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Drax to ‘repurpose’ coal generation assets as it slumps to H1 loss

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UK power producer Drax has laid out its intention to repurpose its coal plants after increased depreciation of those assets caused the firm to incur a H1 loss.

Despite EBITDA climbing by nearly 73% to £121 million year-on-year, Drax saw its profit wiped out as a result of spiralling depreciation and amortisation costs, resulting in the group recording a loss before tax of £83 million for the first six months of the year.

In stark contrast, the first six months of 2016 saw Drax record a £184 million profit.

This performance triggered the company to acknowledge a burgeoning need to reduce its exposure to volatility in the commodity markets and address the performance of its legacy coal generation assets.

Drax’s electricity output for the period ending 30 June 2017 stood at 10.7TWh, of which 7.3TWh were produced by its biomass fleet.

The company said that in the future its coal fleet would enjoy an “increased system support role”, which was reflected in marginal growth of revenue from ancillary services. Drax confirmed that it had secured capacity payments worth around £80 million for the period 2017-2021, and this could grow further if other units are successful in upcoming tenders.

Of particular interest is February’s T-4 Capacity Market auction, in which the company confirmed it would enter two rapid response gas projects.

Meanwhile Drax is also trialling the feasibility of converting coal units to fire using 100% compressed wood pellets. The trial, which has been ongoing throughout H1 2017, has been initially branded a success with the unit performing well, however Drax was eager to state that further work was needed to ensure its output was reliable.

Dorothy Thompson, chief executive at Drax Group, said the delivery of renewable electricity would remain at the heart of its business.

“With the right conditions, we can do even more. We are progressing our four new rapid response gas power projects and our research and innovation work has identified potentially attractive options to repurpose our remaining coal assets.

“We continue to play a vital role in the UK's energy infrastructure and our strategy is helping to change the way energy is generated, supplied and used for a better future,” she said. 

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