Drax Group, the operator of the largest power facility in the UK, has revised its profit forecasts upward as it anticipates reduced contributions from wind farms to the national energy grid.

Situated in North Yorkshire, Drax now expects its adjusted earnings to reach between £993 million and £1.04 billion, aligning with the higher demand for its plants, which produce energy by combusting wood pellets sourced from North America, along with its pumped hydro storage operations.

For its biomass facility, Drax has secured contracted power sales amounting to 11 terawatt hours (TWh) this year, with expectations of 9.7 TWh for next year and 6.8 TWh in 2026.

This guidance includes a significant £25 million penalty imposed by Ofgem, marking the second-largest fine ever issued by the energy regulator, following inaccuracies in sustainability reporting related to wood pellet sourcing. Drax plans to resubmit its compliance figures concerning the types of wood used in its operations.

Additionally, the updated outlook accounts for £7 million that has been reserved for refunds to customers of Opus Energy, the smart metering entity it divested earlier this year, covering overcharging incidents over the past decade.

Drax has set ambitious targets, aiming to exceed £500 million in adjusted earnings by 2027, which includes over £250 million from its pellet production division.

Due to delays in obtaining grid connections, three new open-cycle gas turbines that were intended to begin operations before year-end will not commence until early next year.

Located in Selby, North Yorkshire, the Drax power station accounts for approximately 4 percent of the UK’s electricity generation. The facility has maintained support from various governments by asserting its ‘carbon neutral’ status, claiming that the carbon absorption of the trees used for energy production offsets emissions.

However, a report by the think tank Ember identified Drax power station as the largest single emitter of carbon dioxide in the UK, a claim that Drax has dismissed as inaccurate.

The current subsidy framework is set to conclude in 2027, and Drax is pursuing an extension of these financial supports until 2030. By then, it plans to convert at least one of its units to use biomass equipped with carbon capture and storage technology, referred to as Beccs. The company is awaiting a governmental decision concerning the extension of fiscal support.

According to a report detailing Britain’s pathway to decarbonizing its electricity supply by 2030, the operator responsible for the country’s energy stability anticipates significant biomass generation and at least one Beccs unit to be operational by the end of the decade.

Will Gardiner, the Chief Executive of Drax, emphasized that the company’s £2 billion investment in Beccs is reliant on obtaining further governmental clarity regarding support mechanisms needed to sustain Drax power plant’s operations beyond 2027.

The FTSE 250 firm plans to disclose its full-year financial results on February 27 and has initiated the first phase of a £300 million share buyback program.

In afternoon trading in London, Drax shares increased by 29 pence, or 4.5 percent, reaching 671 pence.