Tag: Financial Reports

Half year results for the six months ended 30 June 2020

LaSalle BioEnergy (centre) and co-located sawmill (right), Louisiana

RNS Number : 3978U
Drax Group PLC (Symbol: DRX)

Six months ended 30 JuneH1 2020H1 2019
Key financial performance measures
Adjusted EBITDA (£ million) (1)(2)179138
Cash generated from operations (£ million)226229
Net debt (£ million) (3)792924
Interim dividend (pence per share)6.86.4
Adjusted basic earnings per share (pence) (1)10.82
Total financial performance measures
Coal obsolescence charges-224-
Operating (loss) / profit (£ million)-3234
(Loss) / profit before tax (£ million)-614
Basic (loss) / earnings per share (pence)-141

Financial highlights

  • Group Adjusted EBITDA up 30% to £179 million (H1 2019: £138 million)
    • Includes estimated £44 million impact of Covid-19, principally in Customers SME business
    • £34 million of capacity payments (H1 2019: nil) following re-establishment of the Capacity Market
    • Strong biomass performance in both Pellet Production and Generation
  • Strong cash generation and balance sheet
    • £694 million of cash and total committed facilities
    • Extended £125 million ESG CO2 emission-linked facility to 2025
    • DBRS investment grade rating
  • Sustainable and growing dividend
    • Expected full year dividend up 7.5% to 17.1 pence per share (2019: 15.9 pence per share), subject to good operational performance and impact of Covid-19 being in line with current expectations
    • Interim dividend of 6.8 pence per share (H1 2019: 6.4 pence per share) – 40% of full year
Biomass storage dome with conveyor in the foreground, Drax Power Station, North Yorkshire

Biomass storage dome with conveyor in the foreground, Drax Power Station, North Yorkshire [Click to view/download]

Operational highlights

  • Biomass self-supply – 9% reduction in cost, 15% increase in production and improved quality vs. H1 2019
  • Generation – 11% of UK’s renewable electricity, strong operational performance and system support services
  • Customers – lower demand and an increase in bad debt provisions, principally in SME business

Progressing plans to create a long-term future for sustainable biomass

  • Targeting five million tonnes of self-supply at £50/MWh(4) by 2027 from expanded sources of sustainable biomass
    • Plan for $64 million ($35/t, £13/MWh(4)) annual savings on 1.85Mt by 2022 vs. 2018 base
    • Investment in new satellite plants in US Gulf – targeting 20% reduction in pellet cost versus current cost
  • BECCS(5) – developing proven and emerging technology options for large-scale negative emissions
  • End of coal operations – further reduction in CO2 emissions and lower cost operating model for biomass

Outlook

  • Full year Adjusted EBITDA, inclusive of c.£60 million estimated impact of Covid-19, in line with market consensus
  • Evaluating attractive investment options for biomass growth: cost reduction and capacity expansion
  • Strong contracted power sales (2020–2022) 34TWh at £51.4/MWh and high proportion of non-commodity revenues

Will Gardiner, CEO of Drax Group said:

“With these robust half-year results, Drax is delivering for shareholders with an increased dividend while continuing to support our employees, communities and customers during the Covid-19 crisis.

Drax Group CEO Will Gardiner

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

“As well as generating the flexible, reliable and renewable electricity the UK economy needs, we’re delivering against our strategy to reduce the costs of our sustainable biomass and we’re continuing to make progress pioneering world-leading bioenergy with carbon capture technologies, known as BECCS, to deliver negative emissions and help the UK meet its 2050 net zero carbon target.

“National Grid stated this week that the UK can’t reach net zero by 2050 without negative emissions from bioenergy with carbon capture and storage. BECCS delivers for the environment and also provides an opportunity to create jobs and clean economic growth in the North and around the country.”

Operational review

Pellet Production – capacity expansion, improved quality and reduced cost

  • Adjusted EBITDA up 213% to £25 million (H1 2019: £8 million)
    • Pellet production up 15% to 0.75Mt (H1 2019: 0.65Mt) – impact of adverse weather in H1 2019
    • Cost of production down nine per cent to $154/t(6) (H1 2019: $170/t(6))
    • Reduction in fines (larger particle-sized dust) in each cargo
  • Cost reduction plan – targeting $64 million ($35/t, £13/MWh(4)) annual savings on 1.85Mt by 2022 vs. 2018 base
    • Expect to deliver $27 million of annual savings by end of 2020 – a saving of $18/t vs. 2018
    • Greater use of low-cost fibre, LaSalle (improved rail infrastructure, woodyard and sawmill co-location) and relocation of HQ from Atlanta to Monroe
    • Savings from projects to be delivered in 2020-2022
    • 35Mt capacity expansion (LaSalle, Morehouse and Amite), increased use of low-cost fibre, improved logistics and other operational enhancements
  • $40 million investment in three 40kt satellite plants in US Gulf – commissioning from 2021, potential for up to 0.5Mt
    • Use of Drax infrastructure and sawmill residues – targeting 20% reduction in pellet cost versus current cost
Power lines and pylon above Cruachan Power Station, viewed from Ben Cruachan above

