrew Jones,
Investor Relations      [phone]            [phone]

Melanie Wedgbury,
Media Contact           [phone]            [phone]

Tulchan Communications
David Trenchard and Peter Hewer            [phone]


CHAIRMAN'S STATEMENT

Introduction

Through the ownership of the largest, cleanest and most efficient coal-fired
power station in the country, with a nominal output capacity of 3,960MW, the
Group provides power sufficient to meet around 7% of the electricity needs of
the UK.

The year 2005 was transformational: it saw the group refinanced and its shares
listed for the first time on the London Stock Exchange. Accordingly, this is the
first Preliminary Results Statement for Drax Group plc which became the holding
company of the Drax group of companies on 15 December 2005.


Re-financing and Listing

In March 2005, Drax Group Limited set out its proposals to refinance and list
the business by the end of the year. The reasons were clear to the Board. The
prevailing capital structure was restricting the ability of management to
develop its trading and business strategy and in consequence management efforts
to enhance shareholder value were being inappropriately constrained. Throughout
the year in a series of investor roadshows, letters, meetings and discussions
the Board outlined and developed its proposals to align the trading,
operational, and financial strategies to deliver greater shareholder value. Much
effort was put into engaging with investors, seeking their understanding of the
plans, and receiving their feedback directly and through their representatives,
all of which helped shape the final proposals. Whilst conceptually
straightforward, the re-financing and listing were technically difficult to
implement requiring very high levels of positive shareholder and lender
approvals within what was then a complex capital structure.

During the autumn of 2005 three separate indicative offers were made for the
business. The Board assessed each of them against the same criteria: value,
deliverability and timeliness. Having regard to these criteria, and to the views
expressed by investors directly, indirectly through their representatives, and
significantly through their votes, the Board with the support of its advisers
concluded that the re-financing and listing was the best option and the bids
were either rejected or fell away.

The Group now enjoys a robust and simple capital structure appropriate to a
business operating within commodity markets and its shares trade in a
transparent and liquid market. I am pleased to note that the refinancing and
listing delivered the expected investment grade ratings for the Group debt and
for the principal operating subsidiary, Drax Power Limited. The resulting credit
standing with trading counterparties, together with our enhanced ability to
provide credit support where necessary, is already delivering significant
trading and operational benefits.


Results for 2005

The Group produced a strong performance in 2005 delivering an Operating Profit
(before exceptional items and mark-to-market adjustments on forward contracts)
of £208 million, a substantial improvement on the previous year's performance.
EBITDA of £239 million was £19 million better than the forecast £220 million
EBITDA included in our Listing Particulars which were published in October 2005
and updated on 11 November 2005. Including exceptional items and mark-to-market
adjustments would increase both Operating Profit and EBITDA by £146 million.


Returns to Shareholders

In our 2005 Listing Particulars the Company put forward Drax as a 'cash
conversion' story. It laid out its intention to make distributions to
shareholders in the form of an annual base dividend of £50 million (payable in
line with normal listed company practice) and in addition to distribute
substantially all of any remaining cash flow subject to the availability of
reserves and after making provision for debt payments, debt service requirements
(if any), capital expenditure, and other expected business requirements.

In respect of our base dividend we intend to pay an interim dividend in respect
of the six months to 30 June 2006 of 4 pence per share being approximately £16.3
million. This will be paid in autumn 2006.

As regards the additional distribution, work has commenced to identify the most
appropriate method for returning surplus cash. We expect to advise shareholders
of the proposed method of return at our AGM in May, followed by an indication of
the likely range of distribution, timing and any shareholder approval process in
a Trading Update given at the end of June.


Our People

The sustained commitment and dedication of all our employees has been a crucial
part of our success over the last three years. The old and new skills brought to
Drax combined as one team, and their efforts against the backdrop of improving
markets has seen the business develop strongly. Our people at Drax rose to the
new challenges and opportunities posed by the impending refinancing and listing.
I should like to thank all of them for their contribution, flexibility and
enthusiasm in what proved to be an eventful and successful year.


Gordon Horsfield

Chairman





CHIEF EXECUTIVE'S STATEMENT


Introduction

In 2005 commodity market developments dominated the UK energy landscape. Energy
commodity prices have been strong, led by the price of crude oil. Natural gas
prices were particularly high towards the end of the year, influenced by oil and
a tighter demand/supply balance as the UK moved to a greater reliance on
imported gas. High gas prices have meant that gas fired generation became the
principal price setting plant in the power market and had a strong upward
influence on the power price. The year also saw the introduction of the EU
Emissions Trading Scheme with carbon becoming a traded commodity and a new cost
to fossil fuelled power plant, so also influencing the price of power upwards.

