Drax profit soars; plans to invest GBP3 billion in renewable energy

(Alliance News) - Drax Group PLC on Tuesday posted a surge in half-year profit, as it plans to invest further into renewable energy sources.

The Yorkshire-based power generation firm reported that in the six months to June 30, revenue was up 64% to GBP3.56 billion from GBP2.17 billion

Pretax profit multiplied four-fold to GBP199.9 million from GBP51.8 million in 2021.

Adjusted earnings before interest, tax, depreciation and amortisation rose 21% to GBP225 million in the half-year, from GBP186 million a year before.

Drax explained that this "strong" performance reflects increased pellet sales, a strong generation performance across its portfolio and improved profitability in its Customers business.

Notably, its pellet production business in North America reported Ebitda of GBP45 million, up 13% year-on-year from GBP40 million, while its Customers business posted Ebitda of GBP24 million, swinging from a GBP5 million loss.

The company also noted that it generated 5% of the UK's electricity between April 2021 and April 2022, the most recent period for which data is available, and 11% of the UK's renewable electricity over the same period, making Drax the "largest" renewable generator by output.

"As the UK's largest generator of renewable power by output, Drax plays a critical role in supporting the country's security of supply," Chief Executive Officer Will Gardiner noted.

The company announced an interim dividend of 8.4 pence per share, up 12% from 7.5p for the same period in 2021. Drax expects a full-year dividend 21p, up 11% from 18.8p in 2021.

Looking ahead, Drax said that it backs its full-year adjusted Ebitda expectations. At the start of July, the company raised its 2022 expectations, anticipating Ebitda to be between GBP584 million and GBP635 million.

It explained that this reflects "optimisation of biomass generation and logistics to support UK security of supply this winter when demand is high, a strong pumped storage performance and agreement of a winter contingency contract for coal".

At the start of July, Drax partnered with FTSE 100 electricity systems operator National Grid PLC at the request of the UK government. Under the agreement, Drax's two coal-fired units at Drax Power Station must remain available to provide a winter contingency service for the UK power system from October until the end of March.

Drax said the request from the government is in response to increased pressure on European gas markets and concerns about electricity security of supply in the UK in the winter.

Further, in line with its strategy to 2030, Gardiner added: "In the UK and US we have plans to invest GBP3 billion in renewables that would create thousands of green jobs in communities that need them, underlining our position as a growing, international business at the heart of the green energy transition."

Working towards this, Drax said it expects capital expenditure in all of 2022 to be between GBP290 million and GBP310 million, including GBP120 million for open cycle gas turbine projects.

Shares in Drax were down 1.6% to 766.00 pence each in London on Tuesday morning.

By Sophie Rose; sophierose@alliancenews.com

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