Tag: decarbonisation

[Carbon Capture Magazine article] Spiking Energy Demand

7 May 2024

Opinion

This story first appeared in Carbon Capture Magazine.

By Raj Swaminathan, Senior Vice President at Drax.

While there’s little debate that the greenhouse gas emissions that sit at the heart of our planet’s unprecedented warming come from fossil fuel consumption and other human activities, clawing back these carbon outputs is a multi-faceted issue. In addition to efforts to transition to renewable power sources like wind, solar, and biomass, which remain essential to mitigating this crisis, leading scientists agree that reducing emissions is not sufficient; we must go further and faster with carbon removals.

It’s estimated that we’ll need to capture and store as much as 9.5 billion metric tons of CO2 every year by 2050 to reverse legacy emissions enough to achieve international climate targets, according to the IPCC. Today, carbon removal facilities only capture a fraction of the emissions generated across the planet, and we urgently need a spectrum of high-quality solutions to scale our ability to remove carbon from the atmosphere.

At the same time, spiking energy demand – driven largely by the growing needs of data centers, particularly those underpinning artificial intelligence (AI) and blockchain technology, as well as new industrial and manufacturing facilities – also means we need to increase generation capacity rapidly to avoid an energy security crisis. This becomes more difficult to achieve through intermittent sources like wind and solar alone, which can’t be turned up and down when the grid is strained, opening an opportunity for solutions that can provide renewable, baseload power while permanently removing carbon from the atmosphere to fill this vital need.

Bioenergy with CCS – a critical technology for decarbonization

Bioenergy with carbon capture and storage (BECCS) is a carbon removal technology that uses sustainably sourced biomass to generate renewable energy while permanently sequestering the carbon underground. Because BECCS is one of the only renewable sources that can generate baseload power around the clock, seven days a week, it can serve as the backbone of renewable power grids for when the sun isn’t shining, or the wind isn’t blowing – a role fossil fuels often fill today.

At the same time, BECCS captures post-combustion carbon at the stack and pipelines it into geologic storage, permanently securing it underground. These high-quality carbon removals are more straightforward to measure in comparison with other solutions like nature-based removals, making it much simpler to quantify the overall impact achieved.

Compared to other carbon capture technologies, BECCS also has more diversified revenue streams – including renewable power generation, government incentives for carbon storage, and the sale of carbon dioxide removals (CDR) credits to offset emissions for other companies and industries. Because of this diversification, BECCS not only provides a clearer path to profitability but also offers a high-quality CDR at a much lower price point than alternatives like direct air capture (DAC). This results in a more sustainable and scalable path to adoption.

Due to these advantages, BECCS is positioned to do much of the heavy lifting regarding carbon removals, but it doesn’t replace the need for additional carbon capture and renewable energy solutions. Technologies like DAC, while costlier to operate today, will play an important role in helping to reverse legacy emissions as well; in fact, BECCS could even power DAC facilities to ensure they’re running on renewable energy. The same is true for renewable power technologies – we need far more wind and solar capacity in addition to BECCS.

Pioneering BECCS in the US and UK

Drax believes that BECCS will be integral to decarbonizing the power sector and hard-to-abate industries. To this end, Drax has launched a new independent business unit this year that is focused on becoming the global leader in large-scale carbon removals. This business unit will oversee the development and construction of Drax’s new-build BECCS plants in the US and internationally, and it will work with a coalition of strategic partners to focus on an ambitious goal of removing at least 6 Mt of CO2 per year from the atmosphere.

Previously, Drax successfully completed two BECCS pilots at Drax Power Station, the UK’s largest power station that contributes approximately 4 percent of Britain’s generation output and 11 percent of its renewables. The Drax team is now working to outfit Drax Power Station with BECCS technology that will remove an estimated 8 Mtpa of carbon while generating 10 TWh of power. This is slated to be the first carbon-negative power station in the world and is key to achieving Drax’s goal of becoming a carbon-negative company.
Drax is also pursuing an initial target in the U.S. to have two BECCS plants built and operating by the 2030s. These will be the first large-scale, biomass-fueled power stations in North America, generating an estimated total of 4 Twh of power while sequestering approximately 6 Mt of CO2 per year.

