Drax sees better trading in commodity markets

POWER station Drax said trading in its commodity markets has improved this year, except for domestic coal where some suppliers are facing problems.

Doncaster-based UK Coal recently announced a fall in coal production due to problems at Daw Mill.

To compensate for this, Drax has taken advantage of better dark green spreads, which means an improvement in the price of power against the cost of coal needed to produce it. Drax said this would strengthen its contracted position.

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The power station, which is based near Selby, said it has delivered a good operating performance since the start of January.

It added that these factors underpin its expectations for the full year, which remain unchanged.

It will update the market again on July 3 when it announces results for the six months to June 30.

Drax also said it is looking forward to the “timely conclusion” of the Government review of renewable technologies.

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The firm said it is ready to transform itself into a predominantly biomass fuelled generator, but said it needs an appropriate level of regulatory support to do this.

Last year, the Government announced its intention to maximise the deployment of the cheapest renewable technologies.

It proposed increased support for electricity fuelled by sustainable biomass in existing coal-fired power stations and Drax is now waiting for the outcome of the review.

Analysts at Investec said in a note: “It remains the case that future years are more important than current trading. Hopes hinge on significant progress with its biomass plans.

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“Otherwise as a coal-fired generator Drax remains exposed to ever-increasing environmental costs.”

In February, Drax scrapped plans to build two biomass power stations in Yorkshire, but said it will forge ahead with plans to become a mainly biomass-fuelled gene rator.

Biomass is a generic term which covers the huge range of organic, plant-based materials which are burnt to create useful heat and power.

The group, which supplies around seven per cent of the UK’s electricity, blamed insufficient Government support for its decision to effectively axe its £2bn dedicated biomass project.

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It will now prioritise converting its 4,000MW power station in Selby into one mainly fuelled by organic, plant-based material such as straw and wood pellets, around a £500m investment.

Drax had planned to build three 300 mega watt (MW) dedicated biomass power stations under original plans.

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