Drax announces progress with biomass projects, co-firing

By Erin Voegele | May 12, 2014

Drax Group plc released an interim management statement on May 9, reporting progress with its biomass energy operations and the development of its U.S. pellet plants.

In its statement, the company noted that is making good progress with its biomass transformation and that overall, capital investment remains on schedule and budget. According to Drax, the commissioning of new on-site biomass facilities is scheduled to be completed in the third quarter. The company also specifies that two of its four storage domes are now in service and that the new facility at the Port of Hull is fully operational.

Drax’s first U.S. pellet plant and port facility are expected to begin operations during the first quarter of 2015. The second U.S. pellet plant is currently expected to begin operations during the second quarter of next year.

The company noted its first unit converted to biomass is continuing to perform well and said that good progress is being made with regard to optimization. Drax is also progressing with co-firing opportunities. The company said that one of its coal units began to operate as an enhanced co-firing unit in early May, meaning it will burn a minimum of 85 percent biomass. That unit has begun a phased commissioning process.

In its interim report, Drax also addressed the recent news that the U.K. government cut early contract for difference (CfD) support for one of its two remaining biomass unit conversions. In April, Drax announced it would legally challenge that decision. http://biomassmagazine.com/articles/10307/decc-finalizes-early-cfds-drax-challenges-subsidy-change

In its interim report, Drax said that the government’s decision has caused some uncertainty, which will lead to a delay in biomass supply and logistics development. “We do, however, remain fully-committed to our strategy of transforming Drax into a predominantly biomass-fueled generator, initially through the conversion of three of our six generating units, with a fourth unit conversion under evaluation,” said the company in the report.

Drax is expected to release its half-year results on July 29. In its recent interim report, the company said that power prices have fallen in recent months, due in part to mild weather across Europe. The company also indicated it expects to experience further weakness in renewable obligation certificate (ROC) prices this year. As a result, full year EBITDA and underlying earnings per share for the year are expected to be below current market forecasts, unless markets improve in coming months. Drax also noted that it has agreed to a new private placement for £100 million ($168.66 million) with various funds managed by M&G Investments. The company said the transaction strengthens its balance sheet and maintains a smooth profile for the group’s debt maturities.