Power lines and pylon above Cruachan Power Station, viewed from Ben Cruachan above [Click to view/download]

Power Generation – flexible, low-carbon and renewable generation

  • Adjusted EBITDA up 45% to £214 million (H1 2019: £148 million)
    • Limited impact from Covid-19 – strong contracted position provided protection from lower demand, reduction in ROC(7) prices offset by increased system support services
    • £34 million of Capacity Market income (H1 2019: nil; £36 million in relation to H1 2019 subsequently recognised in H2 2019 following re-establishment of the Capacity Market)
    • £54 million of Adjusted EBITDA from hydro and gas generation assets (H1 2019: £36 million)
    • System support (Balancing Market, ancillary services and portfolio optimisation) up 8% to £66 million (H1 2019: £61 million)
    • Good commercial availability across the portfolio – 91% (H1 2019: 87%)
  • Covid-19 – business continuity plan in place to ensure safe and uninterrupted operations
  • Biomass generation up 16% to 7.4TWh (H1 2019: 6.4TWh)
    • Strong supply chain (impact of adverse weather in H1 2019) and record CfD availability (Q2 2020 – 99.5%)
  • Pumped storage / hydro – excellent operational and system support performance
  • Gas – excellent operational and system support performance, Damhead Creek planned outage underway
  • Coal – 10% of output in H1 2020 – utilisation of coal stock before end of commercial generation (March 2021)

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

  • Adjusted EBITDA loss of £37 million (H1 2019: £9 million profit) inclusive of estimated £44 million impact of Covid-19 – reduced demand, MtM loss on pre-purchased power and increase in bad debt, principally in SME business
  • Covid-19 – implemented work from home procedures to allow safe and continuous operations and customer support
  • Good performance in Industrial and Commercial market – new contracts with large water companies providing five-year revenue visibility, while supporting the Group’s flexible, renewable and low-carbon proposition
  • Monitoring and optimisation of portfolio to ensure alignment with strategy

Other financial information

  • Total financial performance measures reflects £108 million MtM gain on derivative contracts, £224 million coal obsolescence charges and £10 million impact (£6 million adjusted impact) from UK Government’s reversal of previously announced corporation tax rate reduction resulting in revaluation of deferred tax asset and increased current tax charge
    • Additional c.£25–£35 million for coal closure costs expected to be reported as exceptional item in H2 2020 when coal consultation process is further advanced
  • Capital investment – continuing to invest in biomass strategy, some delay in investment due to Covid-19
    • H1 2020: £78 million (H1 2019: £60 million)
    • Full year expected investment £190–£210 million (was £230–£250 million), includes 0.35Mt expansion of existing pellet plants and $20 million initial investment in satellite plants ($40 million in total)
  • Net debt of £792 million, including cash and cash equivalents of £482 million (31 December 2019: £404 million)
    • Remain on track for around 2.0x net debt to Adjusted EBITDA by end of 2020

View complete half year report

View analyst presentation

Listen to webcast

View/download main image. Caption: LaSalle BioEnergy (centre) and co-located sawmill (right), Louisiana


Notice of half year results announcement

Biomass domes at Drax Power Station
RNS Number : 6129T
Drax Group PLC

Drax Group plc (“Drax”) confirms that it will be announcing its Half Year Results for the six months ended 30 June 2020 on Wednesday 29 July 2020.

Information regarding the results presentation meeting and webcast is detailed below.

Results presentation and webcast arrangements

Management will host a webcast presentation for analysts and investors at 9:00am (UK Time), Wednesday 29 July 2020.

The presentation can be accessed remotely via a live webcast link, as detailed below. After the meeting, the webcast recording will be made available and access details of this recording are also set out below.

A copy of the presentation will be made available from 7:00am (UK time) on Wednesday 29 July 2020 for download at: www.drax.com>>investors>>results-reports-agm>> #investor-relations-presentations or use the link https://www.drax.com/investors/results-reports-agm/#investor-relations-presentations

Event Title: Drax Group plc: Half Year Results

Event Date: Wednesday 29 July 2020, 9:00am (UK time)

Webcast Live Event Link: https://secure.emincote.com/client/drax/drax007

Conference call and pre-register Link: https://secure.emincote.com/client/drax/drax007/vip_connect

Start Date: Wednesday 29 July 2020

Delete Date: Thursday 31 December 2020

Archive Link: https://secure.emincote.com/client/drax/drax007

For further information, please contact Rosie Corbett: [email protected]

Website: www.drax.com

Robust trading and operational performance; 2020 Adjusted EBITDA currently in line with consensus; delivering for all stakeholders

Drax employee in PPE in front of biomass storage dome

RNS Number : 4161K
Drax Group plc
(“Drax” or the “Company”; Symbol: DRX)

Highlights

  • Robust trading and operational performance in first three months of 2020

  • Strong contracted forward power sales supporting 2020-21 earnings visibility

  • 2020 full year Adjusted EBITDA(1) currently in line with consensus(2) inclusive of £60 million estimated potential impact from Covid-19

  • Principally lower power demand and increased bad debt risk in Customers business

  • Lower ROC(3) recycle prices in Generation, partially offset by system support services

  • Strong balance sheet at 31 March 2020 – net debt: £818 million, available cash and committed cash facilities: £663 million

  • 2019 final dividend of 9.5 pence per share (£37 million) to be paid in respect of 2019 performance, as previously announced – subject to shareholder approval at AGM

  • Strategic focus remains on biomass supply chain expansion and cost reduction

Electricity pylon near Cruachan Power Station, Argyll and Bute

Electricity pylon near Cruachan Power Station, Argyll and Bute [Click to view/download]

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.

