Drax sets sights on the future after turbulent year

THE chief executive of Drax Power Ltd Andy Koss is optimistic for the future after a turbulent year for the power station as it makes its transformation to biomass.

In its final results, group revenues reached £3.06bn for the year to 31 December 2015, up from £2.80bn the year before.

Pre-tax profits more than halved from £165.9m to £59.0m, as regulatory difficulties and “severe” market deterioration, with the price of power at some of its lowest levels in 15 years, hitting the company.

Drax Group also acquired Billington Bioenergy, the second largest operator in the UK’s biomass heat market for £4m.

The Government scrapped the Climate Change Levy exemption for the business, which tested the firm, after a High Court rejected their appeal over its reversal. Drax said that these regulatory challenges reduced EBITDA by £30m.

It believes it will cost the business £90m by the end of 2016, but Mr Koss said that the only way is up for the business.

He told TheBusinessDesk.com: “I’m hoping it gets easier in 2016, it’s been a challenging and difficult year for anyone involved in energy sector, with weak commodity prices, and the government withdrawing renewables support.

“Saying all of that, for that which was under our control, we have delivered strong performance.

“The power station has done very well against a tough backdrop, our pellet plants and port facilities are up and running. Haven is delivering against sales objectives and it is a key part of the business.

“We have to have some confidence in the future.”

Mr Koss said he was confident that approval from the EU on its biomass conversion would be forthcoming. He said that having moved half the station from coal to wood pellets, they were “keen” to convert the rest.

“Obviously our major focus is the transformation to biomass. The government has signalled they want to remove coal by 2025 and we want to stand at the forefront of that.”

The business also had a change in management Phil Cox starting as chairman last year.

Mr Koss said: “Dorothy and I have been here 10 years, and our new chairman, Phil Cox, has come in from April 2015.

“He’s come from a background of growing business, and sees the possibilities for growth at Drax, particularly leveraging us as a biomass leader.”

This leadership in the field has meant that possibilities globally have opened up.

Mr Koss said: “We see potential in the US, to develop more pellet plants in the US.”

Their US facilities became functional in April 2015, although poor weather conditions have affected pellet production there. With Obama’s Clean Power Plan, it is clear there is potential in the US markets as Drax looks to the future.

“Highlights for 2015 include the way the plant has coped with the transformation. Historically it has been a base load operation,” said Mr Koss. “With increasing amounts of wind and solar on the market, the plant and coal units have had to be more flexible, turn off at night and on during day.

“I’m pleased with way business has responded it has become a reliable and flexible operation,” Mr Koss said.

“We still believe that biomass is the fastest most affordable way to get off the coal system.”