Drax Group PLC has released its Q1 2024 trading update, highlighting strong system support and generation performance, as well as balance sheet refinancing. The company's CEO, Will Gardiner, expressed excitement about the opportunity to deliver BECCS at Drax Power Station, potentially helping the UK meet its net zero targets and supporting long-term energy security. The company is also developing options for BECCS projects in North America.
The update emphasized the strong performance of Drax Power Station, the UK's largest source of 24/7 renewable power, and its integrated global biomass supply chain. The company believes that the asset will play an integral role in the UK's energy transition. Additionally, Drax's pumped storage and hydro business is performing well, providing flexible and renewable power generation and system support services.
Drax is also constructing three new Open Cycle Gas Turbines with a combined capacity of approximately 900MW, with commissioning expected to take place from September 2024. The company has over £2.9 billion of contracted forward power sales between 2024 and 2026 on its ROC, pumped storage, and hydro generation assets.
The update also mentioned the positive start to the year for Drax's pellet production business, which operates a differentiated model from its peers and sees the current global biomass market as representing a favorable balance of risks and opportunities for the Group. Drax expects biomass demand to grow, especially for BECCS and sustainable aviation fuels.
In terms of financials, Drax completed approximately £408 million of new term-loan facilities, extending the Group's maturity profile beyond 2027. The company also priced a new €350 million five-year bond issue. These proceeds will be used for the repayment of 2025 maturities, and the Group has launched a tender offer process for its €250 million 2025 bond and announced the full redemption of its $500 million 2025 bond.
The update also mentioned an investigation by Ofgem into Drax Power Limited's annual biomass profiling reporting under the Renewables Obligation scheme, with no established non-compliance affecting the issuance of ROCs. Additionally, the UK Government launched a consultation on a bridging mechanism to support the development of BECCS.
Overall, Drax Group PLC expects its 2024 full-year Adjusted EBITDA to be in line with analysts' consensus estimates, subject to continued good operational performance.