BECCS is an essential technology to help achieve global decarbonization targets. While it doesn’t replace the need for additional carbon capture and renewable power generation alternatives, its unique advantages can help reverse carbon pollution from the past while meeting the energy demands of the future.

Biomass and BECCS are essential in the UK’s journey to Net Zero

10 August 2023

Opinion

The Strategy provides an important steer on the short-, medium- and long-term use of biomass in the UK’s 2050 Net Zero target.

With the Government’s Strategy in hand, I am more certain than ever on two things.  First, that there remains a clear and powerful role for biomass and BECCS in helping the UK balance harder to abate sectors, like aviation, and reach Net Zero.

And secondly, that bioenergy with carbon capture and storage (BECCS) has a vital role to play in our global energy transition – and that Drax is well placed to deliver.

Why we should be confident

In developing the Strategy, the Government has considered several factors including: availability of biomass and the priorities for end use; impacts on air quality; the sustainability of biomass use; as well as the role of BECCS in helping to reach our long-term climate goals.

The ‘Priority Use Framework’ evaluates where biomass would be most sustainably and efficiently used across sectors, given supply constraints. This framework is an important tool, which has been developed with four key principles in mind; sustainability; air quality; the circular economy and resource efficiency; and ability to support us getting to Net Zero.

Critically, the Priority Use Framework states that:

  1. In the short-term (2020s) government will continue to facilitate sustainable biomass deployment through a range of incentives and requirements covering power, heat and transport
  2. In the medium-term (to 2035) government intends to further develop biomass use for utilities such as heat and power with a view to where possible transition to BECCS
  3. Biomass for use in BECCS should be prioritised in the long term (to 2050)

It’s very encouraging to see Government recognise the important role that biomass plays in our energy transition in both the short and medium term, as well as its prioritisation of BECCS in the long term.

Although there are various routes for deploying BECCS across different industries, the strategy further prioritises the deployment of BECCS on existing biomass generation plants with established supply chains, further supported by the development of the Power-BECCS business model for the first BECCS projects.

The Strategy is also promising as it presents an evidence-driven basis for long-term policy stability and I believe if the Government continues in this direction, it will draw investment to the UK’s bioenergy industry.

Why this is critical for the country

Biomass has already played an important role in supporting energy security while helping the UK decarbonise, displacing fossil fuels with a source of renewable, dispatchable power. Our work has also made a significant contribution to the UK economy, adding an estimated £1.8 billion to the UK GDP and supporting 17,800 jobs in 2021 alone.

And, looking to the future, BECCS presents an enormous opportunity to the UK.

Early investment in this critical technology has the potential to support energy security, and climate targets whilst creating jobs and making the UK a leader in the potentially trillion-dollar global CDR market.

This work needs to happen now – nearly all realistic pathways to limit warming to 1.5C require the carbon removal technology and renewable power BECCS offers, and expert voices at the UN’s Intergovernmental Panel on Climate Change, the UK’s Climate Change Committee, and Forum for the Future have said that carbon removals will be needed to address the climate crisis.

Today’s Strategy is a clear signal from Government that they recognise the importance of BECCS and the urgency with which we must employ it within the UK.

Why this is encouraging for Drax

Drax is an international, growing, sustainable business at the heart of global efforts to deliver Net Zero and energy security and I believe the Strategy we have seen from Government today is a clear indication of their support for the work that we do.

With BECCS, Drax has the ability to become a global leader in carbon removals technology. We are engaged in formal discussions with the UK Government about the project and, providing these are successful, we plan to invest billions in transforming Drax Power Station into the world’s largest carbon removals project. The prioritisation of BECCS within the Priority Use Framework shows the Government is aligned to this vision.

As we look forward

We welcome the Government’s Biomass Strategy and will continue to unpack what it means for our business over the coming days and weeks with a mind to our next steps.

Government must now ensure that as it progresses its consultation on biomass sustainability that that process is equally evidence-driven and ensures that science-based methods drive the policy forward. We hope to continue to work alongside Government to support these efforts.

Our formal discussions with the UK Government on BECCS and a ‘bridging mechanism’ to support the transition to BECCS have been productive, but to realise the scale of the ambition included in the Government’s Strategy, we need commitment through the delivery of a clear business model that supports BECCS.