Against this background of strong commodity markets, Drax began to realise some
early returns from investments in plant management and maintenance. The
improvement of plant performance compared to 2004 was very positive and directly
translated into improved safety, availability and reliability.


Energy Sales and Other Income

In the year, Drax Power made net sales of 23.2TWh (2004: 22.9TWh) of electricity
at an average capture price of £33.9/MWh (2004: £22.5/MWh). The capture price
achieved reflects the impact of power sold forward in 2003 and 2004 for delivery
in 2005, as well as market prices prevailing in 2005.

Power prices rose significantly during 2005 as reflected in the Drax capture
price. For instance, the price of the forward contract for power delivered in
the six months starting October 2005 rose 49% between the beginning of the year
and the start of delivery in October.

Drax makes sales of other products and services as well as contracted power. In
2005 these sales totalled £32 million.


Fuel Procurement

Coal

Drax burnt approximately 9.3 million tonnes of coal in 2005, with around 60%
being sourced from the UK and 40% internationally. During 2005 we paid an
average price of £37.28/tonne (2004: £32.74/tonne) for our coal, including the
cost of delivery to the power station. International coal prices fell from a
peak of $75/tonne early in the year to about $52/tonne at the close.

Biomass - Naturally Grown Fuel

As well as coal Drax burns renewable biomass material which has the twin
benefits of reducing CO2 emissions and providing an additional revenue source
through the sales of ROCs and LECs. During 2005 we burnt over 235,000 tonnes of
biomass compared with 95,000 tonnes in 2004. We made significant progress during
the year in the development of energy crops grown by local farmers. Contracts
are being arranged to grow and to deliver energy crops over the next decade.
Work continues to source additional energy crops and other cost effective
biomass.


EU Emissions Trading Scheme

On 1 January 2005 the EU Emissions Trading Scheme in respect of carbon
allowances commenced. Phase I of the scheme covers 2005-2007 and Phase II will
cover 2008-2012. Drax has an annual allocation granted by the UK Government of
14.55 million tonnes of allowances in Phase I. In 2005 we purchased a further
6.3 million tonnes of allowances as power was generated at volumes beyond those
supported by the allocation. Carbon prices rose through 2005, opening the year
at around €8/tonne and closing at over €20/tonne.


Trading

The trading function covers all the commodity aspects of our operations
including power, fuel, carbon allowances, renewable generation incentives, and
grid services. The principal objectives of our trading strategy are to optimise
the physical inputs and outputs of the plant, and to enhance the value of the
business while delivering some stability in value through commodity price
cycles. An important aspect of capturing value is exploiting the optionality of
the power plant through its flexibility.

Drax's access to commodity markets was greatly constrained during the year by
the relatively poor credit status of Drax Power Limited, the trading
counterparty. This was a result of the high leverage of the Drax Group. On the
refinancing of the Group on 15 December 2005, the credit status of Drax Power
Limited was greatly improved as reflected in the investment grade rating granted
to the entity by Standard & Poors.


Operations

Health and Safety

Health and safety remains our highest priority. The year 2005 was the first full
year operating the DuPont(TM)STOP(TM)behaviour based safety system which we have
implemented as a vehicle to deliver a step change in safety culture. In
addition, we have focussed on developing simple clear systems, improved
communication, detailed safety incident reporting and follow-up. Overall,
recordable personal injury rates have reduced by some 40% versus 2004.


Load Factor and Availability

The plant load factor for the year was 73.9% (2004: 69.1%) with an availability
of 87.2% (2004: 81.3%). We only seek to generate electricity when it is
profitable to do so. Thus we target profitability rather than production
volumes. A key performance metric for the plant is availability. Last year saw
improvements in both the planned and forced outage rates, with a strong downward
trend in forced outage rate over the four quarters of 2005 resulting in the best
full year performance since 1997.


Investment in Operations

We continue to invest in plant and equipment with four main objectives in mind:
to meet future environmental and safety legislative requirements; to facilitate
fuel diversity; to support reductions in the forced outage rate; and to improve
plant efficiency.

To meet the 2008 Large Combustion Plant Directive ('LCPD') requirements for
oxides of nitrogen emissions standards we have a programme to install Boosted
Over Fire Air ('BOFA') equipment on each of the six units. During 2005, two
units have had BOFA installed; one of the units has been commissioned and has
successfully completed all of its performance tests meeting the design
specification in full. Construction will start in 2006 to install BOFA systems
on the remaining four units in time for the 2008 change. New process control
systems together with BOFA and new instrumentation, designed to deliver
continuous emissions monitoring across the units, will ensure compliance with
LCPD limits for oxides of sulphur and nitrogen, and particulates.

