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Rentech on the hook to deliver pellets to UK

Former Wawa pellet maker may face stiff penalty from Drax Power
Rentech Wawa
Rentech's Wawa pellet mill prior to conversion.

With its Wawa wood pellet plant in mothballs, Rentech is trying to untangle itself from an export contract with a British power supplier.

In releasing its second quarter results, the California company announced it is negotiating with Drax Power to cancel its remaining shipments of wood pellets for 2017.

Drax is one of Europe’s biggest renewable electricity generators.

Last February, Rentech decided to shutter operations at its Wawa mill. The company had chronic equipment and operating issues at the facility that was costing them money they hadn’t budgeted for.

But prior to halting operations at Wawa, Rentech had a contract to ship 336,000 tonnes of pellets to Drax in 2017. Only 48,000 tonnes were exported in January.

Drax agreed in March to cancel the next two shipments for 2017 without penalty, but Rentech’s still on the hook to deliver 193,000 tonnes for this year.

Most of Wawa’s remaining inventory of 12,000 tonnes was shipped to Drax in April.

Rentech said it’s negotiating with Drax in an attempt to cancel the rest.

“At this time, we cannot make a determination if any penalties will be associated with future changes to the contract. Rentech, Inc. has guaranteed the payment obligations of the Drax contract up to a maximum amount of $20 million,” said the company in its Aug. 10 financial statement.

The Wawa plant was set up as an export manufacturing facility to ship Northern Ontario-made wood pellets by rail to the East Coast and overseas.

CN is dinging Rentech with an $800,000 contractual penalty.

Rentech’s other wood pellet mill in Northern Ontario is in Atikokan, where it supplies the local generating station with feed.

The company said it has fulfilled its quarterly obligation to Ontario Power Generation by delivering 11,000 tons of pellets to the power plant.

In its quarterly report, the company’s industrial wood pellet division posted revenue of $3.2 million, down from the $6.5 million recorded during the same period in 2016. The net loss was $3.2 million, compared to $7 million during the second quarter last year.