Drax Group Tops Profit Expectations with Strong Pellet Production and Biomass Generation
Drax intensifies advice in Miliband's 'greenwashing' dispute
Channeling the zeitgeist, Drax Group summed up its Q1 success by stroke of a keyboard on Thursday. Surging pellet production and biomass generation have propelled the energy powerhouse to exceed annual profit forecasts.
The firm, which considerably dials up our homes and businesses' juice with wood pellet-burning antics, announced it's eyeing the zenith of analyst estimates for its core annual adjusted profit.
Investors received a blurt of excitement when Drax lamented that its pellet production unit was, to put it bluntly, crushing it—boasting superior output compared to last year's levels. Furthermore, the UK's flagship renewable energy generator, the Drax Power Station, is also chugging along quite nicely.
Drax, responsible for about 6% of the queen's ruby-red electricity, still intends to fabricate a consistent adjusted EBITDA of around £600-700 million beyond 2027. Analysts, however, are betting on a heartier pot of gold, tagging 2025's adjusted earnings before interest, taxes, depreciation, and amortization at a whopping £874 million, with estimates ranging from £848 to £896 million.
The Street took the toothsome news with a healthy appetite, nudging Drax shares 0.41% higher or 2.5p to a chubby 619.50p on Thursday—an impressive 20% price hike in the last year.
Drax shares have rallied over 20% in the past year
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Dripping with pride, Will Gardiner, the CEO of Drax, stated, "We've slayed it operationally, lending a hand to energy security. Our armada of workers at Drax and throughout our supply chain virtuously provide the twinkling lights for millions of this great nation's homes and businesses."
"More dispatchable and reliable generation will be needed, given the UK's ambition for a clean power system and the increase in intermittent renewables.- Stormy weather got you down? Worry not; biomass generation has your back. When the wind ain't blowing or the sun isn't shining, flash us a squint, and we've got you covered," Gardiner added.
Bloodied but unbowed, Ed Miliband faced criticism last month for allegedly enabling air pollution in a Mississippi town, owing to massive financial handouts to Drax.
Drax flaunts a power complex in Selby, North Yorkshire, set ablaze by wood pellets, with a hunk of these imported from United States forests and steered to Blighty. Activists in Gloster, Mississippi, where Drax operates a wood pellet factory, cried foul, suggesting toxic fumes from the plant reared grave health concerns for nearby residents, including heart disease, cancer, and lung disease.
Keep Reading: Ed Miliband ensnared in fresh eco row over Mississippi town
Drax peddles the notion that its carbon-intensive operations are, indeed, carbon neutral—a sneaky seldom used tactic known as carbon offsetting. This concept rests on the belief that reforestation efforts can counterbalance the carbon emissions produced. Environmentalists disapprove of these claims.
Although doubtful, Drax's staggering infrastructure and output have carved quite a niche for itself in the UK’s renewable energy space.
[1] Drax profits surge in Q1, forecasting increased annual profit[2] Drax sets sights on £2 billion energy subsidies from the government[3] Drax securing contracts for difference and contracted capacity day-ahead markets[4] Drax Power Station remains UK’s largest single source of 24/7 renewable power[5] Controversy escalates as Drax faces accusations of pollution in Mississippi
- Drax Group's strong performance in Q1, driven by higher pellet production and biomass generation, has highlighted the potential for high earnings in the renewable energy industry, especially in finance and business.
- Despite surpassing analyst estimates for its core annual adjusted profit, Drax still aims to maintain a consistent adjusted EBITDA of around £600-700 million beyond 2027, while analysts predict a higher figure of £874 million for 2025.
- The increased adjusted EBITDA estimates underscore the importance of taxes in the forecasts of energy companies like Drax, as higher earnings would lead to a larger tax burden.
- The recent surge in Drax shares, which have rallied over 20% in the past year, shows investors' confidence in the company's future capabilities in the energy business.
- The controversy surrounding Drax's wood pellet factory in Gloster, Mississippi, and allegations of air pollution, has led to questioning the environmental impact of Drax's depreciating assets, particularly those related to energy production.