Today’s support from Government brings us a big step closer and we look forward to continuing the work.

Will Gardiner
CEO
Drax

Read RNS here. 

UK Biomass Strategy – Highly Supportive of Biomass and a Priority Role for BECCS

Financial News

The Strategy outlines the potential extraordinary role which biomass can play across the economy in power, heating and transport, including a priority role for Bioenergy Carbon Capture and Storage (BECCS), which is seen as critical for meeting net zero plans due to its ability to provide large-scale carbon removals.

Will Gardiner, Drax CEO, said:

Will Gardiner, Drax Group CEO

“We welcome the UK Government’s clear support for sustainably sourced biomass and the critical role that BECCS can play in achieving the country’s climate goals.

“The inclusion of BECCS at the top of a priority use framework is a clear signal that the UK wants to be a leader in carbon removals and Drax is ready to deliver on this ambition. We are engaged in formal discussions with the UK Government about the project and, providing these are successful, we plan to invest billions in delivering BECCS at Drax Power Station in North Yorkshire, simultaneously providing reliable, renewable power and carbon removals.

“We look forward to working alongside the Government to ensure biomass is best used to contribute to net zero across the economy, through further progression of plans for BECCS and ensuring an evidence-driven, best practice approach to sustainability.”

A priority role for BECCS

The Strategy reiterates the Government’s ambition to deliver 5Mt pa of carbon removals by 2030, with the potential for this to increase to 23Mt by 2035 and up to 81Mt by 2050, with BECCS expected to provide the majority of the total in 2050.

In the period to 2035 Government intends to facilitate the use of biomass for power and heating, whilst supporting projects transitioning to BECCS. BECCS projects, which includes Drax Power Station, are seen as a priority use of biomass given existing generation assets with established supply chains and Carbon Capture and Storage (CCS) technology ready to be deployed. Beyond 2035 there will remain a role for biomass without BECCS in harder to decarbonise sectors and in supporting energy security.

The Strategy notes the active work in government to support BECCS, including the development of business models.

Biomass availability and sustainability

The Strategy considers the global availability of sustainable biomass, finding that by using domestic and imported biomass sources there is sufficient material to meet estimated future demand in the 6th Carbon Budget.

Alongside the increased use of sustainable biomass, Government will continue to develop sustainability criteria and Drax supports the development of robust standards across sectors.

A link to the Strategy can be found here.

Scientific assessment of carbon removals from BECCS

Alongside publication of the Strategy, the Government has published an evidence-based assessment of BECCS as a route to negative emissions. The report sets out how “well regulated” BECCS can deliver negative emissions and ensure positive outcomes for people, the environment, and the climate.

BECCS at Drax Power Station

In March 2023, the Government confirmed its commitment to support the deployment of large-scale Power-BECCS projects by 2030 and that the Drax Power Station BECCS project had passed the deliverability assessment for the Power-BECCS project submission process.

Formal bilateral discussions with the Government are ongoing to move the project forward and help realise the Government’s ambition to deliver 5Mt pa of carbon removals by 2030. These discussions include a bridging mechanism between the end of the current renewable schemes in 2027 and the commissioning of BECCS at Drax Power Station.

Drax believes that BECCS at Drax Power Station is the only project in the UK that can enable the Government to achieve this ambition, in addition to the large-scale renewable power and system support services it provides to the UK power system.

In July 2023, the Government designated the Viking CCS cluster as a Track 2 cluster. Progressing a CO2 transport and storage network in the Humber represents a significant step toward helping the region meet its net zero ambitions and ensuring that it remains a source of high-skilled jobs and energy security for decades to come. Along with the East Coast Cluster, Viking creates an additional potential pathway to support BECCS at Drax Power Station.

The Government has also confirmed that during 2023 it will set out a process for the expansion of its wider CCS programme for individual projects, including BECCS (Track 1 expansion and Track 2).

