Drax, which runs a coal-fired power station in North Yorkshire, has cheered investors with news that since its half year results at the end of July, its trading conditions have generally improved, with full year expectations unchanged on the back of a continued good operating performance.
However, the domestic coal market, where some of its suppliers continue to face challenges, has continued to result in tough market conditions.
The firm said that it has taken advantage of better dark green spreads - the indicators for coal-fired generation of electricity - since the half year point to strengthen its contracted position for the next and the following year.
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The company's positions under contract for this and the next two years are 26.9 terawhatts (twh) in 2012, 20.3twh in 2013 and 7.3twh in 2014, with fixed price power sales at 25.3twh at £51.5 per megawhatts (mwh) in 2012, 17.7twh at £51.8/mwh in 2013 and 4.7twh at £54.1/mwh in 2014.
Drax also announced its plans to raise around £180m through the placement of just under 36.5m new shares to help fund the £650m - £700m required to carry out its plans to turn the company into a predominantly biomass-fuelled generator. The new shares represent around 9.99% of the exisiting issued share capital. The placing price has yet to be determind.
Dorothy Thompson, Chief Executive of Drax said: "This is a hugely exciting time for Drax and our shareholders. We now have the mandate, means and expertise to become a large renewable electricity generator. We will do this by transforming the largest coal plant in the UK into a power plant fuelled predominantly with sustainable biomass. The placing is one of the key building blocks in this transformation.
"The benefits are multiple - securing jobs at Drax and across the UK in the supply chain, providing reliable cost effective renewable power for the consumer in line with government's policy and with our confident belief that this will deliver attractive returns for our shareholders when the transformation is complete."
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