Drax increases forward contracts to underpin full year forecasts

5th Nov 2014 09:03

Power station group Drax said its expectations for the full year remained unchanged in spite of the persistently challenging energy market.The group, which runs Drax Power Station in North Yorkshire, extended its contracted position, or forward sales, securing three more terrawatt hours (TWh) for 2015 since its July half-year results.As of 27 October, power sales contracted for 2014 were 25.9 TWh at an average price of £51.7, and 15.6 TWh at £52.7 for 2015.Drax, which supplies over 7% of the UK's electricity, said it had also made good progress in converting its feed-in fuel from coal to predominantly biomass, completing the conversion of its second unit in October.Capital investment "remains on schedule and budget", the company said, with commissioning of the new on-site biomass facilities now complete and all four storage domes now in service.As such, Drax, which could be in line for a financial penalty from Ofgem after the regulator investigated its non-compliance with the Community Energy Saving Programme, said: "These factors underpin our expectations for the full year, which remain unchanged."Margins in the power market have been hit by falling coal and gas prices resulting from lower demand earlier in the year.In August, Drax lost a court appeal to gain government "investment contract" incentives for its second power-generating unit.An investment contract would have offered a government guarantee on electricity prices over the next 15 years, but instead the UK Court of Appeal confirmed the unit's eligibility under the previous support scheme known as Renewables Obligation - which offers less price certainty.