Drax puts in a good performance despite market conditions

DRAX’S flexibility and reliability have helped improve profitability in a difficult market it said today.

The Selby-based power generator said despite the UK market experiencing historically low near-term dark green spreads during the year, its earnings had been enhanced by forward contracts and its strategic position in the UK power fleet.

It said that flexibility enabled it to participate more actively in the real-time electricity trading market and also buy-back power to meet forward contracted positions when prices fall below cost of production.

As a result Drax is now anticipating full year EBITDA for 2009 – slightly ahead of market expectations.

“For 2010, we are very strongly hedged at higher average margins than for 2009, which substantially underpins next year’s cash and earnings,” it said.

“We also have a strong forward contracted position for 2011, reducing our exposure to the weaker forward spreads currently being seen for that period.”

Drax announced that it has started commissioning for the £80m 400MW co-firing facility, which is expected to be fully operational by June 2010.

The power generator is also to go ahead with its biomass plans at both Immingham and Selby and has started the pre-qualification process for contractors at the first plant.

Sales to large industrial and commerical customers will begin through retail supply business Haven Power following the success of a feasibility study.

Dorothy Thompson, chief executive of Drax said: “This is a good performance in what remains a challenging market environment.

“Beyond 2010, forward markets are currently weak, although our contracted position for 2011 provides us with a reasonable foundation for that year.”

She added: “Nevertheless, we will retain a strong focus on cost, cash and risk management to ensure we navigate successfully these potentially difficult conditions while at the same time being in a position to maximise opportunities when markets recover.”