Drax earns reward for forward thinking

The North Yorkshire-based group said despite low dark green spreads – the cost of generating power from coal – it has benefited from its strong forward-sold position.

Drax, which supplies about seven per cent of the UK's electricity, added "good operational performance" has allowed it to maintain a high load factor, taking advantage of its flexibility and reliability.

The group has sold 25.6 Terra Watt hours (TWh) for this year at an average of 51.3 per Mega Watt hour (MWh). Next year it has sold 16.7 TWh at an average 56/MWh, and in 2012 its forward position is for 10.1 TWh, sold for 59/MWh.

"Whilst the UK market continues to experience low dark green spreads, our exposure is mitigated by a strong forward contracted position," said the group.

It added its strong forward sold position represents an "accelerated hedge" taken out in mid-2009, as a response to the market at the time. It is now reverting its hedging to be more in line with its "historic norm". The 3,960MW plant burns coal and biomass in six units. It is next due to update the market in mid-December.

Shares in the group edged up 0.96 per cent to 377.8p.

Earlier this year it delayed an investment decision on a new biomass plant until 2011 while it waits for clarity on Government support.

Drax plans to build three 290MW dedicated biomass plants in a 2bn investment, and was due to prove the investment case for the first of these by the end of the year. But recently it said it would make the decision next year as Government support for the plants is not certain.

Two of the plants would be at Selby and Immingham.

Drax is keen to burn more biomass – fuel derived from organic plant-based material – to reduce its carbon emissions.