Drax reports progress with unit conversion, LaSalle pellet plant

Drax Group plc has released financial results for the first half of 2018, reporting lower than expected EBITDA due to two unplanned outages. Good progress, however, is being made with the fourth biomass unit conversion and a Louisiana pellet plant.

EBITA for the first half of the year reached £102 million ($134.11 million), down from £121 million during the same period of 2017. Operating profit was £12 million, up from a loss of £61 million during the first half of last year. The reported basic loss per share was 1 pence ($1.32), compared to a loss of 21 pence per share during the first half of 2017.

In its half year report, Drax attributed the drop in EBITDA primarily to the fire Drax experienced in its biomass rail unloading facilities in late 2017, which restricted biomass operations on two ROC units in early January 2018. Drax also said it experienced a generator outage on one of its biomass units in February, with the unit returning to serve in March. “Flexible and responsive operation of our coal generating units and a strong team effort across the group helped mitigate the impact of these unplanned outages and our pellet production and B2B energy supply businesses performed well, with year-on-year EBITDA growth,” the company said in its report.

In the U.S., Drax said its pellet production operations saw growth in EBIDA and a record 700,000 metric tons of pellets produced, up 80 percent. The company said its Gloster, Mississippi-based Amite and Bastrop, Louisiana-based Morehouse plants are producing at full capacity on a consistent basis. Commissioning of the Urania, Louisiana-based LaSalle Bioenergy plant is complete and contributing to the production level. Drax said it expects the LaSalle plant to increase output through this year and achieve full production by the first quarter of 2019.

Drax also said it has signed a colocation agreement with saw mill operator Hunt Forest Products for the development of a sawmill next to the LaSalle plant. “The agreement will enable a greater proportion of lower cost sawmill residues to be used, reducing transportation and the number of steps in the production process, thereby reducing cost,” Drax said in its half year report. In addition, Drax said it has identified an opportunity to develop a new rail spur linking LaSalle to the regional rail network and the company’s port facility at Baton Rouge, Louisiana.

At its U.K. power plant, Drax said that notwithstanding outages, its biomass units produced 11 percent of the U.K.’s renewable electricity during the first half of the year, enough to power 4 million homes.

“In June, we commenced the conversion of a fourth generating unit from coal to biomass,” the company said in its report. “This low-cost option will, from late summer 2018, allow us to produce a greater amount of renewable electricity at times of high demand, which are typically periods of higher carbon intensity. In this way we plan to provide more renewable electricity, whilst supporting system stability at minimum cost to the consumer.”

In May, Drax commenced a low-cost pilot project looking at the potential for bioenergy carbon capture and storage. “Whilst at an early stage, this project offers the potential for biomass to deliver carbon negative generation, which will be required if the U.K. is to achieve its decarbonization targets, further supporting the case for biomass generation in the long-term,” Drax said in its report.

Moving forward, Drax said it expects increased EBITDA in the second half of the year, built upon good availability of biomass generation since April. In its pellet business, Drax said it expects to continue building production levels and reducing pellet costs. The company’s full-year expectations for 2018 are unchanged.