Enquiries:

Drax Investor Relations:

Mark Strafford
+44 (0) 7730 763 949

Media:

Drax External Communications:

Chris Mostyn
+44 (0) 7548 838 896

Sloan Woods
+44 (0) 7821 665 493

END

Global collaboration
is key to tackling
the climate crisis

Will Gardiner, Chief Executive Officer, Drax Group

22 April 2021

Opinion

Leaders from 40 countries are meeting today, albeit virtually, as part of President Joe Biden’s Leaders’ Summit on Climate. The event provides an opportunity for world leaders to reaffirm global efforts in the fight against climate change, set a clear pathway to net zero emissions, while creating jobs and ensuring a just transition.

Since taking office President Biden has made bold climate commitments and brought the United States back into the Paris Agreement. Ahead of the two-day summit, he announced an ambitious 2030 emissions target and new Nationally Determined Contributions. The US joins other countries that have announced significant reduction goals. For example, the EU committed to reduce its emissions by at least 55%, also South Korea, Japan and China have all set net-zero targets by mid-century.

Here in the UK, Prime Minister Boris Johnson this week outlined new climate commitments that will be enshrined in law. The ambitious new targets will see carbon emissions cut by 78% by 2035, almost 15 years earlier than previously planned. If delivered, this commitment which is in-line with the recommendations of the Climate Change Committee’s sixth carbon budget will put the UK at the forefront of climate action, and for the first time the targets include international aviation and shipping.

What makes climate change so difficult to tackle is that it requires collaboration from many different parties on a global scale never seen before. As a UK-North American sustainable energy company, with communities on both sides of the Atlantic, at Drax we are keenly aware of the need for thinking that transcends borders, creating a global opportunity for businesses and governments to work together towards a shared climate goal. That’s why we joined other businesses and investors in an open letter supporting the US government’s ambitious climate actions.

Collaboration between countries and industries

It’s widely recognised that negative emissions technologies will be key to global efforts to combat climate change.

At Drax we’re pioneering the negative emissions technology bioenergy with carbon capture and storage (BECCS) at our power station in North Yorkshire, which when up and running in 2027 will capture millions of tonnes of carbon dioxide (CO2) per year, sending it for secure storage, permanently locking it away deep under the North Sea.

Experts on both sides of the Atlantic consider BECCS essential for reaching net zero. The UK’s Climate Change Committee says it will play a major role in removing CO2 emissions that will remain in the UK economy after 2050 from industries such as aviation and agriculture that will be difficult to fully decarbonise. Meanwhile, a report published last year by New York’s Columbia University revealed that rapid development of BECCS is needed within the next 10 years in order to curb climate change and a recent report from Baringa, commissioned by Drax, showed it will be a lot more expensive for the UK to reach its legally binding fifth carbon budget between 2028 and 2031 without BECCS.

A shared economic opportunity

Globally as many as 65 million well-paid jobs could be created through investment in clean energy systems. In the UK, BECCS and negative emissions are not just essential in preventing the impact of climate change but will also be a key component of a post-Covid economy.

Government and private investments in clean energy technologies can create thousands of well-paid jobs, new careers, education opportunities and upskill workforces. Developing BECCS at Drax Power Station, for example, would support around 17,000 jobs during the peak of construction in 2028, including roles in construction, local supply chains and the wider economy. It would also act as an anchor project for the Zero Carbon Humber initiative, which aims to create the world’s first net zero industrial cluster. Developing a carbon capture, usage, and storage (CCUS) and hydrogen industrial cluster could spearhead the creation and support of tens of thousands of jobs across the Humber region and more than 200,000 around the UK in 2039.

Under the Humber Bridge

Additional jobs would be supported and created throughout our international supply chain. This includes the rail, shipping and forestry industries that are integral to rural communities in the US South and Western Canada.

A global company

As a British-North American company, Drax embodies the positive impact that clean energy investments have. We directly employ 3,400 people in the US, Canada, and the UK, and indirectly support thousands of families through our supply chains on both sides of the Atlantic. Drax is strongly committed to supporting the communities where we operate by investing in local initiatives to support the environment, jobs, education, and skills.

From the working forests of the US South and Western Canada to the Yorkshire and Humber region, and Scotland, we have a world-leading ambition to be carbon negative by 2030. At Drax, we believe the challenge of climate change is an opportunity to improve the environment we live in. We have reduced our greenhouse gas emissions by over 80% and transformed into Europe’s largest decarbonisation project. Drax Power Station is the most advanced BECCS project in the world and we stand ready to invest in this cutting-edge carbon capture and removal technology. We can then share our expertise with the rest of the world – a world where major economies are committing to a net zero future and benefiting from a green economic recovery.