Drax Group CEO Will Gardiner

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

“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.”

Trading, operational performance and outlook

The trading and operational performance of the Group has been robust in the first three months of 2020.

While the impact of Covid-19 is still unfolding, the Group’s expectations for 2020 Adjusted EBITDA are currently in line with consensus inclusive of an estimated potential impact from Covid-19 of £60 million, principally in relation to its Customers business.

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

In the Customers business, the consequences of Covid-19 are only now starting to become visible. It is expected to result in reduced demand and a potential increase in bad debt, which represents a major sensitivity, particularly in the SME(4) market. As a result, Drax has significantly increased its expectation of potential customer business failures and higher bad debt.

Assuming the continued impact of Covid-19 throughout 2020, Drax now expects a full year Adjusted EBITDA loss for the Customers business. The Group will closely monitor the impact on the Customers business and update the market accordingly.

In Generation, the Group’s expectations for the full year reflect a reduction in ROC recycle prices resulting from reduced power demand. Drax expects to partially offset this through increased activity in system support services across its generation portfolio.

The performance of the Generation business is dependent on the continuation of biomass deliveries to Drax Power Station. Biomass generation is currently the most material area of activity for the Group and a protracted suspension of the supply chain could lead to lower levels of biomass generation, resulting in a reduction in the Group’s expectations for the full year. At present there has been no impact from Covid-19 and the Group has a good supply of biomass throughout the supply chain, which continues to be robust and functioning well.

Engineer climbs cooling tower at Drax Power Station

Engineer climbs cooling tower at Drax Power Station [Click to view/download]

Generation

During the first three months of 2020 Drax’s generation portfolio performed well with good asset availability and optimisation of generation underpinning a strong financial performance.

The business benefits from a strong forward power sales position through 2022 which, combined with index-linked renewable schemes and capacity payments, provides a high level of earnings visibility, helping to protect the business from the current weakness in UK power prices.

In response to Covid-19, Drax has implemented robust business continuity procedures across its sites to protect employees and contractors and ensure continued operation. In addition to operating strategically important infrastructure, the components of the Group’s UK supply chain are considered key sectors allowing continued operation.

The Group’s biomass supply chain has a high level of operational redundancy designed to mitigate any potential disruption. Drax sources biomass from suppliers across North America and Europe, including the Group’s own facilities in Louisiana and Mississippi. In the UK, Drax utilises dedicated port facilities at Hull, Immingham, Tyne and Liverpool, with a capacity of eleven million tonnes, providing supply chain capacity in excess of the Group’s annual biomass usage of over seven million tonnes.

Sustainable biomass wood pellets destined for Drax Power Station unloaded from the Zheng Zhi bulk carrier at ABP Immingham

Sustainable biomass wood pellets destined for Drax Power Station unloaded from the Zheng Zhi bulk carrier at ABP Immingham [Click to view/download]

Drax Power Station has 300,000 tonnes of biomass storage capacity. Taken together with volumes throughout its supply chain the Group currently has visibility of over one million tonnes of biomass in transit – enough to operate the CfD(5) unit on its own for over four months, subject to managing deliveries to Drax Power Station.

Biomass generation has performed well in the first three months of 2020. Whilst Covid-19 has not had any measurable impact on biomass generation to date, a sustained reduction in electricity demand could result in a reduction in ROC recycle prices in the current compliance period. The Group has adjusted its expectations for the full year but the precise impact will be dependent on the depth and duration of any reduction in demand. Drax expects to partially offset this through increased activity in system support services across its generation portfolio.

Engineer at Cruachan Power Station

Engineer at Cruachan Power Station [Click to view/download]

The Group’s hydro assets have performed well, particularly the pumped storage business, primarily driven by activity in the system support services market. As previously disclosed, Cruachan Pumped Storage Power Station was successful in a tender process run by the system operator to procure inertia and reactive power services. The contract is worth up to c.£5 million per year over six years and is expected to commence during the second quarter of 2020. This was the first tender of its kind and reflects the growing importance of system support services as the generation market becomes increasingly supplied by intermittent renewable power sources. The system operator is expected to conduct further tenders over the coming year.

Thermal generation is performing in line with Drax’s expectations.

Pellet Production

LaSalle BioEnergy wood pellet manufacturing plant in Louisiana

LaSalle BioEnergy wood pellet manufacturing plant in Louisiana [Click to view/download]

Pellet Production has performed well in the first three months of 2020.

