Drax has benefited from the revival of coal as a fuel source

Drax, based in Selby, North Yorkshire, said it would pay a special dividend to shareholders later this year.

The move follows a turnaround achieved off the back of spiralling energy prices and supplier demand for cheaper fuels than gas.

Drax is the largest coal-fired power station in the UK.

Firm re-financed

The firm confirmed more than 600 staff would be awarded the shares as part of an incentive scheme.

Banks had controlled Drax after it went into administration three years ago when US power giant TXU collapsed.

Drax, which supplies about 7% of the UK's electricity, was then re-financed ahead of a listing on the stock market.

The company said earlier this year it would consider a return of cash, but told shareholders for the first time on Friday it would pay a special dividend rather than other means, such as a share buy-back.

Chairman Gordon Horsfield said the move reflected optimism about prospects for 2006 and the significant amount of surplus cash likely to be generated.