Drax Group plc has provided a trading update, stating that its 2023 Adjusted EBITDA and EGL expectations are in line with consensus estimates. The company has made progress on its UK BECCS (Bioenergy with Carbon Capture and Storage) project and expects a bridging mechanism consultation to be released soon. Drax has also agreed to sell up to one million tonnes of biomass to a major European utility for projects including biofuels. The company has completed a £150 million share buyback program. Drax Power Station is the UK's largest provider of renewable energy and contributes to the country's security of supply. The company is excited about the opportunity to deliver BECCS in Yorkshire, which could help the UK meet its net zero targets and create thousands of new jobs. Drax is also exploring options for BECCS projects in North America.
The company's UK generation assets, supported by its integrated global biomass supply chain, have performed well, providing flexible and reliable renewable power generation and system support services. As of November 30, Drax had over £4.4 billion of forward power sales between 2023 and 2025. The company has also contracted 3.3TWh of CfD (Contracts for Difference) generation for 2023 and 2024.
Drax's pumped storage and hydro assets, including Cruachan pumped storage and the Lanark and Galloway hydro schemes, continue to perform well. The company expects the 2023 full-year Adjusted EBITDA for these assets to be significantly above 2022. Drax believes that the retirement of dispatchable assets and increased reliance on intermittent renewables in the UK system will drive further demand for dispatchable power and system support services, creating long-term earnings opportunities. The company is developing options for Cruachan, including a 600MW expansion.
In terms of biomass generation and supply chain, Drax has a robust and diversified global supply chain and operates around five million tonnes of production capacity across its own facilities in the US and Canada. The company has dedicated port facilities in the UK and ample biomass storage capacity. Drax currently has visibility of around one million tonnes of biomass in inventories, adding to the resilience and security of the UK power market. Drax operates a differentiated biomass model and sees the current global biomass market as representing both short-term risks and long-term opportunities.
Drax's pellet production business has delivered a robust performance and has commenced supply of a new five-year contract with a Japanese customer. The company has contracted over 17 million tonnes of long-term biomass sales to third parties in Asia and Europe. Drax has also agreed to sell up to one million tonnes of biomass to a major European utility for projects including a biofuel project. The company believes that these developments demonstrate the growing demand for biomass pellets in Asia and Europe and their wider application in the energy transition. Drax is well-positioned to support increased demand for sustainable biomass in various applications.