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Drax Group PLC on Wednesday said it has raised its profit expectations for 2022, following a request from the UK government for owners of legacy coal-fired generation assets to extend their lives up to March 2023.
As a result, the Yorkshire-based power generation firm has partnered with electricity systems operator National Grid PLC, to have Drax's two coal-fired units at Drax Power Station to remain available to provide a winter contingency service for the UK power system from October until the end of March.
The units will not generate commercially for the duration of the agreement, however Drax will be paid a fee for the service and compensated for costs incurred, including coal costs.
Drax said the request for the government is in response to increased pressure on European gas markets and concerns about electricity security of supply in the UK in the winter.
As a result of the new contract and an optimisation of Drax's biomass generation, the company now expects its annual adjusted earnings before interest, tax, depreciation and amortisation to be slightly above the range of consensus expectations.
As at Tuesday, consensus for 2022's adjusted Ebitda ranges from £584 million from £635 million.
‘At the request of the UK Government, Drax has agreed to delay the planned closure of its two coal-fired units and help bolster the UK's energy security this winter. Drax has played a central role in ensuring Britain's energy security over several decades and our workforce is proud to be providing this critical support to the UK energy system,’ said Chief Executive Officer Will Gardiner.
Shares in Drax closed 1.8% lower at 625.50 pence on Wednesday in London. National Grid's shares ended 1.6% higher at 1,083.50 pence.
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