Drax to add 350,000 metric tons of pellet capacity

By Erin Voegele | July 25, 2019

Drax Group plc released its half-year financial report July 24, reporting increased profit. The company also discussed plans to expand pellet production capacity and reported an increase in biomass power output.

According to the report, Drax produced 650,000 metric tons of wood pellets during the first half of 2019, down slightly from 660,000 metric tons reported for the same period of last year. The company primarily attributed the decrease to high levels of rainfall in the U.S. gulf, which restricted the level of commercial forest extraction, restricted wood pellet production and impacted the shipment of pellets out of the port of Baton Rouge. Drax said both commercial forestry processes and pellet production have increased in recent months.

Drax also reported good progress with cost reduction initiatives at its U.S. pellet plants. At the Urania, Louisiana-based LaSalle pellet plant, Drax said a new rail spur became operational in May that is reducing transportation cots to the Port of Baton Rouge. In addition, a collocation agreement with Hunt Forest Products also led to the development of a sawmill adjacent to the LaSalle plant. The site is now operational and allowing the pellet plant to access a greater proportion of low-cost sawmill residues. In addition, Drax Biomass’s port facility at Baton Rouge was commissioned in May. The company said the enlarged chambering yard at the Port of Baton Rouge will allow 80-car train sets to operate from its LaSalle and Morehouse pellet plants.

Drax Biomass plans to expand pellet capacity at its three existing pellet plants by 350,000 metric tons over the next two years, representing an investment of £50 million ($62.27 million). Following the capacity expansion, the plants are expected to have a combined capacity of 1.85 million metric tons annually.

Regarding biomass power, Drax said the company completed two planned biomass unit outages during the first half of the year, including the unit that was converted to biomass last year under the ROC scheme. “The operational experience with this low-cost conversion has been encouraging,” said the company in its report. “In the second half of 2019 we expect to complete a more substantial major planned outage on a second unit operating under the ROC scheme. This will include a high-pressure turbine upgrade, which we expect to enhance efficiency and reduce the cost of production.”

Drax said biomass output reached 6.4 terawatt hours (TWh) for the first half of 2019, up 2 percent when compared to the same period of 2018. For the full year, Drax expects to realize higher biomass generation and a growth in pellet production.

The company reported £138 million in adjusted EBITDA for the first half of 2019, up from £102 million during the first half of last year. Operating profit was £34 million, up from £12 million, while profit was £4 million, compared to an £11 million loss. Basic earnings per share increased to 1 pence, compared to a loss of 1 pence for the same period of 2018.