Drax reports strong Q1, expects minimal COVID-19 impacts

By Erin Voegele | April 22, 2020

Drax Group plc released a trading statement on April 22 providing insight into its first quarter financial performance and confirming the company is in a strong position to support its employees, customers and communities during the COVID-19 crisis.

Drax reported strong performance for its U.S. wood pellet plants. “At present there has been no disruption to production caused by COVID-19, although the state of Louisiana is experiencing a high number of cases,” the company said in the trading statement. “The semi-automated nature of the pellet production process limits the need for individuals to be in contact with each other and this has been enhanced by robust business continuity procedures to further reduce the risk to employees and contractors.”

In the statement, Drax also said that its biomass supply chain has a high level of operational redundancy designed to mitigate any potential disruption. In addition to its own U.S. plants, Drax also sources biomass from supplies across North America and Europe. In the U.K., Drax uses dedicated port facilities at four locations. Those port facilities have a capacity of 11 million metric tons, significantly higher than the 7 million metric tons of wood pellets Drax Power Station uses annually.

Drax Power Station also has 300,000 metric tons of biomass storage capacity. “Taken together with volumes throughout its supply chain, the Group currently has visibility of over 1 million [metric tons] of biomass in transit—enough to operate the CfD unit on its own for over 4 months, subject to managing deliveries to Drax Power station,” the company said.

Drax also confirmed that biomass generation performed well during the first quarter of 2020. Although COVID-19 has not yet had any measurable impact on biomass generation, the company said a sustained reduction in electricity demand could result in lower ROC recycle prices in the current compliance period.

Within the statement, Drax said biomass sustainability remains at the heart of its activities. The company aims to reduce biomass costs to a level that makes generation in the U.K. economically viable when the existing renewable schemes end in 2027.

As part of that goal, Drax aims to have 5 million metric tons of wood pellet production capacity in place by 2027, up from the 1.5 million metric tons of capacity currently in place today. Approximately 350,000 metric tons of additional capacity are currently under development.

While the impacts of COVID-19 are still unfolding, Drax currently projects £60 million full-year impact from the pandemic.

A full copy of the trading statement can be downloaded from the Drax website.