Drax hails 2016 as “pivotal year”

Despite government levies and challenging commodity markets, Drax has hailed 2016 as a “pivotal year”.

Though EBITDA for 2016 was down 17% to £140m, Drax said this was primarily due to the Climate Change Levy being applied to renewables, reducing levels by £34m on 2015 and the lower commodity prices during the year.

Consolidated revenue for 2016 of £2.95bn, £115m lower than in 2015. Electrical output from Drax’s generation business was “significantly” lower in 2015, as lower market power prices resulted in its coal-fired units being out of merit for much of the summer.

Despite this, the business completed its major biomass conversion project that had been underway since 2012 and announced a long-term strategy to move the business towards further sustainability.

Andy Koss, chief executive of Drax Power within the group said that the main focuses for the coming year would be the integration of Opus Energy, which it officially acquired for £340m last week as well as working to grow profits in the generation business. Another focus would be the US market, where it already has a wood pellet plant, and weathering the uncertainty caused by the Brexit decision last June.

Koss said: “We’re very focused on the UK market so have not directly impacted but we buy wood pellets in foreign currency – 80% comes from North America – but we buy currency five years forward so we are well protected. Key for us is certainty, whatever comes out of Brexit and government policy on renewables, were making long terms decisions and what we’re looking for is certainty.”

He continued:”We started the year in a more difficult position but profits were up compared to expectations.

“EBITDA is down on the basis of commodity prices, which have been lower in 2015 compared to 2016, and the renewables certificate that the Chancellor pulled in 2015 the full year of that has come through in our results.

“We completed the conversion to wood pellets and now 65% of our energy is renewable and provide more support to the grid. Although number were down we were pleased with the year.

“The conversion of the third unit and the move into retail with the acquisition of Opus really completed the older strategy and marked the start of our new strategy.

“We have three strong businesses with strong strategy for each of them and we’re aiming for long-term, sustainable, high quality earnings going forward.”