Drax powers ahead with strong earnings

Drax cheered investors yesterday by forecasting that its full-year earnings would reach the top end of market expectations.

Drax, which is based near Selby, is the largest coal-fired power station in Britain, and provides enough power to meet seven per cent of the UK’s electricity needs. Its financial performance has been boosted by the power plant’s reliability and more stable conditions in the commodities market.

In August, the Government approved Drax’s plans to build 299-megawatt (MW) biomass-fired power plants in Selby and Killingholme to diversify its power generation portfolio into greener energy sources.

However, the projects are now in doubt because Drax says the planned Government support was disappointing.

“(The proposed subsidy level) makes the investment case for our planned dedicated biomass developments highly challenging,” Drax said in its interim management statement.

Drax’s finance director Tony Quinlan said yesterday: “We certainly haven’t given up on them. We feel they are good projects.”

Drax is considering its response to a Government consultation paper which outlines proposals for support levels for all renewables from 2013. The deadline is January 12. A spokesman from the Department of Energy and Climate Change said: “We are consulting on new support levels for large-scale renewable electricity that get us more green power generation with less impact on consumer bills. Biomass will have a key role to play as part of a balanced energy portfolio.

“That’s why we are proposing to double support for generators co-firing significant amounts of biomass and introduced a new band which aims to support the conversion of existing coal to 100 per cent biomass. We will use the consultation period to work constructively with developers.”