Power producer Drax reports strong performance in the first quarter of the year

Drax, which has a power station in Selby, saw an increase in the value of contracted power prices between 2022 and 2024.

More than 99 per cent of generation came from renewables such as sustainable biomass, hydro and pumped storage, the business said.

Will Gardiner, CEO of Drax, said: "In the first quarter of 2022 we delivered a strong system support performance as our reliable, renewable electricity continued to support UK energy security and helped to keep the lights on for millions of British homes and businesses.

"We advanced our strategy to increase biomass pellet production, with another 400Kt of capacity commissioned from two new pellet plants in the US.

“We also progressed the engineering design work for our UK BECCS (Bioenergy Carbon Capture and Storage) project, which will deliver negative emissions for the UK and pioneer BECCS technology at scale.

“BECCS is a vital carbon removals technology that the UN's IPCC says is needed globally to achieve net zero.

"With the right government support, Drax is ready to invest £3bn this decade in delivering vital renewable energy technologies including BECCS, a carbon removal technology that is cost-effective but also the only one that generates reliable, renewable electricity while removing millions of tonnes of CO2 from the atmosphere."

Drax says during 2022 it is investing incremental capital expenditure and development expenditure into BECCS, including continuing a front-end engineering design study at Drax Power Station in Selby.

The group is expected to take a final investment decision in 2024 and expects the UK Government to set out the process for selection and support for individual BECCS projects, such as BECCS at Drax Power Station this year.

The development of BECCS in the UK is supported by its plans to invest in the expansion of its biomass pellet production to deliver security of supply for the biomass volumes required for BECCS, Drax says.

When it comes to pellet production, this month it completed the commissioning of its 360Kt plant at Demopolis in Alabama and its 40Kt satellite plant in Leola, Arkansas.

The group is also currently constructing a second 40Kt satellite plant at Russellville, Arkansas, which it says allows for greater utilisation of lower cost sawmill residues whilst leveraging on existing infrastructure in the US southeast.

Drax previously sourced a small volume of Russian and Belarussian biomass, which it says has now been removed from its supply chain.

The removal of Russian biomass cargoes from European supply chains has led to higher prices and lower availability in the small European spot market, adding incremental costs and limiting the potential to source additional cargoes to support incrementally higher levels of generation in 2022.

The group now expects that full year adjusted EBITDA for 2022 will be around the top of the range of analyst expectations, subject to continued good operational performance.

Reflecting the improved outlook for adjusted EBITDA, the group expects net debt to adjusted EBITDA to be significantly below 2x by the end of 2022.