Drax estimates £60m Covid-19 hit - but remains in strong position

The company has reported a 'robust' trading and operational performance' in the first three months of 2020 and says it it is in a 'strong position to support its employees, business customers and communities'.

In its latest trading report, the energy giant highlights a strong balance sheet with net debt of £818m and available cash and committed cash facilities of £663m, as of March 31, 2020.

However, the Group’s expectations for 2020 adjusted EBITDA includes a £60m estimated impact from Covid-19, principally in relation to lower power demand and increased bad debt risk from its customers' business.

Its strategic focus remains on biomass supply chain expansion and cost reduction, says the report.

Will Gardiner, Drax Group CEO, said: “With our strong balance sheet, robust trading and operational performance, and resilient sustainable biomass supply chain, Drax is in a strong position to support its employees, business customers and communities during the Covid-19 crisis, while continuing to generate returns for shareholders.

“As an important part of the UK’s critical national infrastructure, we recognise our responsibility to support the country’s response to Covid-19. We have strong business continuity plans in place and are in close contact with the UK Government. Our dedicated teams across England, Scotland and Wales, supported by our US biomass colleagues and business partners, are working around the clock to generate and supply the flexible, low-carbon and renewable electricity the UK needs, not least to the 250,000 businesses, including care homes, hospitals and schools we supply.

“The Group is also providing support for communities and others affected by Covid-19.

“Nevertheless, it is still early in this pandemic. As Covid-19 continues to develop, we remain vigilant in looking to protect all our stakeholders and will report further if there are significant changes to our outlook for 2020.”

Full year expectations for the Group remain underpinned by good operational availability for the remainder of 2020.

On Monday, Network Rail reopened one of the most important freight lines in the country after an unprecedented 24/7 operation to keep the lights on.

The line into Drax Power Station was inundated with flood water in February when the River Aire burst its banks. With the Selby plant supplying five per cent of the UK’s electricity, it was vital to keep services moving while repair work was carried out.

Engineers have been deployed on 24-hour-a-day shifts to maintain the constant safety reassurance required to keep freight trains running.

Chris Gee, head of operations for Network Rail’s North and East Route, said: “This was an unprecedented operation to deal with an unprecedented situation.

“It’s never been more important for us to keep freight services running, so we pulled out all the stops to maintain this vital link while we conducted repair work at the same time.

“Our teams have worked non-stop to make sure that crucial deliveries of biomass have been able to run despite severe flooding, which has been incredibly important to keep the nation powered up.

“This has been a real team effort and shows the dedication of the rail industry to vital services moving during this national crisis.”

Engineers were able to keep one route open to allow vital freight services transporting sustainable biomass to keep the nation powered up during the Covid-19 pandemic.

The damaged line has now reopened following significant repair work by Network Rail.

Deliveries were maintained during the work with more than 90 freight trains per week transporting sustainable biomass to the plant. The emergency repair work cost £300,000 and included unconventional methods to make sure that the line could reopen as quickly as possible.

This included using a team of divers to inspect structures which were underwater to check for damage, as well as flying drones and helicopters along the route to assess the extent of the damage. The team faced an additional challenge when they discovered that several Koi Carp from a nearby private residence were on the railway, when the pond they were in also flooded. Network Rail teams worked closely with the landowner to safely transport them home.

Network Rail is working on ways to improve resilience on the line, in a £2.5million investment, and are currently in the design stage of this project.