At present there has been no disruption to production caused by Covid-19, although the State of Louisiana is experiencing a high number of cases. The semi-automated nature of the pellet production process limits the need for individuals to be in contact with each other and this has been enhanced by robust business continuity procedures to further reduce the risk to employees and contractors.

Drax continues to monitor developments closely and notes that energy, rail, port and forestry are designated key sectors in the USA allowing continued operation.

Customers

The Group’s Customers business, which sells power, gas and energy services to the I&C(6) and SME markets has seen a significant reduction in demand as a result of Covid-19. The Group has been working to assess the potential impact of this demand reduction, the increased risk of business failure and bad debt. The impact is expected to be most pronounced in the SME market, which represents c.30 percent of monthly billing. The impact is expected to be partially mitigated by credit insurance in respect of certain customers.

Balance sheet

At 31 December 2019 Drax had £404 million of cash, which increased to £454 million at 31 March 2020.

The Group’s plan for 2020 included capital investment of £230-£250 million, with half of this assigned to strategic investment in biomass expansion and cost reduction. Whilst the Group continues to see its biomass strategy as both a primary long and short-term source of value, Drax is reviewing the timing of its investment programme in 2020 and in the short-term investment is expected to be lower.

At 31 March 2020 net debt had reduced to £818m million and Drax continues to target around 2 x net debt to EBITDA for the full year.

The Group has available cash and committed facilities of £663 million including a cash line available within a £315 million Revolving Credit Facility (RCF), which is currently undrawn and matures in April 2021. The Group has an ESG facility with final maturity in 2022 and a £350m sterling bond which matures in 2022. The Group has a further $500 million fixed rate USD bond maturing in 2025 and infrastructure private placement loans maturing through 2024-2029.

The Group’s facilities include a maintenance covenant which, if triggered, requires a minimum EBITDA level requirement around 40% of 2020 current consensus Adjusted EBITDA. Customary covenants apply to all other facilities.

The Group’s rolling five-year foreign exchange hedge book continues to provide protection from the recent weakness in sterling to 2025. The Group actively manages risk limits with counterparties providing forward foreign exchange contracts and the current weakness in sterling has led to the rebasing of a number of contracts, resulting in the acceleration of cash flows from these contracts to the benefit of Drax.

Contracted power sales

As at 16 April 2020, the power sales contracted for 2020, 2021 and 2022 were as follows:

 202020212022
Power sales (TWh) comprising:16.79.64.3
– Fixed price power sales (TWh) 17.110.14.3
Of which CfD unit (TWh)3.8
At an average achieved price (£ per MWh)53.249.448
– Gas hedges (TWh)-0.4-0.5-
At an achieved price (pence per therm)1.732-

Merchant power prices remain an important part of the Group’s earnings, but by focusing on flexible, renewable and low-carbon generation, which includes index-linked renewable schemes, capacity payments and system support services, the impact of power prices has reduced.

Exposure to merchant power prices by generation asset class

  • Biomass CfD – power produced by this unit is remunerated based on an index-linked strike price and underpinned by a private law contract which runs until March 2027. At baseload the unit is expected to produce over 5TWh per year. The current strike price is c.£116/MWh and taken together with a biomass cost at or below c.£75/MWh gives a margin of over £40/MWh and an annual contribution to gross profit of over £200 million, with daily cash settlement in 30 days
  • Biomass ROC – ROC buyout prices are index-linked and extend to March 2027, acting as a premium on UK power prices. The buyout price for the current compliance period is £50.05 per ROC. Annual generation is in the region of 9-10 TWh, with the associated power sold up to two years forward, providing strong earnings visibility over the period 2020-21
  • Hydro – a small but profitable volume of merchant power generation (144MW) with zero fuel cost
  • Pumped storage – operates in the system support services market and carries little net exposure to merchant power prices
  • Coal – commercial generation will end in March 2021, ahead of which date Drax will utilise its residual coal stock to realise further cash flows
  • Gas – the Group’s mid-merit CCGT(7) assets have power forward sales for 2020. To the extent that gas prices continue to set the price of power, the clean spark spread from these assets is expected to be maintained at or around current levels in future periods
Engineer working in PPE at Rye House Power Station in Hertfordshire

Engineer working in PPE at Rye House Power Station in Hertfordshire [Click to view/download]

Investment in biomass to increase capacity and reduce cost

Biomass sustainability remains at the heart of the Group’s activities and building a long-term future for sustainable biomass remains the Group’s strategic objective. Drax remains focused on reducing biomass costs to a level which makes biomass generation in the UK economically viable when the existing renewable schemes end in 2027.

Innovation engineer looks up at flue gas desulphurisation unit. The massive pipe above him could be used to transport more than 90% of the carbon captured in the BECCS power generation process.