If we are to reach the targets set in Paris, global leaders must lock in this opportunity and make this the decade of delivery.

Full year results for the twelve months ended 31 December 2020

25 February 2021

Investors
Water outlet into Loch Awe from Cruachan Power Station

Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)
RNS Number : 2751Q

Twelve months ended 31 December20202019
Key financial performance measures
Adjusted EBITDA (£ million) (1)(2)412410
Continuing operations366371
Discontinued operations – gas generation4639
Cash generated from operations (£ million)413471
Net debt (£ million) (3)776841
Adjusted basic EPS (pence) (1)29.629.9
Total dividend (pence per share)17.115.9
Total financial performance measures
Coal and other asset obsolescence charges(239)-
Operating (loss) / profit (£ million)(156)48
Loss before tax (£ million)(235)(16)

Financial highlights

  • Adjusted EBITDA from continuing and discontinued operations up £2 million to £412 million (2019: £410 million)
    • Includes estimated impact of Covid-19 of around £60 million, principally SME customers
    • Strong performance in Pellet Production and Generation
  • Strong cash generation and balance sheet
    • 1.9 x net debt to Adjusted EBITDA, with £682 million of cash and committed facilities at 31 December 2020
    • New carbon-linked RCF, Eurobond and infrastructure facilities with maturities to 2030 and reduced cost of debt
  • Sustainable and growing dividend up 7.5% to 17.1 pence per share (2019: 15.9 pence per share)
    • Proposed final dividend of 10.3 pence per share (2019: 9.5 pence per share)

Operational highlights

  • Pellet Production – 7% increase in production, improved quality and 5% reduction in cost
  • Generation – 11% of UK’s renewable electricity, strong operations and system support performance
  • Customers – lower demand and an increase in bad debt provisions, principally SME customers
  • Sustainability – sale of gas assets, end of coal generation, CDP Climate A- rating (2019: C) and TCFD Supporter
Train carrying sustainably sourced compressed wood pellets arriving at Drax Power Station in North Yorkshire

Train carrying sustainably sourced compressed wood pellets arriving at Drax Power Station in North Yorkshire [click to view/download]

Will Gardiner, CEO of Drax Group said:

“Drax has supported its customers, communities and employees throughout the Covid-19 pandemic and I want to thank colleagues across the Group for their commitment and hard work over the last year. We have delivered strong results, a growing dividend for shareholders and excellent progress against our business strategy.

Drax Group CEO Will Gardiner

Drax Group CEO Will Gardiner in the control room at Drax Power Station [Click to view/download]

“Our focus is on renewable power. Our carbon intensity is one of the lowest of all European power generators. We aim to be carbon negative by 2030 and are continuing to make progress. We are announcing today that we will not develop new gas fired power at Drax. This builds on our decision to end commercial coal generation and the recent sale of our existing gas power stations.

“The proposed acquisition of Pinnacle Renewable Energy will position Drax as the world’s leading sustainable biomass generation and supply business, paving the way for us to develop bioenergy with carbon capture and storage (BECCS) – taking us even further in our decarbonisation.”

2021 outlook

  • Targeting carbon negative
    • No new gas generation at Drax Power Station, retain options for system support gas in next capacity auction
    • Completion of sale of existing gas generation (January 2021) and end of commercial coal (March 2021)
  • Progressing biomass strategy
    • Proposed acquisition of Pinnacle Renewable Energy Inc. (Pinnacle) – supports long-term options for third-party supply, BECCS and biomass generation
    • BECCS – commencement of DCO planning process, potential FEED study and clarity on regional clusters

Infographic: How BECCS removes carbon from the atmosphere

  • Operations
    • Major planned outage on CfD unit and continued impact of Covid-19 on SME customers
    • Strong contracted power sales (2021–2023) 24.4TWh at £48.5/MWh

