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Drax has insulated itself from weak power prices in a “challenging” market by extending its contracted position, the generating giant revealed in a trading update on Monday morning.
New contracts have been signed extending the generator’s power sales for 2015 and 2016 by 3.4TWh and 2.7TWh respectively. This brings the total contracted position up to 23.8TWh and 12.1TWh for 2015 and 2016.
Despite this, the company admitted that trading conditions “have remained challenging” due to weak gas markets keeping the power price down, and it has sold 22.3TWh of its 2015 contracts at £49.9/MWh, which is slightly below the average price of £50.8/MWh announced in February.
In the trading update, Drax stated the contracts, coupled with the “good operation performance” of its generating units have helped the company to maintain its full-year targets.
This follows news that Thames Water signed a £500 million, five year deal with Drax’s retail arm Haven Power, to provide the water company with renewable electricity.
This has the potential to be extended for two more five year periods, which would increase the total value of the deal to £1.5 billion.
Drax generates around 7-8 per cent of the UK’s electricity and is playing an increasing role in the decarbonisation of the electricity mix as it converts its coal-fired units to burn biomass.
Two out of six units have now been converted and plans are advanced to modify a third unit to high-biomass later this year.
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