An engineer looks up at flue gas desulphurisation unit (FGD) at Drax Power Station. The massive pipe would transport flue gas from the Drax boilers to the carbon capture and storage (CCS) plant for CO2 removal of between 90-95%. [Click to view/download]

The Group is targeting five million tonnes of self-supply capacity by 2027 (1.5 million today, plus 0.35 million tonnes in development), with greater scope for operational leverage and cost reduction. These savings will be delivered through further optimisation of existing biomass operations, greater utilisation of low-cost wood residues and an expansion of the fuel envelope to incorporate other low-cost renewable fuels across its expanded self-supply chain. Drax remains alert to sector opportunities for organic and inorganic growth.

By 2027 these activities would enable Drax to develop a biomass generation business operating without the current renewable schemes and potentially the development of BECCS(8), subject to the right support from the UK Government. Drax notes the incremental progress and support announced for carbon capture and storage at the UK Government’s Budget in March 2020.

These efforts support the Group’s ambition to become a carbon negative company by 2030.

In addition, the Group is exploring options to service biomass demand in other markets – Europe, North America and Asia.

Capital allocation and dividend

The Group remains committed to its capital allocation policy established in 2017, through which it aims to maintain a strong balance sheet; invest in the core business; pay a sustainable and growing dividend and return surplus capital beyond investment requirements.

A final dividend of 9.5 pence per share in respect of 2019 performance was proposed at the 2019 Full Year Results on 27 February 2020 and, subject to shareholder approval at today’s Annual General Meeting, will be paid on 15 May 2020.

An interim dividend of 6.4 pence per share was paid in October 2019, making the total dividend in relation to 2019 performance 15.9 pence per share.

In determining the continued appropriateness of the dividend, the Board has considered a range of factors – trading performance, current liquidity, the outlook for the year in the context of Covid-19, as well as the steps being taken to support all stakeholders. The Board believes payment of the final dividend remains consistent with the Group’s commitment to stakeholders.

Drax will update on its expectations for the 2020 full year dividend at the 2020 interim results on 29 July 2020.

Enquiries:

Drax Investor Relations: Mark Strafford

+44 (0) 1757 612 491

Media:

Drax External Communications: Ali Lewis

+44 (0) 7712 670 888

Website: www.drax.com

END

Mailing of the Annual Report and Accounts 2019, Annual General Meeting and key dates relating to the proposed final dividend

Red British post box set against a hedgerow

RNS: 7279G
Drax Group plc

(“Drax” or the “Company”; Symbol:DRX)

Mailing of the Annual Report and Accounts 2019 and ancillary documents to shareholders

The following documents have been mailed to the registered shareholders of Drax Group plc:

  • Annual Report and Accounts 2019;
  • Notice of the 2020 Annual General Meeting; and
  • Form of Proxy for the 2020 Annual General Meeting.

In accordance with Listing Rule 9.6.1 a copy of each of these documents will shortly be available for viewing on the National Storage Mechanism.

The Annual Report and Accounts 2019 and the Notice of the 2020 Annual General Meeting will also shortly be available as follows:

  • for viewing on the Company’s website, www.drax.com; and/or
  • by writing to the Company Secretary at the Registered Office; Drax Power Station, Selby, North Yorkshire YO8 8PH.

Annual General Meeting

The Company is to hold its Annual General Meeting (AGM) at 11.30am on Wednesday 22 April 2020, at Grocers’ Hall, Princes Street, London EC2R 8AD.

We are monitoring the potential impact of COVID-19 on the arrangements for the AGM. We expect to hold our AGM at the venue stated above and are encouraging all shareholders to vote in advance of the meetings using the proxy facilities set out in the Notice of Meeting. We will update shareholders in the event that alternative arrangements prove to be necessary.


Key dates relating to the proposed final dividend

Detailed below are the key dates regarding the proposed final dividend:

  • 23 April 2020 – ordinary shares marked ex-dividend.
  • 24 April 2020 – record date for entitlement to the dividend.
  • 15 May 2020 – payment date for the dividend.

The proposed rate of the final dividend is 9.5 pence per share.

Brett Gladden
Company Secretary

Full year results for the twelve months ended 31 December 2019

Biomass storage domes and wood pellet conveyor system at Drax Power Station, 2019

Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)
RNS Number : 2763E

Twelve months ended 31 December20192018
Key financial performance measures
Adjusted EBITDA (£ million) (1)(2)410250
Net cash from operating activities (£ million)413311
Net debt (£ million) (3)841319
Total dividends (pence per share)15.914.1
Adjusted basic earnings per share (pence) (1)29.910.4
Total financial performance measures
Operating profit (£ million)6260
Profit after tax (£ million)120
Basic earnings per share (pence)0.15

Financial highlights

  • Group Adjusted EBITDA up 64 percent to £410 million (2018: £250 million)
    • Includes £114 million from acquired hydro and gas generation assets (2019 guidance of £90-110 million)
  • Strong cash generation and balance sheet
    • Net cash from operating activities up 33 percent to £413 million (2018: £311 million)
    • 9x net debt to Adjusted EBITDA adjusted to reflect Capacity Market payments received in January 2020
    • Refinancing of hydro and gas generation assets acquisition facility completed, includes ESG CO2-linked facility and infrastructure private placement extending to 2029 – interest rates below three percent
  • Sustainable and growing dividend up 13 percent to 15.9 pence per share (2018: 14.1 pence per share)
    • Final dividend of 9.5 pence per share (2018: 8.5 pence per share)
Engineer planning work near Cruachan Power Station dam and reservoir

