Biomass generate 70 percent of Drax total power providing 20 percent of UK total

Biomass generate 70 percent of Drax total power providing 20 percent of UK total Ljungblom/2016-08-02   The UK huge power group Drax reported July 26 in their half year financial report a large increase in pellet used for power generation, up from 36 percent in 2015 to 70 percent.  However the company also reported EBITA for the same period is down with 42 percent. The company reports investments in schedule and budget as well as US pellet operations which are performing in line with plan and will increase production volumes further.  The company say they stand ready, with the right support, to further deploy Drax world leading biomass technology to become 100 percent renewable. Drax main business is power generation in the Shelby plant in UK but they do also produce and trade pellets in Drax biomass, sell electricity in the company Haven Power and sell pellets heat in the company Billington Energy.

Chariman Philip Cox commented:

“Drax Group delivered a good operational performance in the first half of 2016, though financially we continue to feel the effect of weak commodity markets and the removal of the Climate Change Levy exemption. It is for this reason Group EBITDA was down 42% to GBP70 million “

Dorothy Thompson, Chief Executive of Drax, said:

“Drax delivered a good operational performance over the last six months, a period during which around 70% of our electricity generation was renewable – enough to power Leeds, Manchester, Sheffield and Liverpool combined – truly a renewable northern powerhouse.

“Whilst we have seen signs of power and commodity prices improving, our financial performance was impacted by the challenging environment in which we operate.

Fastest and most reliable way to decarbonise

“With our reliable and flexible generation we are well placed to support the country’s electricity system as we prepare for the tightest winter in many years. With the right conditions, we can do even more, upgrading further units to use compressed wood pellets in place of coal. This is the fastest and most reliable way to decarbonise the UK whilst minimising the cost to the consumer.”

The electricity output (net sales) first half year was 10.9 TWh compared to 14.0 TWh 2015. There has been a significant increase in biomass generation to 7.5 TWh compared to 5.2 TWh 2015. Also good progress with biomass volumes and port and pellet plants operations are in line with plan.

Drax Biomass will further increase wood pellet production

During the second half of 2016, Drax Biomass will continue to increase its American based wood pellet production volumes. It will also explore the potential for entering into new long-term supply contracts with credit-worthy parties in Asia, Europe and other regions where the use of compressed wood pellets is gaining government support as an important component of a low-carbon, renewable energy future. In addition to diversifying income this will also help underpin further investment.

The wood pellet market continues to be soft after three successive warm winters in Europe. Spot prices are low and liquidity remains limited. This has placed some pellet producers in financial distress.

Longer term Drax expect prices to stabilise as new demand comes on line, specifically from the power plant Lynemouth and the MGT plant in Teesside in the UK and new biomass generation projects in the Netherlands, Belgium, Korea and Japan.

Drax strategy has always been to secure the base requirements through long-term contracts providing secure revenue for the company suppliers and secure supplies to meet Drax requirements. Drax also look to hedge the commodity and foreign exchange exposures that arise in relation to those contracts up to five years out. During the period our supply chain continued to work efficiently and effectively, delivering wood pellets for generation as required. Ljungblom/2016-08-02