Drax profit rises on higher biomass power generation, pellet output

Drax has converted four of its six former coal-fired plants to use biomass wood pellets, often made from compressed sawdust, ahead of Britain’s plans to phase out coal-fired power plants by 2025

British power producer Drax Group reported a 9 percent rise in full-year core earnings on Tuesday, driven by higher levels of renewable power generation from its biomass units.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 250 million pounds for the year ended Dec. 31 from 229 million, helped also by higher pellet production at lower costs.

Drax has converted four of its six former coal-fired plants to use biomass wood pellets, often made from compressed sawdust, ahead of Britain’s plans to phase out coal-fired power plants by 2025.

Biomass made up 75 percent of the company’s electricity generation in 2018, up from 65 percent the year before.

Drax bought UK power generation assets from Iberdrola’s Scottish Power including some gas, hydro and pumped storage sites, for 702 million pounds in a deal which closed on January 1.

The terms of the deal were revised to ensure Drax gets a rebate on lost capacity payments due to a pause in a government scheme.

Last November Britain had to halt a back-up power scheme to avoid electricity shortages called the capacity market pending a further investigation by European Union regulators.

Drax said it expects the scheme to be reinstated, echoing comments by Britain’s government which said earlier this year that it expects to make retrospective payments to participating companies.

The suspension of those payments led to a 7 million pounds loss in revenue in the final quarter of 2018, Drax said.

Source: reuters