Engineer planning work near Cruachan Power Station dam and reservoir

Operational highlights

  • Reduction in US self-supply pellet cost – $161/tonne(4) (2018: $166/tonne(4))
  • Strong system support performance – 63 percent increase in value from flexibility(5) – £129 million (2018: £79 million)
  • Integration of acquired hydro and gas generation assets complete
  • 47 percent reduction in reported carbon emissions – 2.4Mt(6) (2018: 4.5Mt(6))
Engineer working at Rye House Power Station in Hertfordshire

Engineer working at Rye House Power Station in Hertfordshire

Progress with strategic initiatives – building a long-term future for sustainable biomass

  • Clear plan to reduce US costs and expand capacity – $35/t (£13/MWh(7)) saving on 1.85Mt by 2022
  • Targeting five million tonnes of self-supply at £50/MWh(7) by 2027 from expanded sources of sustainable biomass
  • BECCS(8) – development of technology options – proven and emerging technology options for at-scale carbon negative generation at Drax Power Station
  • End of coal operations will support further reduction in CO2 emissions and lower cost operating model for biomass
Innovation engineer inspecting CCUS incubation area BECCS pilot plant at Drax Power Station, 2019

Innovation engineer inspecting CCUS incubation area BECCS pilot plant at Drax Power Station, 2019

Outlook – 2020

  • Strong contracted forward power sales of 15.8TWh at £53.9/MWh and high proportion of non-commodity revenues
  • Evaluating attractive investment options for growth: biomass cost reduction and capacity expansion

Will Gardiner, CEO of Drax Group said:

“Drax has delivered a strong set of full-year results following the successful integration of new hydro and gas generation assets and made good progress with its strategic initiatives to build a long-term future for sustainable biomass and be the leading provider of power system stability. Drax achieved these results while still delivering a 47 percent reduction in its carbon emissions compared with the previous year.”

Drax Group CEO Will Gardiner

Drax Group CEO Will Gardiner in the control room at Drax Power Station.

“And today, Drax has also taken a significant step towards its ambition to be carbon negative by 2030 and help the UK achieve its net zero target by ending coal generation ahead of the Government’s target.

“This moves Drax and the UK closer to meeting their climate targets, while continuing to provide the flexible and reliable renewable power that millions of British homes and businesses rely on.

“Drax remains fully committed to the regions where it operates and with the right regulatory and investment framework is well positioned to deliver its plans for Yorkshire and the Humber. Using bioenergy with carbon capture and storage at Drax would anchor a new zero carbon cluster that could help protect thousands of jobs and create new opportunities for clean growth in the north and throughout the UK.”

Operational review

Woodchips and sawmill residue at Drax LaSalle Bioenergy in Louisiana, September 2019

Woodchips and sawmill residue at Drax LaSalle Bioenergy in Louisiana, September 2019

Pellet Production – focus on capacity expansion with good quality pellets at lowest cost

  • Adjusted EBITDA up 52 percent to £32 million (2018: £21 million)
    • Pellet production up four percent to 1.41Mt (2018: 1.35Mt)
    • Cost of production down three percent to $161/tonne(4) (2018: $166/tonne(4))
    • Weather-affected forestry activities in H1 leading to reduced low-cost input fibre, offset by cost reduction initiatives and stronger output in H2
  • Delivering a programme of cost reduction initiatives – targeting $35/t (£13/MWh(7)) on 1.85Mt by 2022
    • Projects delivered in 2019 with further benefits in 2020
    • LaSalle Bioenergy – improved rail infrastructure, woodyard decommissioning and sawmill co-location
    • Ongoing saving from 2018 relocation of HQ from Atlanta to Monroe
    • Savings from projects to be delivered in 2020-2022
    • 0.35Mt capacity expansion (LaSalle, Morehouse and Amite), sawmill co-locations and woodyard decommissioning (Morehouse and Amite), increased use of dry shavings, improved logistics and other operational enhancements
Engineers inspect generator in Drax Power Station turbine hall, 2019

Engineers inspect generator in Drax Power Station turbine hall, 2019

Power Generation – flexible, low-carbon and renewable generation

  • Adjusted EBITDA up 76 percent to £408 million (2018: £232 million)
    • £114 million of Adjusted EBITDA from acquired hydro and gas generation assets (guidance of £90-110 million)
    • Strong system support performance – 63 percent increase in value from flexibility(5) to £129 million (2018: £79 million)
    • Good commercial availability across the portfolio – 88 percent (2018: 87 percent)
  • £78 million of Capacity Market agreements (2018: £6 million) following re-establishment of the market
  • Biomass output (net sales) down three percent to 13.4TWh (2018: 13.8TWh)
    • H1 – ROC(9) generation reprofiled to reflect weather-affected US biomass supplies
    • H2 – record biomass output in November and December 2019 reflecting excellent operational availability
  • Coal – Four percent of portfolio generation but with incremental value from buy back of forward power sales
  • Gas – Damhead Creek restricted hours ahead of inspection and Shoreham interim inspection brought forward
Opus Energy employees holding meeting in Northampton, 2019

