Drax sees FY profits at top end of forecasts; Aims to double biomass capacity
By Frank Prenesti
Date: Wednesday 01 Dec 2021
(Sharecast News) - Power generator Drax said it expected annual core earnings to be at the top end of current forecasts as it looked to double sustainable biomass production capacity and sales by 2030.
The company said it had played an "important role providing stability to the UK power system" as higher gas prices, European interconnector issues, and periods of low wind placed the system under increased pressure.
It now expected adjusted earnings before interest, tax, depreciation and amortisation to be at the upper end of analyst consensus of £374m-£391m subject to a good December performance.
Drax, whose power stations provide around 6% of Britain's electricity, said it was targeting biomass pellet production of 8m tonnes per annum (Mtpa) by 2030, compared with current production of 4 Mtpa. The company is looking to capitalise on increasing demand from Europe and Asia as countries look to move away from coal.
Strategic capital investment is expected to be around £3bn up to 2030, Drax said, as the new target will require more than 3 Mt of new biomass pellet production capacity and other carbon capture facilities. Drax is developing technology to capture and store emissions generated from burning wood-based biomass pellets, which are categorised as renewable power, and hopes to have this up and running at a plant in Britain by 2027.
More than 20 UK energy firms have gone bust in recent months in the face of soaring wholesale energy prices in Europe.
"The group's strong forward sold position means that it has not been a significant beneficiary of higher power prices from these activities in 2021 but has been able to increase forward hedged prices in 2022 and 2023," Drax said.
Drax said there had been no disruption to own-use or third-party volumes from global supply chain delays currently being experienced in other sectors.
It added that it had also limited the impact on supply due to reduced wood pellet exports from Canada after summer wildfires and heavy rainfall and flooding in British Columbia.
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