The Need for Power:K-Fuel Upgrades Substandard Coals:
No Doubt About It Substandard Coal is Valuable:
K-Fuel enhances BTU content.
Drax burned by soaring coal costs
4 hours ago
The owner of Europe's largest coal-fired power station said profits had been squeezed by falling electricity prices and surging costs.
North Yorkshire-based Drax said average electricity prices fell to £45.30 per megawatt hour in 2007 compared to £48.90p the previous year.
Meanwhile strong demand from China and India as well as production problems in Australia saw coal prices almost double to 127 US dollars (£63.90) a tonne over the year.
Drax - which burned 9.8 million tonnes of coal last year - felt the impact in its pre-tax profits, which fell 29% to £449 million for 2007.
Its plant near Selby has six generators capable of producing 4,000 megawatts - twice the size of the next largest coal-fired power station - and around 7% of the UK's electricity needs.
But the company saw weaker wholesale electricity prices in an unusually warm winter at the beginning of last year, which also lowered the price of its forward contracts.
The mild weather and higher UK supplies hit wholesale gas costs, lowering Drax's electricity prices in turn. Gas prices have since climbed higher following surging crude oil costs in the latter half of 2007, prompting hikes from five of the UK's "big six" energy firms.
Drax added that it expects power markets to tighten in the near term as older stations are retired by 2015 under new European regulations on power plants.
The company said it had made "good progress" with the improving its environmental performance and upgrading its turbines under a £100 million investment programme.
It has set itself the target of producing 10% of its output from renewable biomass sources by the end of 2009, reducing carbon emissions by more than three million tonnes a year. The drive comes despite a 75% rise in wheat and rapeseed costs last year, which led it to shelve plans for a rapeseed crushing plant.