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Drax to end coal generation in 2021 after debt soared to £841 million in 2019

Image: Drax.

Image: Drax.

Drax announces it is to eliminate coal from its generation from next year, as it unveils financial results for 2019.

From March 2021, the company plans on not using coal for power generation, four years earlier than previously announced and ahead of the government’s 2025 deadline.

However, Drax’s remaining two coal units are to stay available until September 2022 in line with its Capacity Market agreements.

Will Gardiner, CEO of Drax, said the decision was a “landmark” in the company’s continued efforts to transform the business.

“Drax’s journey away from coal began some years ago and I’m proud to say we’re going to finish the job well ahead of the government’s 2025 deadline,” Gardiner added.

The UK’s coal fleet is rapidly declining, with six power stations still operating, and two of those set to close next month. The government is currently consulting on bringing its deadline for the end of coal generation forward to 2024.

Dr Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit (ECIU) said the accelerated closure of the UK’s coal fleet shows how rapidly the “renewable revolution” has changed the power system.

“Undercut by ever-cheaper clean power, coal units have been struggling for years and closing early is a sign of the times.

“Getting the UK back on track to meet these goals is the next step for the Government, which will surely be beginning to plan a similar retreat from high carbon natural gas,” Marshall added.

Drax’s announcement comes as it reveals its financial results for 2019, with little change to its operating profit compared with 2018, having risen slightly from £60 million to £62 million, despite its adjusted EBITDA soaring to £410 million from £250 million in 2018.

However, it saw a significant increase in net debt from £319 million to £841 million, including cash and cash equivalents of £404 million, with its profit after tax falling from £20 million to £1 million.

Gardiner said Drax has delivered a “strong set of results”, following the successful integration of new hydro and gas generation assets, while also making good progress with its strategic initiatives to build a long-term future for sustainable biomass.

“Drax achieved these results while still delivering a 47 percent reduction in its carbon emissions compared with the previous year.”

The company saw £78 million of Capacity Market agreements following its reinstatement, with its adjusted EBITDA for power generation up 76% to £408 million compared to £232 million in 2018.

In December 2019, Drax announced its intention to become carbon negative by 2030 by generating power through biomass alongside carbon capture and storage (BECCS).

Drax Power Station in North Yorkshire is to play a key role in this. Whilst it has been generating electricity using coal since the 1970's, four of its units have been converted to biomass over the last decade.

However, the end of coal generation in its other two units in 2021 will result in a reduction of the workforce at the power station, with trade unions and employee representatives to be consulted and support provided to those affected, Drax said.

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