Drax Power forecast to shift even larger volumes of power through retail arm in 2013

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23 May 2013, Electricity

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B2B energy retailer Haven Power has been on a significant acquisition drive since 2011. It has seemingly redoubled this effort in the past few quarters, picking up customers using the hook of competitive pricing allied with superior customer service. This strategy puts heavy strain on an already under pressure margin, with Drax Power admitting in its recent annual report that it expects "Haven Power to make a modest loss up to 2015."

Datamonitor's soon to be published "Structural Balances of Key Power and Gas Retailers in Great Britain" shows this may be due to a change in Drax Power's market position, specifically in relation to its relationship with Centrica. Contracted power sales to Centrica were around 7TWh in 2012 but will be significantly lower in 2013, in the region of 2-3TWh. While some of this difference will likely head straight to the wholesale market, Drax Power has stated it considers retail sales "a credit-efficient alternative to selling power in the wholesale market." This shines a light on the likely motive for Drax touting Haven Power to be a 10-15TWh per annum retailer in the near future.

Market participants can expect Haven Power to continue its drive for customers and volume in the B2B market until at least 2015, with Drax Power's healthy coal generation margins providing the safety net for any losses that Haven racks up. The current "bark spread" situation (the profitability of biomass generation) means that Drax's 2012 biomass burning has been at a loss. Looking further ahead, if this continues beyond when Drax must convert fully to biomass, Haven's retail strategy will need to change beyond all current recognition.

Datamonitor's "Structural Balances of Key Power and Gas Retailers in Great Britain" report will be available on the Knowledge Center as an Excel databook containing gas/power retail sales, generation output, and capacity, and trade requirements from 2009 to 2012 with a forecast for 2013.

www.datamonitorenergy.com / asken@datamonitor.com / @DatamonitorEN

Source: MarketLine

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