10th Feb 2025 08:39
(Alliance News) - Drax Group PLC on Monday said it has agreed heads of terms with the UK government for the operation of Drax Power Station after 2027.
The Yorkshire, England-based power generator said the contract for difference scheme with a strike price of GBP113 per megawatt-hour applied to all four biomass units.
The company said the terms include a six terawatt-hour per year generation collar, with "flexible operation" to support high and low demand periods.
The contract period stretches from April 2027 to March 2031.
Drax Power Station is the UK's largest power station and provides around 10% of all UK renewable energy.
The firm said it is targeting average earnings before interest, tax, depreciation and amortisation of GBP100 million to GBP200 million pear year from the power station over the agreement period.
It says it is targeting over GBP500 million adjusted Ebitda per year after 2027 from Flexible Generation and Pellet Production.
Drax said that analysis from Baringa Partners LLP says the agreement will result in a reduction in electricity system costs for consumers between GBP1.6 billion to GBP3.1 billion.
Chief Executive Officer Will Gardiner said: "The government's low-carbon dispatchable CfD framework for biomass, announced today, is an investment in UK energy security, which will result in a net saving for consumers and support the delivery of Clean Power 2030.
"Under this proposed agreement, Drax can step in to increase generation when there is not enough electricity, helping to avoid the need to burn more gas or import power from Europe, and when there is too much electricity on the UK grid, Drax can turn down and help to balance the system."
He said: "The size, flexibility and location of the power station makes it important for UK energy security and the proposed agreement helps protect the jobs and skills of today and the future, creating options for billions of pounds of investment in growth across Britain, including the development of large-scale carbon removals and data centres."
Drax Group shares climbed 4.1% to 661.00 pence each in London on Monday morning.
By Michael Hennessey, Alliance News reporter
Comments and questions to [email protected]
Copyright 2025 Alliance News Ltd. All Rights Reserved.