Operational review

Pellet Production – capacity expansion, improved quality and reduced cost

  • Adjusted EBITDA up 63% to £52 million (2019: £32 million)
    • Pellet production up 7% to 1.5Mt (2019: 1.4Mt)
    • Reduction in fines (larger particle-sized dust)
    • Cost of production down 5% to $153/t(4) (2019: $161/t(4))
  • Cost reduction plan – targeting $35/t (£13/MWh(5)) saving vs. 2018 on 1.9Mt by 2022 – annual savings of $64 million
    • $28 million of run-rate savings from projects delivered 2019-2020
    • Low-cost fibre, LaSalle (improved rail infrastructure, woodyard and sawmill co-location) and HQ relocation
    • $36 million of additional run-rate savings to be delivered by end of 2022
    • Expansion of Morehouse plant completed Q4 2020
    • Expansion of Amite and LaSalle, increased use of low-cost fibre and improved logistics
  • Additional savings from $40 million investment in three 40kt satellite plants in US Gulf – commissioning from 2021, with potential for up to 0.5Mt – targeting 20% reduction in pellet cost versus current cost

 Power Generation – flexible and renewable generation

  • Adjusted EBITDA up 9% to £446 million (2019: £408 million)
    • Biomass generation up 5% to 14.1TWh (2019: 13.4TWh) – record CfD availability (Q2 2020 – 99.5%)
    • Good commercial availability across the portfolio – 91% (2019: 88%)
    • Strong contracted position provided protection from lower demand and reduction in ROC(6) prices
    • Includes £46 million from discontinued gas (2019: £39 million)
Water cooling tower at Drax Power Station

Water cooling tower at Drax Power Station [click to view/download]

  • System support (balancing mechanism, Ancillary Services and optimisation) of £118 million (2019: £120 million)
    • Hydro and gas – one-off hydro contracts in 2019, offset by higher demand for system support services in 2020
    • Lower level of biomass activity due to higher value in generation market
    • 2019 included benefit of buying back coal generation
  • Pumped storage / hydro – excellent operational and system support performance
    • £73 million of Adjusted EBITDA (Cruachan, Lanark Galloway schemes and Daldowie) (2019: £71 million)
Aqueduct supplying water into the reservoir at Cruachan pumped hydro storage plant in Scotland

Aqueduct supplying water into the reservoir at Cruachan pumped hydro storage plant in Scotland [click to view/download]

  • Coal – 8% of output in 2020 and short-term increase in carbon emissions – utilisation of coal stock by March 2021
  • Covid-19 – business continuity plan in place to ensure continued operation and two major outages completed

Customers – managing the impact of Covid-19 on SME customers

  • Customer service employeeAdjusted EBITDA loss of £39 million (2019: £17 million profit) inclusive of estimated £60 million impact of Covid-19
    • Reduced demand, MtM loss on pre-purchased power and increase in bad debt, principally SME customers
    • Continue to evaluate SME options to maximise value and alignment with strategy
  • Development of Drax Customers Industrial & Commercial portfolio – increased sales to high-quality counterparties providing revenue visibility, while supporting the Group’s flexible and renewable energy proposition
  • Renewable and energy services expand Group system support capability and customer sustainability objectives

Other financial information

  • Total operating loss from continuing operations of £156 million reflects:
    • £70 million MtM loss on derivative contracts
    • £239 million obsolescence charges, principally coal (includes £13 million associated with decision not to develop new gas generation at Drax Power Station)
    • £34 million of costs associated with coal closure (redundancy, pensions and site reparations), with annual run-rate savings once complete of c.£30-35 million
  • Total loss after tax of £158 million includes £18 million reduced valuation of deferred tax asset resulting from UK Government’s reversal of previously announced corporation tax rate change (adjusted impact of £14 million, 3.5 pence per share)
  • Capital investment of £183 million(7) – continued invest in biomass strategy, some delay into 2021 due to Covid-19
    • 2021 expected investment of £190-210 million (excludes proposed acquisition of Pinnacle), includes expansion of LaSalle and Amite pellet plants and satellite plant development
  • Net debt of £776 million, including cash and cash equivalents of £290 million (31 December 2019: £404 million)
      • 1.9 x net debt to EBITDA, with £682 million of total cash and total committed facilities
      • Expect around 2 x net debt to EBITDA by end of 2022 inclusive of proposed acquisition of Pinnacle

 

View complete full year report View investor presentation Listen to webcast

New ESG RCF and Financing Update

19 November 2020

Investors
Landscape of trees in autumn Where: Cruachan Power Station, Scotland
RNS Number: 8002F
Drax Group PLC (Symbol: DRX)

Drax is pleased to announce that it has completed the refinancing of its revolving credit facility.

