Drax (LSE:DRX) has taken commercial control of the Hirwaun Power Station in South Wales following the completion of commissioning works, marking the company’s first operational 299MW open cycle gas turbine (OCGT) facility. The asset was acquired from developer Metlen Energy & Metals and represents the first of three planned OCGT plants across England and Wales that are expected to deliver a combined capacity of approximately 900MW.
The Hirwaun facility forms part of Drax’s strategy to expand its flexible generation portfolio and will generate income through a combination of peak electricity production, grid balancing and support services, and long-term Capacity Market contracts. These index-linked agreements extend to 2039 and are valued at more than £260 million across the portfolio.
Drax will oversee the operation and dispatch of the plants from its central control functions, while Siemens Energy has been appointed to manage day-to-day site operations. The facilities have been designed to respond rapidly to fluctuations in electricity demand and will also be capable of operating as synchronous compensators, helping to maintain grid stability as renewable generation continues to increase across the UK energy system.
The company’s outlook is supported by solid cash generation, manageable debt levels and favourable valuation metrics, including an attractive earnings multiple and dividend yield. Technical indicators remain constructive, with the shares trading above key moving averages, although momentum indicators are broadly neutral. Management has also reiterated its longer-term free cash flow and shareholder return targets, though these positives are balanced by impairment charges and near-term earnings pressures associated with the UK’s new Contracts for Difference framework.
More about Drax Group plc
Drax Group plc is a UK-based energy company focused on power generation, flexible energy infrastructure and grid support services. Alongside investments in open cycle gas turbine facilities, the company is developing battery energy storage projects to help support the transition to a lower-carbon electricity system while enhancing energy security and grid resilience across the UK.
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