Centrica secures major coal priced electricity contract with Drax

Centrica plc today announced it has secured a major five year coal priced electricity supply contract with Drax Power Limited, owner of Drax power station in North Yorkshire. The agreement, which will provide Centrica with access to 600MW of power, brings increased fuel diversity to Centrica’s electricity supply mix, enabling it to further stabilise the cost of sourcing electricity to supply its British Gas customers.

The agreement, which will start in October 2007, will be capable of meeting around 8 per cent of Centrica’s forecast peak residential electricity demand. Drax will supply baseload power to Centrica under a contract linked to international coal prices, which will include seasonal fixed clean dark spreads. The agreement will run to the end of the EU Emissions Trading Scheme phase 2 in December 2012.

Together with Centrica’s existing fleet of gas and renewable power generation assets, its International Power contract and the Spalding tolling agreement, Centrica will now be able to supply 65% of its peak British Gas electricity customer demand from its own sources.

In addition to the agreement with Drax, Centrica expects to consider further power purchase arrangements, tolling deals and equity assets to help supply electricity for its British Gas customers in the future. It is currently in the final stage of evaluating tenders for the construction of a gas fired power station of up to 1010MW at Langage, Devon. Centrica expects to make a final decision on moving ahead to full construction by the summer of 2006.

Sir Roy Gardner, Chief Executive of Centrica, said: “This agreement not only provides us with greater coal exposure but offers a further source from which we can supply electricity to our British Gas customers, in addition to our own gas and renewable generation assets.

“British Gas is a leading household electricity supplier and we will continue to seek opportunities to increase our level of power generation, major contracts and tolling agreements in order to continue to offer competitive prices to our customers.”