Drax Group PLC End of Coal Generation at Drax Power Station (2747E)
27 February 2020 - 6:00PM
UK Regulatory
TIDMDRX
RNS Number : 2747E
Drax Group PLC
27 February 2020
27 February 2020
Drax Group plc
("Drax" or the "Group"; Symbol:DRX)
End of Coal Generation at Drax Power Station
Following a comprehensive review of operations and discussions
with National Grid, Ofgem and the UK Government, the Board of Drax
has determined to end commercial coal generation at Drax Power
Station in 2021 - ahead of the UK's 2025 deadline.
Commercial coal generation is expected to end in March 2021,
with formal closure of the coal units in September 2022 at the end
of existing Capacity Market obligations.
Will Gardiner, Drax Group CEO, said: "Ending the use of coal at
Drax is a landmark in our continued efforts to transform the
business and become a world-leading carbon negative company by
2030. Drax's move away from coal began some years ago and I'm proud
to say we're going to finish the job well ahead of the Government's
2025 deadline.
"For over 40 years Drax has played a critical role in the UK's
energy system and is a leading provider of flexible, renewable and
low-carbon energy and the country's largest single source of
renewable electricity.
"By using sustainable biomass we have not only continued
generating the secure power millions of homes and businesses rely
on, we have also played a significant role in enabling the UK's
power system to decarbonise faster than any other in the world.
"Having pioneered ground-breaking biomass technology, we're now
planning to go further by using bioenergy with carbon capture and
storage (BECCS) to achieve our ambition of being carbon negative by
2030, making an even greater contribution to global efforts to
tackle the climate crisis.
"Stopping using coal is the right decision for our business, our
communities and the environment, but it will have an impact on some
of our employees, which will be difficult for them and their
families.
"In making the decision to stop using coal and to decarbonise
the economy, it's vital that the impact on people across the North
is recognised and steps are taken to ensure that people have the
skills needed for the new jobs of the future."
Drax will shortly commence a consultation process with employees
and trade unions with a view to ending coal operations. Under these
proposals, commercial generation from coal will end in March 2021
but the two coal units will remain available to meet Capacity
Market obligations until September 2022.
The closure of the two coal units is expected to involve one-off
closure costs in the region of GBP25-35 million in the period to
closure and to result in a reduction in operating costs at Drax
Power Station of GBP25-35 million per year once complete. Drax also
expects a reduction in jobs of between 200 and 230 from April
2021.
The carrying value of the fixed assets affected by closure was
GBP240 million, in addition to GBP103 million of inventory at 31
December 2019, which Drax intends to use in the period up to 31
March 2021. The Group expects to treat all closure costs and any
asset obsolescence charges as exceptional items in the Group's
financial statements. A further update on these items will be
provided in the Group's interim financial statements for the first
half of 2020.
As part of the proposed coal closure programme the Group is
implementing a broader review of operations at Drax Power Station.
This review aims to support a safe, efficient and lower cost
operating model which, alongside a reduction in biomass cost,
positions Drax for long-term biomass generation following the end
of the current renewable support mechanisms in March 2027.
While previously being an integral part of the Drax Power
Station site and offering flexibility to the Group's trading and
operational performance, the long-term economics of coal generation
remain challenging and in 2019 represented only three percent of
the Group's electricity production. In January 2020, Drax did not
take a Capacity Market agreement for the period beyond September
2022 given the low clearing price.
Enquiries:
Drax Investor Relations: Mark Strafford
+44 (0) 7730 763 949
Media:
Drax External Communications:
Ali Lewis +44 (0) 7712 670 888
Website: www.drax.com
Notes:
END
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