Drax bids to acquire two distressed pellet plants

By Anna Simet | February 28, 2017

Drax announced on Feb. 27 that it is participating in separate processes for the acquisition out of bankruptcy for the operating assets of Texas Pellets in Woodville, Texas, and Louisiana Pellets in Urania, Louisiana.

Drax notified investors that it has submitted initial cash bids for the assets as part of an auction process, which will be held on March 1 and March 2. “Whilst these are binding bids, and could be accepted by the sellers, it is expected that the successful buyer will be determined through auctions,” Drax said.

German Pellets, builder of both plants, filed for bankruptcy protection in February 2016.

The Louisiana plant, commissioned in early 2015, has a reported production capacity of 578,000 metric tons, and though German Pellets reported plans for an expansion project to its double capacity, it was not completed.

The Texas plant, which began operating in 2013, has an annual production capacity of about 500,000 metric tons. It leases a five-silo pellet storage facility located at Port Arthur, Texas, which can hold 75,000 tons of wood pellets and includes a loading device for vessels up to Panamax size, or about 60,000 tons, according to previous statements by German Pellets.

In a recent investor call, Drax indicated its potential wood pellet production expansion via acquisition of distressed plants, to increase self-supply and support 20 to 30 percent of its generation requirement.  The acquisition of the Louisiana and Texas plants would help meet that goal, Drax said.

Update on 3/1/2017:

Drax said it had been notified that the sellers of Texas Pellets and Louisiana Pellets have delayed the processes for the sale out of bankruptcy of these assets, originally scheduled for March 1 and March 2, and that it is expected these processes will continue during March.