Drax Group, the UK operator of Europe's largest coal-fired power plant, will pay up to GBP326 million to shareholders in a special dividend on the back of higher electricity prices.

The announcement of the 75 to 80 pence a share dividend came as the firm confirmed that it has already sold 63% of its 2007 output at the higher price of GBP49.90 per megawatt hour (MWh). Drax has sold 87% of this year’s annual expected output at GBP47.90 MWh. The 2007 contracts include around 1.3 terawatt hours of production under a recent deal to supply Centrica from October 1.

The Yorkshire-based firm said that the special dividend, barring any adverse unforseen circumstances, would be paid at the same time as the interim ordinary dividend of four pence per share in late October.

Dorothy Thompson, chief executive of Drax said: This trading update demonstrates the continued progress of the business and evidences our commitment to return excess cash to shareholders.

The group also said that it intends to make a payment in July of GBP22.5 million into its pension scheme, which has an actuarial deficit of GBP44.7 million.