The new £300 million facility (“the Facility”) matures in 2025, with an option to extend by one year(1). The Facility replaces the current RCF which matures in 2021 and provides increased liquidity, enabling the full facility to be drawn as cash (the previous facility restricted cash drawn to support liquidity to £165 million). The Facility is currently undrawn for cash.

The Facility has a customary margin grid referenced over LIBOR, which reflects a small reduction in cost versus the current RCF and includes an embedded ESG component which adjusts the margin based on Drax’s carbon intensity measured against an annual benchmark.

Drax has also agreed a change to the Group’s £35 million term-loan facility, maturing in 2022, in order to simplify its capital structure. This facility will now rank as senior, previously super senior.

Drawing of previously agreed infrastructure facility

On 14 September 2020, Drax confirmed that it had agreed a new infrastructure term-loan agreement (the “Agreement”) that provided committed facilities of approximately £160 million with a range of maturities between 2024 and 2030(2). These facilities extended the Group’s maturity profile while also reducing the cost of debt. Drax has now drawn £28 million(2), with the balance to be drawn by February 2021.

The Agreement also included an option for a further £75 million. Under this option Drax has now agreed £53 million maturing in 2028, which will be drawn in December 2020.

Proceeds from Euro denominated bond issue and utilisation

On 4 November 2020, Drax issued €250 million of Euro denominated senior secured notes which mature in 2025. The effective Sterling-equivalent interest rate is 3.24% per annum.

The proceeds from this issuance, along with existing cash flows, are being used to redeem the Group’s £350 million 2022 Sterling bond and £125 million ESG term-loan facility.

The notes extend the Group’s debt maturity profile and reduce the overall cost of debt to approximately 3.7%.

Summary of Group debt structure at 19 November 2020

InstrumentMaturityDescription
Infrastructure facilities (2019)2024-2029£375m
Infrastructure facilities (Sept 2020)2024-2030approx.£160m (2) (£28m (2) drawn)
Infrastructure facilities (Nov 2020)2028£53m
Bonds2025$500m
Bonds2025€250m
RCF2025£300m (undrawn for cash)
Index-linked term-loan2022£35m

Enquiries:

Drax Investor Relations: Mark Strafford

+44 (0) 7730 763 949

Media:

Drax External Communications: Selina Williams

+44 (0) 7912 230 393

Website: www.drax.com

END

£125 million ESG facility extended to 2025

12 June 2020

Investors
Engineers in PPE high above Drax Power Station looking towards biomass wood pellet storage dome

RNS Number: 7379P
Drax Group plc
(“Drax” or the “Company”; Symbol: DRX)

Drax is pleased to announce that it has completed a three-year extension to the £125 million Environmental, Social and Governance (ESG) facility agreement entered into in July 2019. The contractual final maturity of the facility is 2025, further extending the profile of Drax’s existing facilities, which include maturities to 2029.

The ESG facility includes a mechanism that adjusts the rate of interest paid based on Drax’s carbon emissions against an annual benchmark, reflecting Drax’s continued commitment to reducing its carbon emissions as a part of its overall purpose of enabling a zero-carbon, lower cost energy future and an ambition to become carbon negative by 2030.

The average all-in interest rate during the first year of the extended facility is less than 2%. The Group’s overall cost of debt is less than 4% per annum.

Enquiries:

Drax Investor Relations: Mark Strafford

+44 (0) 7730 763 949

Media:

Drax External Communications: Ali Lewis

+44 (0) 7712 670 888

Website: www.drax.com

END

Acquisition Bridge Facility refinancing completed

24 July 2019

Investors

Private placement

The £375 million private placement with infrastructure lenders comprises facilities with maturities between 2024 and 2029(2).

