THE company behind North Yorkshire power station Drax has reported an increase in pre-tax profits of more than 400 per cent but warns of a challenging year ahead.

Drax bosses said the group had faced "regulatory headwinds" last year; one side of a double blow which also included deterioration in commodity markets.

The company, which produces eight per cent of the UK's electricity from its power plant near Selby, saw pre-tax profits rise from £32 million in 2013 to £166 million for the year ending December 31, 2014.

Reporting is full year results yesterday, the company revealed a 38 per cent rise in revenue to £2.45 billion.

However bosses also reported challenging external factors, with Drax last year fined £28 million for failing to meet environmental targets under the government's Community Energy Saving Programme (CESP).

The group reported almost flat EBITDA (earnings before interest, taxes, depreciation, and amortization) of £229.4 million compared to £230 million the year before.

Dorothy Thompson, chief executive of Drax, said: "External factors have been challenging, with regulatory headwinds in 2014 exacerbated by the recent major deterioration in commodity markets.

"In these conditions we are placing particular focus on business efficiencies and cost control measures.

"However, I am pleased that the key activities within our direct control have gone very well indeed. We will deliver our biomass transformation plans, converting three units to sustainable biomass, on time and on budget.

"We are delivering Europe’s largest decarbonisation project whilst producing eight per cent of the UK’s electricity.

"At the core of the Group is a very high quality power station, hugely important to the security of electricity supply in the UK."

Last year saw Drax fully convert its second unit from coal firing to biomass burning as part of a £700 million project to switch half of its power producing units on site to renewable sources.

The company says its expects to convert its third and final until by early 2016.

Mrs Thompson added: "We are on track to complete our transformation into a predominantly biomass-fuelled power provider in 2016. The case for a three unit conversion is robust and we are committed to full execution of this project.

"We trust that, over time, the significant benefits of biomass conversion as an attractive renewable will underpin support for further generating unit conversions at Drax."