Drax to take £60m COVID-19 hit as its supply arm falters

drax cooling towers

This story has come from our friends at current-news.co.uk.

Drax is estimating that it is to take a £60 million hit from the impact of COVID-19 as its Customers business feels the bite due to plummeting demand.

As demand falls across the UK business sectors, energy giant Drax has outlined that its Customers business, which supplies power, gas and energy services to the C&I and SME markets, has seen a “significant” reduction in demand, with the SME market expected to be particularly hard hit moving forwards.

Drax operates both Haven Power and Opus Energy, both of which are focused on B2B energy supply.

Whilst Drax stressed it is working to assess the potential impact of the demand reduction, as well as the increased risk of business failure and bad debt, it is estimating a potential impact of £60 million from the COVID-19 pandemic, the majority of which relates to its Customers business.

The company is now expecting a full year Adjusted EBITDA loss for the Customers business.

There are also worries about the continuation of the biomass supply chain, with the performance of its Generation business hinging on dependable supplies.

Four units of company’s flagship Drax Power Station operate using biomass, whilst the other two are to stop using coal in 2021.

The company is also part of a consortium looking to establish a net zero industrial cluster in the Humber, with biomass alongside carbon capture technology to be a key part of the project.

At present there has been no impact on the biomass supply chain, Drax said, as the company has suppliers across both North America and Europe, and 300,000 tonnes of biomass storage capacity at Drax Power Station. This, alongside the biomass currently in its supply chain, means Drax has visibility over one million tonnes of biomass in transit, which would allow it to operate its Contracts for Difference unit for over four months.

Our comment; Makes us think about how fragile our supply chain is. No wonder more and more people look towards self sufficiency.

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