Drax Group predicts full-year earnings will eclipse estimates

Drax Group expects annual profits to surpass forecasts on significant demand for renewable energy in recent weeks.

The power generation business anticipates full-year adjusted underlying earnings to be ‘slightly above’ the £651million to £681million analysts’ consensus range, compared to just under £400million made the previous year.

Fossil fuel prices have soared in the past 18 months as easing Covid-19 restrictions led to a resurgence in demand and Russia’s invasion of Ukraine significantly disrupted supplies.

Forecasts: The power generation business anticipates full-year adjusted underlying earnings to be ‘slightly above’ the £651million to £681million analysts’ consensus range

This has made renewable sources much more financially competitive, benefiting the likes of Drax, which runs a large biomass power station in Selby, North Yorkshire, pumped storage and hydro generation projects.

It is also developing bioenergy carbon capture and storage technology that will be added to a pair of biomass units at its Selby site, with the goal of removing eight megatonnes of carbon dioxide per year from the atmosphere.

Between January and November, the company said it generated 11 per cent of the UK’s renewable energy and a fifth during peak periods.

Drax noted its pumped storage and hydro assets ‘performed strongly’ during the second half of the year, while its sustainable biomass pellet division helped provide support at times of elevated demand this winter.

Chief executive Will Gardiner said: ‘Drax plays a critical role in supporting the UK energy system, generating more renewable power by output than any other company.

‘During the difficult winter ahead, we will continue to optimise our biomass operations to ensure that more renewable power is available when the country needs it most.

‘We are accelerating our plans to invest billions of pounds in critical renewable energy and carbon removal technologies which could create thousands of jobs and generate the secure, renewable power that this planet urgently needs.’ 

But, while the FTSE 250 firm is advancing its green energy plans, it is also under contract from the National Grid to supply a ‘winter contingency’ service by way of its legacy coal-fired generation units.

These assets were mothballed last year owing to growing competition from gas and renewable sources, and the UK Government’s introduction of a carbon price floor making them less economically viable.

As Ukraine’s conflict has intensified, though, threats of electricity outages have grown, leading many European countries to buy and burn more coal as a contingency measure.

Drax was asked by former Business Secretary Kwasi Kwarteng to keep its coal-fired units open this winter as a ‘sensible precaution,’ and will be compensated for any costs incurred by the electricity grid operator.

Drax Group shares were up 0.6 per cent at 630.5p on Thursday morning, having recovered considerably from a September and October slump. 

This post first appeared on Dailymail.co.uk