By Sinchita Mitra
(Reuters) -Power generation Drax Group (LON:DRX) plans to invest up to 30 million pounds ($36 million) in the United States to take advantage of the country's law to promote low carbon investment, it said on Thursday, after posting profit ahead of expectations.
Despite the upbeat tone, shares in the company were down 3.7% at 1100 GMT as analysts said weaker forward sales of power could impact core earnings next year.
President Joe Biden in 2022 signed the $430 billion Inflation Reduction Act (IRA) into law, which companies see as opening up lucrative opportunities to develop renewable energy, although European governments have raised concern it could lure investment away from Europe.
Drax Chief Executive Will Gardiner said the company had identified its first preferred sites to expand its Bioenergy with carbon capture and storage (BECCS) and was assessing further sites.
He said Drax was well positioned to enter the IRA's "global race for investments into renewable energy and carbon removals".
Drax has 18 pellet plants, which produce sustainable biomass, across Canada and the United States and plans to expand the sector.
Drax, which provides around 7% of Britain's electricity through its network of power stations, said annual adjusted core profit rose 83.6% to 731 million pounds, beating a company-compiled analyst consensus of 699 million pounds.
It increased its total dividend by 11.7% to 21 pence per share and also said its renewables generation, which includes biomass, hydro and pumped storage, collectively supplied up to 70% of Britain's renewable power in certain periods last year.
Demand for renewable energy in the country has risen after Russia's invasion of Ukraine last year heightened concerns over Europe's power supply, pushing gas prices to record highs.
Although full-year profit beat expectations, analysts from Credit Suisse and J.P. Morgan said falling forward sales could hit earnings expectations for 2024.
"We are already below consensus for FY24 EBITDA and we believe the market is pricing in an outlook even below our estimates," J.P. Morgan said in a note.
Net debt also rose to 1.21 billion pounds for the year ended Dec. 31, from 1.11 billion pounds last year, the company said.
($1 = 0.8286 pounds)