Fuel diversity projects include petcoke and biomass. Drax has invested in
petcoke handling and blending facilities during the year and commenced an 18
month trial burn on one unit in June 2005. Air quality monitoring both before
and during the trial has shown that there has been no material increase in
pollutants measured. We expect to apply for a licence for commercial burn
commencing in 2007. Although the early results from the trials are encouraging,
there can be no guarantee that consent to burn petcoke in some or all of the
units will be granted. A biomass 'Direct Injection' system was installed on one
unit during August and has proved to be an effective way of delivering larger
volumes of prepared biomass to the boiler than is possible through the coal
pulverising mills. Drax has the potential to install at modest cost such a
system on each unit should the investment criteria be met.

Drax recognises the potential to improve operating and thermal efficiency
leading to reduced fuel costs and emission rates. Examples of work undertaken in
2005 are investment in the flue gas desulphurisation facility to improve
scrubbing efficiency and a project to improve boiler heat transfer when burning
imported coal. Looking forward Drax is exploring several turbine enhancements
and feed system upgrades with the objective of further improving efficiency and
reducing consumption.


Regulatory Matters

Energy Review

On 23 January 2006, the UK Government launched its Energy Review (the
'Review').  The Review promises to be broad in scope, considering both energy
supply and demand and, importantly, within it, all energy sources for power
generation.  We welcome the Review as an opportunity to increase awareness of
the need for coal-fired generation in the long term energy mix of the country.
Given the right policy framework, we believe that coal-fired generation can
contribute to the Government's key energy policy objectives of delivering
security of supply and affordability, and tackling climate change.  We are fully
engaged with the Government on the Review. We will be seeking clarity and
consistency of policy from Government to support term investments in the sector,
the maintenance of an open and competitive market for power generation and
equality for all forms of renewable generation. In particular we will be seeking
a relaxation of the 10% cap on co-fired biomass Renewables Obligation
Certificates which becomes effective on 1 April 2006.


Large Combustion Plant Directive

On 3 February 2006, under LCPD regulations, approximately 20GW of UK coal plant
'opted in' with a further 12GW 'opted out'. Those opted in will be required to
comply with the emissions regulations set down in the LCPD. Those opted out are
limited to 20,000 operating hours post 2007. Drax 'opted in' under the National
Emissions Reduction Plan the ('NERP'), the alternative being Emission Limit
Values ('ELV') on the basis that this will serve to retain the optionality and
flexibility of the plant and therefore the opportunity to add value. Under the
NERP, coal generators are subject to annual emission limits relative to historic
generation levels whilst under ELV, there is a 48 hour emission constraint.


EU Emissions Trading Scheme

During the course of 2006, across the European Union each country's National
Allocation Plan ('NAP') for Phase II of the Emissions Trading Scheme will be
announced. Drax is active in the UK Government's consultation process on the UK
Phase II NAP.


Outlook

The refinancing of the Group together with the listing on 15 December 2005
transformed the capital structure of Drax. The new capital structure enables us
to align the operational, trading and financial strategies of the business to
deliver greater shareholder value. The focus going forward is to deliver this
value.

Key to our success will be the sustained performance of the Drax team to improve
on the good results achieved in 2005. We will continue to invest in the
development of our staff with a keen focus on the performance culture that is
now well established.

Within the business, work will continue on improving plant performance and
seeking areas to enhance the business by further developing fuel and product
optionality. There are a number of EBITDA enhancement projects which we
identified in 2005 which we will work to deliver in 2006 and 2007. In addition,
the improvement in credit status has significantly enhanced our ability to trade
in the power, coal and carbon markets. It has provided access to greater depth
and tenor in all of these markets. Our strategy is to extend our forward
contracts whilst retaining a significant exposure to the commodity markets in
order to exploit the full value of the optionality of the power plant and the
expertise of the Drax trading team.

As at 3 March 2006 Drax had contracted 75% of expected 2006 output at an average
price of £46.9/MWh, and 47% of expected 2007 output at an average price of £49.2
/MWh. Corresponding fixed price coal and carbon have been secured to underpin
these sales. Overall our volume of forward power sales has grown by over 49% in
the 11 weeks from 15 December to 3 March 2006 reflecting both our increased
credit capacity and counterparty interest.

Given current trading expectations and the continued development of hedge
position coupled with effective cash management, we expect during 2006 to start
to deliver on our commitment to return substantially all excess cash flow to our
shareholders.

We will remain active in the regulatory debate. We believe coal is critical to
the UK energy mix going forward if the Government is to achieve its objectives
of delivering security of supply, affordability and tackling climate change
where biomass burning with coal has much to contribute.  We will be seeking
clarity, coherence and consistency of Government policy and an equal treatment
of biomass co-fired generation with other renewable energy.



Dorothy Thompson
Chief Executive



PART 2 TO FOLLOW







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