Drax sees favourable commodity swing

But the Selby, North Yorkshire-based group warned that markets remain volatile and said is “cautious” in its outlook.

Drax said it has taken advantage of better dark green spreads – the difference between the price of power and the cost of generation – to strengthen its contracted power sales.

Together with continued good operating performance, Drax said this underpins its expectations for the year.

In February, Drax reported some of the weakest spreads between the price of power and the cost of generation since the electricity industry was privatised in 1990 – reducing the profit margins on power generation.

At the time, chief executive Dorothy Thompson warned the outlook was “difficult,” after coal prices started to increase towards the end of last year. Coal prices have been boosted by Australia’s floods, strong Asian demand and the Japanese nuclear disaster.

Drax yesterday said it has forward sold 22.6 Tera Watt hours (TWh) so far this year, with another 11.5 TWh sold in 2012 and 3.2 TWh in 2013. It sold 26.4TWh in 2010.

Last month Drax revealed a £180m tax boost which it will use to step up its biomass clean fuel strategy, after a deal with HMRC.

As a result, £117m of cash, previously ring-fenced on its balance sheet, has been released earlier than expected. Further tax losses worth £63m have also been agreed.