ESG Facility

The £125 million ESG facility matures in 2022. The facility includes a mechanism that adjusts the margin based on Drax’s carbon emissions against an annual benchmark, recognising Drax’s continued commitment to reducing its carbon emissions as part of its overall purpose of enabling a zero-carbon, lower cost energy future.

Together these facilities extend the Group’s debt maturity profile beyond 2027 and reduce the Group’s overall cost of debt to below 4 percent. 

Enquiries:

Drax Investor Relations:
Mark Strafford
+44 (0) 1757 612 491

Media:

Drax External Communications:
Matt Willey
+44 (0) 7711 376 087 

Website: www.drax.com

Note

(1)  Drax Corporate Limited drew £550 million under an acquisition bridge facility on 2 January 2019 used to partially fund the acquisition of ScottishPower Generation Limited for initial net consideration of £687 million. £150 million of the acquisition bridge facility was repaid on 16 May 2019.

(2)  £122.5 million in 2024, £122.5 million in 2025, £80 million in 2026 and £50 million in 2029.

Beyond the bottom line – why businesses need a purpose

Jonathan Kini, CEO Customers

18 October 2018

Opinion

Electricity, like so many industries today, is changing at a rapid pace. Technology and data are transforming both the industry itself and its relationship with consumers, while renewables are shifting where electricity comes from and how the system operates. In eras of transition, when few have clear views of the future, it’s crucial that businesses remain focused on their goals and values, beyond just revenue, to steer them through times of disruption and change.

This is often referred to as a company’s ‘purpose’ and it acts as a guiding North Star for businesses in meeting challenges or opportunities, in any industry.

Drax’s purpose is “helping to change the way energy is generated, supplied and used for a better future”. This strong sense of purpose was one of the key factors for me, personally in moving into the electricity industry.

We have an unprecedented chance to be a part of the zero carbon future and the purpose we share across the business is key to grasping that. But for Drax purpose is not just about what drives us. As the largest supplier of renewable electricity to UK businesses, we are in the unique position of being able to help other companies follow their purpose and meet their own sustainable business goals.

Why purpose pays off

Business today is about more than just the bottom line. There is a growing recognition in the role companies play in the lives of their employees and consumers, in wider society and the well-being of the planet.

The hard-nosed business people of the past might ask: why does this matters? How does a company’s stance on social issues, for example, impact revenue or value to shareholders? However, evidence shows that businesses with a strong sense of purpose foster more engaged employees, are more innovative, retain more customers, and even make more money.

And it starts with people. A sense of being a part of something bigger than yourself is a strong influence on people. It attracts the best talent and enables them to deliver with passion. This not only inspires a greater level of engagement in employees, but drives them to go further for clients, as well as fostering creativity and innovation.

At a time when innovation and ability to adapt to changes are more and more valued by businesses, purpose unites workforces and enables companies to implement new ideas and transform themselves more quickly.

It was the desire for a strong guiding purpose that brought me into the electricity industry. The Paris Climate Agreement brought greenhouse gas emissions into the forefront of global thinking, and the opportunity to be a part of meeting this monumental challenge, and creating a net-zero future still plays a strong role in what drives me every day.

Of course, sustainability is not just part of Drax’s purpose. More people than ever around the world care deeply about our planet, many believe climate change is our biggest threat. As a result, sustainable business is now an important part of many different types of companies’ purpose.

Helping others follow their purpose

Drax is in a position to not only help move the UK towards much lower carbon electricity generation, but to also enable other businesses to meet their own sustainability goals.

An increasing number of businesses are generating their own electricity from renewable sources. These so-called prosumers can also sell electricity back to the grid when they have excess power, offering an opportunity for new revenue. 

One such business is a farm outside of Solihull in the West Midlands, where since 2014 it has generated its own electricity from solar panels. This is now the site of Drax Retail’s first Power Purchase Agreement (PPA) batteries. It means that rather than just selling electricity back to the grid via Opus Energy in real time, the farm can store electricity and sell it to grid when it needs it most and the price is higher.

It is just one example of a commercial benefit for a business that make sustainability a part of its purpose. And research by Haven Power found that 78% of small businesses want to use energy efficiency as a means of saving money.

Having a purpose inspires the people who make businesses successful and gives the business direction. Our purpose of helping to decarbonise the UK allows us to help other businesses follow their purposes too.