Drax speeds up plans for coal conversion to gas

[ LONDON] Britain's Drax, which once owned Europe's most polluting coal-fired power plant, is speeding up plans to convert one of its six units to gas and could bid for a capacity contract as early as 2019, its chief executive said on Wednesday.

Under pressure from government plans to close all coal plants by 2025, Drax has increasingly turned to burning compressed wood pellets, or biomass.

It is also applying for permits to convert one of its units to run on gas, underlining the more profitable outlook for using gas plants to balance Britain's growing renewable energy output. "We have started the planning process to get permission to get one or more of these (gas) conversions," Chief Executive Dorothy Thompson told Reuters.

She said the most likely scenario was for one unit to be converted and that Drax could participate in bidding for a 15-year capacity market contract in the 2019 auction.

Britain auctions long-term contracts under which power producers commit to providing back-up power supply if required which offers generators a lucrative way to secure future income.

In a setback to its biomass conversion plans, Drax said a unit at which it has been trialling to burn biomass only will be returning to running entirely on coal this winter as it will be producing more reliably.

Drax said its full-year earnings target remained on track despite a one-off foreign exchange hit which sent it to a first half loss.

Drax, which raised its dividend payments last month, reported a loss of £83 million (S$147.7 million) versus a £184 million profit a year earlier.

Its shares were down 4.6 per cent at 0732 GMT.

Underlying earnings were up 73 per cent at £121 million mainly due to Opus Energy, a business energy supplier it acquired last year. However, it took a £65 million hit on unfavourable currency movements.

REUTERS