Drax snaps up bankrupt US pellet plant

Group aiming to self-supply 30 per cent of the biomass pellets burnt at its power station in Yorkshire

Drax has moved a step closer to its goal of self-supplying 30 per cent of the biomass pellets which it burns at its power station in Yorkshire, after completing the purchase of a bankrupt pellet plant in the US.

Following a court hearing to approve the results of an auction on 30 March, the group has bought the bulk of the assets of Louisiana Pellets for $35.4 million (£27.6 million), including its production facility in the town of Urania.

Drax’s power station – the largest anywhere in Britain – typically consumes around 7 million tonnes of biomass pellets each year. Of that, around 600,000 tonnes – nearly 12 per cent – was self-supplied in 2016.

The new acquisition will increase group’s self-supply capacity by roughly 450,000 tonnes each year, bringing the share of total consumption to around 20 per cent. The pellet plant will resume production in 2018 following a programme of upgrades and optimisation.

Drax Group chief executive Dorothy Thompson said: “The deal forms part of our plan to significantly increase our capability to manufacture high quality compressed wood pellets and increase self-supply to Drax Power Station.

“Upgrading half the power station to use sustainable wood pellets has resulted in Drax producing 16 per cent of the UK’s renewable electricity and with the right conditions we aim to do more.”

The sale came after German Pellets – the owner of Louisiana Pellets at the time – was declared insolvent in February 2016 by a court in Germany.

Shortly afterwards Louisiana Pellets and another of the firm’s US subsidiaries, Texas Pellets, filed for chapter 11 bankruptcy protection. As of the end of 2016, the companies had respectively valued their assets at $301.5 million and $504.7 million.

The assets owned by Texas Pellets, which include a pellet plant in Woodville and a storage facility at Port Arthur, were due to be auctioned off in March alongside those of Louisiana Pellets. However, the sale was postponed and no new date has been set.

Drax submitted bids to buy both companies’ assets in February. 

The group already owns three biomass supply facilities in the US: Morehouse Bioenergy, another pellet plant in Louisiana producing 450,000 tonnes of fuel annually; Amite Bioenergy, a pellet plant in Mississippi which produces a further 450,000 tonnes of fuel each year; and Baton Rouge Transit, a shipping facility on the Mississippi River with an annual capacity of two million tonnes.