Drax increases pellet capacity, plans fourth unit conversion

On Feb. 27, Drax Group plc released 2017 financial results, reporting improved earnings from biomass generation and Opus Energy. During an investor presentation, the company provided insight into its future bioenergy plans.

Drax reported EBITDA of £229 million ($315.15 million) for 2017, up 64 percent from the £140 million reported for 2016. Pellet production EBITDA increased by £12 million, reaching £6 million. Will Gardiner, chief executive of Drax, called 2017 “a transformational year for Drax Biomass,” noting that last year was the first time the division delivered positive EBITDA. Power generation EBITDA also increased, reaching £238 million, up £64 million when compared to 2016. Business-to-business energy supply EBITDA increased as well, reaching £29 million, an increase of £33 million when compared to the previous year.

Pellet production by Drax Biomass increased 35 percent last year, reaching approximately 800,000 metric tons, up from 600,000 metric tons in 2016. Expansion projects at the Amite and Morehouse pellet plants were completed last year, and the newly acquired LaSalle Bioenergy facility began commissioning during the fourth quarter.  

According to Gardiner, Drax Biomass began producing consistently at nameplate capacity at the Morehouse and Amite facilities during the fourth quarter. “We also completed our dry shavings projects on time and to a budget of £10 million, increasing capacity by 75,000 tons at each plant,” he said. “These projects also helped us significantly reduce the cost of production, thereby moving us towards our long-term target of making biomass viable without government support.”

Gardiner also noted Drax Biomass purchased and successfully recommissioned LaSalle Bioenergy last year. “The total investment, including upgrade, of £15 million is approximately half the cost of a new build plant,” he said. “We are already ramping up, and on some days are producing at levels close to our other plants. As a result, we now have about 1.5 million tons of our own capacity, closing in on our target of 2 to 2.5 million tons, or approximately 30 percent of self-supply.”

“We will continue to develop projects to expand our capacity at our own sites,” Gardiner continued. “These projects have excellent returns and have the added benefit of reducing our pellet production costs. And, we will also look opportunistically at acquisitions.”

Gardiner also spoke briefly about the recent decision to move the U.S. headquarters for Drax Biomass from Atlanta, Georgia, to Monroe, Louisiana. “We already have a regional office in Monroe, which is located close to our three existing plants on the U.S. Gulf Coast,” he said. “This was not an easy decision to make and we will treat all of our people fairly and I would like to thank them for their contributions. The change is driven by our desire to promote efficiency and reduce costs to help achieve our long-term goal of making biomass viable without government support.”

Work on a fourth biomass conversion at the Drax Power Station is scheduled to be completed later this year as part of a major planned outage. Gardiner said the conversion will require an investment of approximately £30 million, making it a very low cost solution. 

According to Gardiner, the conversion project will utilize older biomass infrastructure at the power station that was built in 2010. “We expect to run the unit at periods of high demand, which are often those of higher carbon intensity, supporting the system when it is most needed,” he continued. “While we will not receive a significant number of additional ROCs, by optimizing our running regime we believe the investment will be attractive.”

A recent fire at Drax was also discussed during the investor presentation.

“Safety and sustainability are at the core of what we do, “Gardiner said. “We work in challenging environments. Both coal and biomass must be handled carefully or they can pose significant safety risks. We had a small fire in our biomass handling facilities at the station in December. Most importantly, no one was injured in the incident. While this limited biomass operations on two units for about four week, the team at the power station worked very well to both mitigate and then repair the damage. Overall, our safety record continues to be outstanding and in line with prior years.”

Andy Koss, chief executive of Drax Power, explained that the fire was small, noting it was located just outside the rail unloading building on the station’s conveyor system. “It was put out very quickly,” he said.

“This was the first major incident we’ve had putting 25 million tons of biomass through the plant,” Koss added. While there are continued improvements that need to be made to the biomass handling system, Koss said that the company has concluded that the design is good and the facility has a reliable operation.