Opus Energy employees holding meeting in Northampton, 2019

Customers – growth in margin per MWh and customer meters

  • Adjusted EBITDA of £17 million (2018: £28 million)
    • 2019 includes £8 million of restructuring costs (£6 million exceptional item in 2018)
    • Growth in gross profit per MWh – focus on customer value over volume (MWh) – £6.7/MWh vs. 6.6/MWh
    • Six percent growth in customer meters to 419,000 (2018: 396,000)
    • Improvement in bad debt charge – £18 million (2018: £31 million)
  • Investment in restructuring to drive future earnings growth

Other financial information

  • Tax rate benefits from Patent Box claims – corporation tax of 10% on profits arising from investment in innovation
  • Capital investment of £172 million
    • Includes 0.35Mt of new low-cost US pellet capacity (£10 million in 2019 and £40 million in 2020)
  • Net debt of £841 million, including cash and cash equivalents of £404 million (31 December 2018: £289 million)
    • 1.9x net debt to Adjusted EBITDA adjusted to reflect receipt of Capacity Market payments in January 2020

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Notice of Full Year Results announcement, presentation and webcast arrangements

Drax Group CEO Will Gardiner
RNS Number : 3963D
Drax Group PLC

Information regarding the results presentation meeting and webcast is detailed below.

Results presentation meeting and webcast arrangements

Management will host a presentation for analysts and investors at 9:00am (UK Time), Thursday 27 February 2020, at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. 

Would anyone wishing to attend please confirm by e-mailing [email protected] or calling Rosie Corbett at FTI Consulting on +44 (0) 20 3727 1718

The meeting can also be accessed remotely via a live webcast, as detailed below. After the meeting, the webcast will be made available and access details of this recording are also set out below.

A copy of the presentation will be made available from 7:00am (UK time) on Thursday 27 February 2020 for download at: https://www.drax.com/investors/results-reports-agm/#investor-relations-presentations

Event Title: Drax Group plc: Full Year Results

Event Date: Thursday 27 February 2020, 9:00am (UK time)

Webcast Live Event Link: https://secure.emincote.com/client/drax/drax005

Start Date: Thursday 27 February 2020

Delete Date: Thursday 31 December 2020

Archive Link: https://secure.emincote.com/client/drax/drax005                                            

For further information please contact [email protected] on +44 (0) 20 3727 1718

Website: www.drax.com

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

END

Acquisition Bridge Facility refinancing completed

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.

Half year results for the six months ended 30 June 2019

Drax Biomass - Morehouse
Six months ended 30 JuneH1 2019H1 2018 (restated)
Key financial performance measures
Adjusted EBITDA (£ million)138102
Net cash from operating activities (£ million)197112
Net debt (£ million)924366
Interim dividends (pence per share)6.45.6
Adjusted basic earnings per share (pence)21.6
Total financial performance measures
Operating profit (£ million)3412
Profit / (loss) before tax (£ million)4-11
Basic earnings / (loss) per share (pence)1-1

Financial highlights

  • Group Adjusted EBITDA up 35% to £138 million (H1 2018: £102 million)
    • Includes £36 million from acquired Hydro and Gas assets
    • Excludes £34 million of capacity payments (H1 2018: £6 million recognised) – expect Capacity Market to be re-established in 2019
  • Sustainable and growing dividend
    • Interim dividend up 12.5% to £25 million (6.4 pence per share) (H1 2018: £22 million, 5.6 pence per share)
    • Expected 2019 full year dividend up 12.5% to £63 million (15.9 pence per share) (2018: £56 million)
  • Good progress with refinancing of acquisition bridge facility, continue to expect completion during 2019
    • On track to deliver 2x net debt / Adjusted EBITDA by year end, assuming reinstatement of the Capacity Market

Operational highlights

  • Integration of acquired Hydro and Gas assets progressing well
  • Strong system support performance – 92% increase in value from flexibility(5) – £69 million (H1 2018: £36 million)
  • Progress with biomass cost reduction – LaSalle sawmill co-location and rail spur operational
  • 52% reduction in reported carbon emissions – 128tCO2/GWh (H1 2018: 265tCO2/GWh)

Progress with strategic initiatives

  • Planned expansion of biomass self-supply – 0.35Mt of new capacity and lower cost biomass
  • Development of options for BECCS(6) – potential for large-scale carbon negative generation at Drax Power Station
  • Planning approval for third OCGT(7) received, expect fourth OCGT and coal-to-gas CCGT(8) approval in 2019

Outlook

  • Full year EBITDA and net debt expectations unchanged; remain subject to re-establishment of Capacity Market
    • Generation – strong contracted position and system support services, higher H2 biomass generation
    • Pellet Production – growth in H2 pellet volumes, focus on cost reduction and improved quality
    • Customers (formerly B2B Energy Supply) – focus on increasing gross profit, reducing bad debt and cost to serve
  • Attractive investment options for growth: biomass capacity expansion, cost reduction and new gas generation

Will Gardiner, Chief Executive of Drax Group said:

Will Gardiner, CEO, Drax Group. Click to view high resolution photo.

