Power producer Drax's core earnings beat estimates

(Corrects paragraph 1 to say the company produced less power, not more)

Feb 18 (Reuters) - British power producer Drax Group Plc (LSE: DRX.L - news) reported core earnings ahead of analysts' estimates despite generating slightly less electricity from its power production fleet.

The company said earnings before interest, tax, depreciation, amortisation (EBITDA) and unrealised gains or losses on derivative contracts were ahead of market estimates, but slumped 23 percent to 230 million pounds ($384.40 million) due to rising carbon costs.

Analysts on average were expecting EBITDA of 221.52 million pounds for the 12 months ended Dec. 31, according to Thomson Reuters I/B/E/S.

Amid an acute shortage of coal and EU rules that limit carbon emissions, burning coal has become increasingly uneconomic. The British government too has levied a tax on emissions, forcing utility companies to search for cheaper alternatives.

Noting the trend, Drax, which owns one of Europe's largest coal-fired power stations, made a partial switch to biomass last year in a bid to rein in costs at a time when rising coal prices were squeezing its profits.

Drax, which runs coal and biomass-fired power plants to supply electricity largely to retail clients, cut its full-year dividend to 17.6 pence per share from 25.3 pence per share a year earlier.

Shares in the company were up 1 percent at 815 pence at 0829 GMT on the London Stock Exchange (Other OTC: LDNXF - news) . ($1 = 0.5983 British pounds) (Reporting by Esha Vaish in Bangalore; Editing by Supriya Kurane)