Drax Eyes Possible Sale of New Gas Plants With State Guarantees

(Bloomberg) -- Drax Plc is considering selling the new natural gas-fired power capacity the utility won in the U.K.’s latest electricity capacity auction.

The power producer was awarded 15-year agreements worth about 230 million pounds ($321 million) for three yet-to-be-built open cycle gas turbine projects, Drax said. A fourth participated in this week’s auction for the guaranteed contracts to provide electricity at peak times, but exited above the clearing price.

“Drax will now evaluate options for all four OCGT projects including their potential sale,” the company said in a statement.

OCGTs are designed to fire up at short notice and are usually used to balance the grid rather than generate around the clock. As the U.K. transitions toward a net-zero economy dependent on variable wind generation, fast-response technologies are seen as increasingly important to a stable energy system.

The total capital cost of the Drax projects is about 80-90 million pounds each, with a build time of about two years.

Drax was awarded the contracts due to start in 2024 even as it increasingly positions itself as a renewable-energy company with biomass at the center.

“These assets do not sit comfortably within Drax’s portfolio,” analysts at Barclays Plc said in a note.

Drax has pledged to be carbon negative by 2030 using technology to remove carbon from the atmosphere. The company completed the sale of its large-scale gas generation assets to energy trader Vitol Group in March and has shelved plans to develop a new combined cycle gas turbine project on the site of its retired coal units.

Drax Sells Three Large U.K. Gas Plants to Energy Trader Vitol

“The direction of travel is clear - Drax is focused on renewable generation from sustainable biomass and hydro – as well as development of negative emissions from bioenergy with carbon capture and storage,” a company spokesperson said.

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