The future’s bright and green for Drax

BRITAIN’S biggest coal fired power station Drax told shareholders at its AGM that the future is bright – and green.

The Selby-based business told investors that despite “extreme movements” in commodity market prices Drax put in a strong performance last year and is continuing to demonstrate the strength of its strategic role within the UK power generation sector.

Although it is experiencing pressure on its margins it is anticipating results in line with market forecasts and that its continued focus is on active working capital management.

For 2010 and beyond, Drax is predicting a sharp recovery in prices, which look set to continue.

A resolution is to be proposed at the AGM for a final dividend of 38.3p per share. If passed, a further £130m will be returned to shareholders in May.

But it’s not only traditional firing that is helping Drax earn its profits. Investors will also hear from chairman Charles Berry how its strategy to invest in renewables is paying off.

In October it announced it was entering a strategic partnership with Siemens Project Ventures to build a 900MW biomass-fired plant and has so far names Immingham and Drax and two out of three potential sites.

Once operational, the new developments combined with its increased biomass co-firing capability at Drax will mean that almost 30% of generation capacity will be fuelled by renewable sources.

On current estimates, Drax will be responsible for around 15% of the UK’s renewable electricity, equivalent to the output of some 2,000 wind turbines, and for producing around 10% of the UK’s total electricity – enough to power around seven million homes.

A biomass pellet plant at Goole, which will use locally sourced straw as fuel, is set to be commissioned on May 1.

Mr Berry said: “We believe our strategy should provide a diversified and sustainable business growth path and deliver value with a clear focus on return on investment. Given the outlook for the UK power generation market and the incentives to invest in renewable generation, we firmly believe this strategy is right.

“We’re now in the advanced feasibility stage of developing and planning, but we’ve been clear to our investors that we’ll only commit to investment once it can be plainly demonstrated that we’ll secure attractive returns.”

Last month it announced that it was to go ahead with an £18m design and build project that will enable it to burn renewable biomass materials.

The contract will see construction specialist C Spencer supply unloading equipment and biomass bulk storage and handling systems to feed the direct injection biomass co-firing systems currently being installed at Selby-based Drax.

It’s the final contract to be awarded for the 400MW biomass co-firing project. Work will commence immediately with the detailed engineering design and procurement of key items of equipment.

Installation of the equipment is scheduled to be complete in the first half of 2010, coinciding with the completion of the biomass co-firing project.

Drax will issue a pre close statement on June 30, 2009 in which it will update the market on its positions under contract for 2009, 2010 and 2011.