UK's Drax considers selling four gas projects

By Nina Chestney

LONDON (Reuters) - British power generator Drax is evaluating its options after a British power capacity auction and could sell four open-cycle gas turbine (OCGT) projects, it said on Thursday.

Drax provisionally secured 15-year backup power agreements worth a total 230 million pounds ($321 million) for three new 299 megawatt (MW) OCGT projects at sites in England and Wales.

Drax has said the capital cost for each project is about 80 to 90 million pounds with a build time of some two years, putting the total value of the agreements below the development costs.

Another OCGT project participated in the auction but dropped out above the clearing price and did not secure an agreement.

"Drax will now evaluate options for all four OCGT projects including their potential sale," the company said.

"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 BECCS," a spokeswoman said, referring to bioenergy with carbon capture and storage.

Analysts at Barclays said the open-cycle gas plants would not fit with Drax's ambitions to become a negative carbon emissions company.

Last month, Drax said it would abandon plans to build a new gas-fired power plant to replace its existing coal-fired power units at its North Yorkshire site as it strives to become carbon negative by 2030.

Commercial coal generation at the Drax power station will end this month. The rest of the units at the plant run on biomass.

"Whilst OCGTs will be needed to balance the increasingly volatile power markets as renewable penetration rises, these assets do not sit comfortably within Drax's portfolio," the Barclays analysts said in a research note.

The three power capacity agreements are for the delivery period from October 2024 to September 2039 at a price of 18 pounds per kilowatt per year, Drax said.

($1 = 0.7171 pounds)

(Reporting by Nina Chestney; Editing by David Clarke)