Drax, the owner of the UK's biggest coal-fired power station, scrapped plans for a refinancing yesterday because of uncertainty in the world financial markets.

The company also gave warning that its full-year profits were likely to fall slightly below expectations at £500million, compared with analysts' consensus of £520million and a total for 2006 of £583million.

The decision was announced as it was revealed that Gordon Horsfield, the insolvency expert who has chaired Drax for the past four years, is to leave. He recently became chairman of Partnerships UK, the Government's Public Private Partnerships initiative. Mr Horsfield will be succeeded by Charles Berry, a non-executive at Drax and a former chief executive of ScottishPower's UK operations. Mr Horsfield last year sold down nearly a third of his stake in the once bankrupt organisation for £12million.

Drax's decision not to press on with its plan, announced in September, to refinance by taking on more debt means that it will pay out far less in a special dividend. In a statement, the company, which owns the giant coal station near Selby in North Yorkshire, said: “Conditions in the debt markets have continued to deteriorate ... and the company has therefore chosen not to proceed with a refinancing at the present time.”

Several other companies have postponed refinancing because of the difficult markets. Last month, Peacocks, the retailer, shelved an £800million refinancing, saying it would look at a move again in the summer.

In September, when it announced interim results, Drax said that it wanted to take on extra debt both to improve its cash position and to help it to return cash to investors. Yesterday, Drax said: “The board remains committed to ensuring balance sheet efficiency is maintained and will continue to keep the position under review.”

City analysts had expected a special dividend of about 80p if the refinancing had gone ahead. The market is now forecasting about 9p. Drax said that it had not specified a figure and that “the level of special distribution will take account of the closing cash position, the working capital, capital expenditure and any other needs of the business, and the expected final ordinary dividend.”

The generator blamed a dip in expected profits on the high cost of coal and fluctuating energy markets. It said: “International coal prices have been at record levels for much of the second half of 2007. Power markets have been volatile.” The company expects its bank debt to stand at £405million at the end of the year. Its current debt facilities expire in 2010.

Drax has begun a £100million upgrading of its steam turbines to increase their efficiency. The generator is the country's biggest single polluter. Last year, it pumped 22.7million tonnes of CO2 into the atmosphere, an increase of 1.7million tonnes because of rising output. The company is also to use more biofuels in an effort to reduce emissions and increase its use of renewable energy to 10 per cent by 2009.

Its shares fell 6.8 per cent to 623p.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax