AGM statement - Drax

AGM statement

Drax Group plc Annual General Meeting

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Publication of Circular and Notice of General Meeting in relation to proposed acquisition of flexible, low-carbon and renewable UK power generation from Iberdrola
5th December 2018

Publication of Circular and Notice of General Meeting in relation to proposed acquisition of flexible, low-carbon and renewable UK power generation from Iberdrola

On 16 October 2018, Drax Group plc (“Drax” or the “Company”) announced that it had entered into a binding conditional agreement to purchase Scottish Power's portfolio of pumped storage, hydro and gas-fired generation for £702 million in cash from Iberdrola (the “Acquisition”).
RNS Number : 0475M
Drax Group PLC

Drax holds its Annual General Meeting at 11:30am today at The Grand Hotel & Spa, Station Rise, York YO1 6GD. At this meeting Philip Cox CBE, Chairman of Drax Group, and Will Gardiner, Chief Executive Officer (CEO) of Drax Group, will make the following comments:

Philip Cox CBE, Chairman, said:

Photo of Philip Cox CBE“2017 was an important year for the Group with the development of our strategy, a new dividend policy and the departure of Dorothy Thompson who announced her intention to stand down as CEO. I would like to thank Dorothy for her enormous contribution to the Group over the last 13 years.

Dorothy is succeeded by Will Gardiner, who was previously Group Chief Financial Officer (CFO) and a key architect of our strategy. His appointment follows a thorough review of internal and external candidates and is a natural progression after two years working alongside Dorothy developing our strategy, which remains clear and unchanged. I am confident this strategy will create significant benefits for all Drax’s stakeholders.”

Will Gardiner, CEO, said:

“I am very pleased to have taken over as CEO of the Drax Group. I have greatly enjoyed working alongside Dorothy Thompson for the past two years as CFO. Having worked closely with the Board and executive team, I know that I will be leading a great team. I have also worked closely on developing our strategy and I look forward to continuing to deliver it and taking advantage of the opportunities ahead.

In 2017 we made significant progress with the strategy we announced in December 2016. We completed the acquisition of Opus Energy – a leading challenger brand in the UK Small and Medium-sized Enterprise (SME) energy market; we acquired a third biomass pellet plant (LaSalle Bioenergy), which significantly increases our pellet production capacity; and we continued to develop options for flexible gas generation at four sites around the UK as well as the exploration of coal-to-gas repowering at Drax Power Station. To support our strategy, we completed a refinancing in May and announced a new dividend policy in June.

We have a major role to play in supporting the UK energy system, as it becomes increasingly ambitious in decarbonising. With confirmation of Government support for further biomass generation at Drax Power Station we are working on a fourth biomass unit conversion.

Through this flexible, low-carbon and customer-focused approach we aim to deliver higher quality earnings, with a reduction in commodity exposure alongside opportunities for growth.

Safety remains at the centre of our operational philosophy and we have performed well in this regard, although we continue to work to improve our performance across the Group. Biomass is a challenging fuel to manage. We work very hard to manage it carefully, but unfortunately, in December, we had a fire at Drax Power Station.  It cost us several weeks of production but most importantly, no one was hurt.  We are currently incorporating the lessons learned from that incident in our operations to ensure that we operate as safely as we can.

Our financial performance, which we measure with reference to EBITDA, was £229 million in 2017, significantly ahead of 2016 (£140 million).

This increase was principally from producing high levels of renewable power from sustainable biomass and growth in our Energy Supply and Pellet Production businesses. I am very pleased that all three of our businesses generated positive EBITDA(1) last year for the first time.

In June we announced a new dividend policy. This policy is to pay a dividend which is sustainable and expected to grow as the implementation of the strategy generates an increasing proportion of stable earnings and cash flows. In determining the rate of growth in dividends the Board will take account of contracted cash flows, the less predictable cash flows from the Group’s commodity based business and future investment opportunities. If there is a build-up of capital the Board will consider the most appropriate mechanism to return this to shareholders.

For 2017 we are recommending a total basic dividend of £50 million (12.3 pence per share) inclusive of a final dividend of £30 million, equivalent to 7.4 pence per share.

We are also currently undertaking a £50 million share buy-back programme. This is consistent with our capital allocation policy and commitment to returns to shareholders.

Sustainability remains at the heart of the business, both the specific sustainability of biomass and more broadly the long-term sustainability of the Group.

Biomass sustainability is in the financial and long-term interests of the business and we always strive to ensure all our pellets comply with our policy. It is fundamental to us that the biomass we use is sustainable and meets statutory requirements. We have a dedicated sustainability team whose role is to ensure the wood pellets we manufacture and use to generate electricity meet the requirements we have set ourselves in our Sustainability Policy and the criteria for sustainable biomass as established by the UK government.”

Philip Cox CBE, Chairman, added:

“The Board and its committees play an active role in guiding the Company and leading its strategy. We greatly value the contribution made by our Non-Executive Directors and during a time of transition their role is especially important.

The Board has been complemented by the appointment of two new Non-Executives. Firstly, David Nussbaum, whose in-depth knowledge of sustainability will support our continued focus in this area; and secondly, Nicola Hodson, whose experience in technology, business transformation and energy, will provide real value as the Group delivers its strategy.

As a Board, we are well aware that, to achieve our strategic objectives, our commitment to diversity is crucial and reducing our gender pay gap is an important part of this.

We must do more to attract, retain and progress women to ensure we’re an employer of choice for everyone who sees their future in energy. In this context, we are supportive of the goals of Hampton Alexander.

It only remains for me to say that your Board remains totally committed to the complementary aims of delivering sustainable long-term value for the Group, and of helping our country build a low-carbon economy.”

Enquires:

Investor Relations

Mark Strafford        +44 (0) 1757 612491

Media

Ali Lewis                +44 (0) 1757 612165

Website: www.drax.com

Notes:

  1. EBITDA is defined as earnings before interest, tax, depreciation, amortisation and material one-off items that do not reflect the underlying trading performance of the business.
  2. The principal performance indicators and operational achievements for 2017 which were “summarised on the screen” were as follows:

During 2017:

  • Total revenue – £3,685 million
    (2016: £2,950 million)

    • EBITDA – £229 million
      (2016: £140 million)
    • Gross Profit – £545 million
      (2016: £376 million)
    • Net debt – £367 million
      (2016: £93 million)
  • Total recordable injury rate – 0.27
    (2016: 0.22)
  • Total dividend – 12.3p
    (2016: 2.5p)
  • % of UK Renewable Electricity Generated – 15%
    (2016: 16%)
  • Wood pellets produced – 822kt
    (2016: 607kt)
  • Meter Points – 376k
    (2016:41k)