Drax upgrades FY profit expectations, shares power ahead

Drax shares rallied on Thursday as the renewable power generator upgraded its full-year earnings expectations after agreeing to keep its coal-fired power plan units open this winter.

In a statement after the close on Wednesday, Drax said it now expects 2022 adjusted earnings before interest, tax, depreciation and amortisation to be "slightly above" the top of the range of analyst expectations of £584m to £635m, subject to continued good operational performance.

Drax said that at the request of the UK government, it has now entered into an agreement with National Grid - in its capacity as the electricity systems operator - pursuant to which its two coal-fired units at Drax Power Station will remain available to provide a "winter contingency" service to the UK power system from October 2022 until the end of March 2023.

The units will not generate commercially for the duration of the agreement and only operate if and when instructed to do so by National Grid.

Drax will be paid a fee for the service and compensated for costs incurred, including coal costs, in connection with the operation of the coal units in accordance with the agreement.

At 1000 BST, the shares were up 6.7% at 666.50p.