Drax response to Banding Review

RNS Number : 4569I

Drax Group PLC

25 July 2012

 



25 July 2012

Drax Group plc

("Drax" or the "Group")

Symbol:DRX

GOVERNMENT DECISIONS PROVIDE SUPPORT TO TRANSFORM DRAX

The Government has today published its final decisions on support levels for the various renewable technologies under the Renewables Obligation (RO), which will come into effect from April 2013.

The Government has decided to create support levels for electricity generated from sustainable biomass at existing fossil fuelled power stations on an individual generating unit by unit basis, and not, as previously proposed, on a power station wide basis.

1.0 ROC/MWh will be awarded for generating units that are fully converted to burn biomass⁽¹⁾. Lower but graduated support will be available for units burning biomass but not fully converted. The support levels for fully converted units will be grandfathered.

Drax continues to make very good technical progress with its biomass research and development work and is particularly encouraged by the preliminary results from very recent unit combustion trials, where a single generating unit was operated successfully on a fully converted basis for a sustained period. Fuel purchased to support these critical trials has resulted in the Group incurring approximately £20m more in research and development costs for 2012 than originally envisaged, with the fuel burnt at a loss relative to the current support level of 0.5 ROC/MWh. However, the trial results confirm we can fully convert Drax units to burn biomass.

Commenting on the new levels of support for biomass announced by the Government, Dorothy Thompson, Chief Executive of Drax said:

"We appreciate the extensive work undertaken by the Government on biomass and we welcome the confirmation of the strategically important role that electricity generated from sustainably-sourced biomass can play in the UK renewable energy mix.

"As a result of our excellent technical progress and the Government's conclusions on support levels, we are confident that we can transform Drax into a predominantly biomass fuelled generator. Initially we expect to convert three of our six generating units. It will take some time to develop all of the sustainable biomass supply chain to fuel these units, but we believe that within approximately five years Drax could become a predominantly biomass fuelled plant. We are currently refining our previously announced £650 million to £700 million strategic capital investment plan, but remain confident of the overall scale. We will continue to work with Government and Ofgem on the design of practical and efficient regulations for the implementation of these decisions.

"This transformation will be achieved through major capital investments at Drax and across the supply chain, securing significant numbers of jobs, primarily in the North East. We remain keen to contribute fully to the UK's renewables and carbon reduction targets by producing low cost, reliable and flexible renewable electricity."

Notes

(1)   A fully converted unit must generate at least 90% output from sustainable biomass.

Management Conference Call

Management will host a conference call for analysts and investors at 2:30pm (UK time) today, Wednesday 25 July 2012. A recording of the call will be made available afterwards. Access details are set out below.

Event Title	Drax Group plc: Conference Call
Event Date	Wednesday 25 July 2012
Event Time	2.30pm (UK time)
UK Toll Number	0203 140 0722
UK Toll-free Number	0800 368 1916
US Toll Number	1718 705 7514
US Toll-free Number	1855 716 1594
Instant Replay
Playback Number	020 3140 0698
Playback Toll-free Number	0800 368 1890
Passcode	386037#

Half Year Results Announcement

The Group will be announcing its Half Year Results for the six months ended 30 June 2012 on Tuesday 31 July 2012. Management will host a presentation for analysts and investors at 9:00am (UK Time), Tuesday 31 July 2012, at Deutsche Bank, Winchester House, 1 Great Winchester Street, London, EC2N 2DB. Attendance and remote access details will be circulated in advance of the event.

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Enquiries:

Drax Investor Relations: Michael Scott

[phone]

Media:

Drax External Affairs: Melanie Wedgbury

[phone]

Brunswick: Michael Harrison / Andrew Porter

[phone]

Website: www.draxgroup.plc.uk

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