- Full-year adjusted earnings expected slightly above expectations
- Company says generated 20% of UK renewables at peak demand in 2022
- Analyst notes ‘high pricing is persisting for longer’
Strong demand for renewable power has seen Drax (DRX) lift its full-year adjusted earnings guidance ‘slightly’ above analysts’ expectations - demonstrating the key role the company is playing in addressing the current energy crisis.
Shares in the power provider sank in October thanks to a Panorama investigation which cast doubt on the company’s claims for biomass as a renewable energy source - its lawyers have subsequently written to the BBC and it has firmly refuted the programme’s arguments.
Sentiment also wasn’t helped by a mild autumn but, as National Grid’s (NG.) recent actions in putting two of the company’s coal plants on standby demonstrated, freezing temperatures have put renewed pressures on energy supply. After gaining 10% over the last month the shares are steady today.
According to company-compiled consensus forecasts Drax had been expected to post adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to be in a range of £540 million to £606 million.
OPTIMISING BIOMASS OPERATIONS FOR A HARSH WINTER
Drax said it generated 20% of UK renewables at peak demand from January to November. The company is also busily optimising its biomass operations to ensure it has capacity to help see the UK through a difficult winter.
Analyst Adam Forsyth from clean energy financial services firm Longspur Capital said Drax’s guided contracted pricing levels suggest ‘high pricing is persisting for longer and Drax should benefit accordingly.
‘Drax has also taken advantage of some relative gas and power price weakness in October to reprofile its forward power sales and optimise biomass sales between own use and third-party supply taking advantage of high pellet prices. The pumped storage and hydro assets have benefited from system stability support activity, and we expect this to continue.’