“Drax Group has delivered strong profit and dividend growth in the first half of the year. Integration of our new Hydro and Gas generation assets is progressing well and the value the Group delivers from supporting the energy system has almost doubled. Drax is supporting British business with innovative new energy services and, despite challenging market conditions, our Customers business continues to grow. Our biomass cost reduction initiative and plans for expanded biomass self-supply are going well.

“Drax wholeheartedly supports the UK’s target of achieving net zero carbon emissions by 2050.”

“Reducing our greenhouse gas emissions by half in the past year underscores Drax’s commitment to this goal. With the right investment and regulatory framework we could go further and Drax could become the world’s first carbon negative power station – something the UK Committee on Climate Change recognises will be crucial.”

Operational review

Pellet Production – Focus on capacity expansion with good quality pellets at lowest cost

  • Adjusted EBITDA of £8 million (H1 2018: £10 million)
    • Pellet production 0.65Mt (H1 2018: 0.66Mt) – weather-affected forestry activities and lower pellet production
  • Good progress with cost reduction initiatives
    • Initiatives for run rate savings of £10/MWh on 0.45Mt pa from LaSalle pellet plant
      • Rail spur operational May 2019 – reduction in transport cost to Port of Baton Rouge
      • Co-location agreement with Hunt Forest Products for low-cost sawmill residues, now operational
      • Port of Baton Rouge rail agreement – increased rail capacity and lower costs for LaSalle and Morehouse
    • Capacity expansion with run rate savings of £20/MWh on 0.35Mt
      • £50 million investment in 0.35Mt capacity increase at LaSalle, Morehouse and Amite, commissioning 2020/21
      • Pellet and hammermill upgrades to enable greater utilisation of low-cost sawmill residues and dry shavings

Power Generation – Flexible, low-carbon and renewable generation

  • Adjusted EBITDA of £148 million (H1 2018: £88 million)
    • Contribution of Hydro and Gas assets following acquisition from ScottishPower – £36 million
    • Strong system support performance – 92% increase in value from flexibility(5) – £69 million (H1 2018: £36 million)
    • Suspension of Capacity Market – £34 million of H1 revenue not accrued (H1 2018: £6 million recognised)
  • Biomass output (net sales) up 2% to 6.4TWh (H1 2018: 6.3TWh)
    • ROC(9) generation reprofiled to reflect weather-affected US biomass supplies – optimise within ROC cap and utilise fourth biomass unit to produce expected higher levels of ROC generation in H2 2019
  • Lower thermal output
    • Coal – higher carbon costs, lower margins and reduced output – buy back opportunities for hedged sales
    • Gas – Damhead Creek restricted hours ahead of inspection and Shoreham interim inspection brought forward

Customers – Continued growth in meters and margin per MWh, implementing structure to support long-term growth

  • Adjusted EBITDA of £9 million (H1 2018: £16 million)
    • Increased operating costs associated with integration, restructuring and development of next generation system
    • Weather-related reduction in energy consumption and increased focus on margin per MWh
    • Continued growth in gross profit per MWh
    • Growth in customer meters to 405,000 (H2 2018: 396,000)
    • Improvement in bad debt £13 million (H1 2018: £18 million)
  • Progressing with integration of Opus and Haven
  • Focused on creation of scalable platform for growth, improved gross margin, reduction in bad debt and cost to serve

Group financial information

  • Tax rate benefits from Patent Box claims – Corporation Tax rate of 10% on profits arising from the use of biomass innovation
  • Capital investment of £60 million, full year expectations unchanged (£170 – £190 million)
    • Includes 0.35Mt of new low-cost US pellet capacity (£10 million in 2019 and £40 million in 2020/21)
  • Net debt of £924 million, including cash and cash equivalents of £244 million (31 December 2018: £289 million)
    • Expect 2x net debt to Adjusted EBITDA by end of 2019 subject to re-establishment of Capacity Market

Notes:

  1. H1 2018 restated to reflect adoption of IFRIC guidance issued in respect of derivative contract accounting consistent with the approach taken in the 2018 Annual Report.
  2. Adjusted Results are stated after adjusting for exceptional items (including acquisition and restructuring costs, asset obsolescence charges and debt restructuring costs), and certain remeasurements.
  3. Earnings before interest, tax, depreciation, amortisation, excluding the impact of exceptional items and certain remeasurements.
  4. Borrowings less cash and cash equivalents (see note 12 to condensed consolidated interim financial statements).
  5. Balancing Market, Ancillary Services and lower-cost coals.
  6. BioEnergy Carbon Capture and Storage.
  7. Open Cycle Gas Turbine.
  8. Combined Cycle Gas Turbine.
  9. Renewable Obligation Certificate.

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