We believe investing in our people goes hand-in-hand with enabling the green energy transformation and positive future growth.
We believe investing in our people goes hand-in-hand with enabling the green energy transformation and positive future growth.
We’re committed to enabling a zero carbon, lower cost energy future through engineering, technology and innovation.
We’re building for a sustainable future in how we source our biomass, generate energy, remove carbon dioxide and function as a business.
Read our carbon capture, sustainable bioenergy and power generation stories, as well as thinking from Drax’s leaders and business updates.
Explore a comprehensive guide to our business model and investor relations.
Drax Group’s ambition is to reach net zero across its value chain by the end of 2040, including steps aimed at decarbonising its supply chains.
We believe investing in our people goes hand-in-hand with enabling the green energy transformation and positive future growth.
Drax Group plc (the Company) announces that following the purchased ordinary shares on Monday, 21 January 2019, the Company’s £50 million share buyback programme, managed by J.P. Morgan Securities plc, which was announced on 20 April 2018, was completed in accordance with its terms.
In aggregate between 20 April 2018 and 21 January 2019, the Company repurchased 13,841,295 ordinary shares.
Mark Strafford
Ali Lewis
Website: www.drax.com
END
RNS Number : 8681L
Drax Group PLC
Drax Group plc is pleased to announce that it has completed the acquisition of Scottish Power’s portfolio of pumped storage, hydro and gas-fired generation, which comprises ScottishPower Generation Group and its wholly owned subsidiary, SMW.
The Acquisition was originally announced on 16 October 2018.
Drax Investor Relations: Mark Strafford
+44 (0) 1757 612 491
+44 (0) 7730 763 949
Drax External Communications: Matt Willey
+44 (0) 7711 376 087
Website: www.drax.com
END
| No. | Brief Description | Votes For | % | Votes Against | % | Votes Total | Votes Withheld |
|---|---|---|---|---|---|---|---|
| 1. | To approve the acquisition of the entire issued share capital of ScottishPower Generation Limited | 268,580,494 | 85.75 | 44,619,027 | 14.25 | 313,199,521 | 21,841 |
The resolution was carried. Completion of the acquisition is expected to occur on 31 December 2018.
The number of shares in issue is 407,193,168 (of which 12,867,349 are held in treasury. Treasury shares don’t carry voting rights).
Votes withheld are not a vote in law and have not been counted in the calculation of the votes for and against the resolution, the total votes validly cast or the calculation of the proportion of issued share capital voted.
A copy of the resolution is available for inspection in the Circular, which was previously submitted to the UK Listing Authority’s Document Viewing Facility, via the National Storage Mechanism at www.morningstar.co.uk/uk/NSM.
The Circular and the voting results are also available on the Company’s website at www.drax.com.
Mark Strafford
+44 (0) 1757 612 491
+44 (0) 7730 763 949
Matt Willey
+44 (0) 7711 376 087
Website: www.drax.com
END
Drax is pleased to announce that a Circular in relation to the Acquisition (the “Circular”) has been published.
The Acquisition is subject to the approval of the shareholders of the Company and, accordingly, the Circular contains a notice convening a general meeting of the Company to be held at the offices of FTI Consulting, 200 Aldersgate Street, London EC1A 4HD on 21 December 2018 at 10:00 am.
The Circular, which has been produced in accordance with the Listing Rules of the Financial Conduct Authority, will shortly be available on the Company’s website at www.drax.com. In accordance with Listing Rule 9.6.1 a copy of the Circular has been submitted to the National Storage Mechanism and will be available shortly at www.morningstar.co.uk/uk/NSM. Printed copies of the Circular will be posted to shareholders who have elected to receive them.
| Latest time and date for receipt of Forms of Direction | 10:00 am on 17 December 2018 |
| Latest time and date for receipt of Forms of Proxy or Crest Proxy Instructions | 10:00 am on 19 December 2018 |
| General Meeting | 10:00 am on 21 December 2018 |
| Expected date of Completion | 31 December 2018 |
Mark Strafford
+44 (0) 1757 612 491
+44 (0) 7730 763 949
Drax External Communications:
Matt Willey
+44 (0) 7711 376 087
+44 (0) 207 742 6000
Robert Constant
Jeanette Smits van Oyen
Carsten Woehrn
+44 (0) 20 7653 4000
James Agnew
Jonathan Hardy
END
Read the full report [PDF]
As a contribution to COP24, this report informs the debate on decarbonising the global energy system, evaluating how rapidly nations are transforming their energy systems, and what lessons can be learned from the leading countries across five energy sectors.
It was commissioned by power utility Drax Group, and delivered independently by researchers from Imperial College London and E4tech.
continued … [View PDF]
I. Staffell, M. Jansen, A. Chase, E. Cotton and C. Lewis (2018). Energy Revolution: A Global Outlook. Drax: Selby.
The revised contractual arrangements are designed to mitigate the risk to 2019 capacity payments arising from the recent suspension of the Capacity Market.
“The strategic merits of this acquisition remain unchanged and the Board believes there is a compelling logic in our move to add further flexible sources of power to our offering, which will accelerate our ability to deliver our strategic vision of a lower-carbon, lower-cost energy future for the UK.
“The capacity market is a central pillar of the UK’s energy policy and ensures security of supply while minimising costs to consumers. The Government has stated it is working closely with the European Commission to aid their investigation and to reinstate the full capacity market regime, including existing agreements, as soon as possible.
“To mitigate the risk that capacity payments take time to be restored, we have agreed revised terms which provide protection in 2019. Beyond 2019, while reinstatement of the Capacity Market is the most likely outcome, we considered other outcomes, the more plausible of which would still deliver returns in excess of Drax’s weighted average cost of capital.
“The acquisition makes financial and strategic sense, delivering material value to our shareholders through long-term earnings and attractive returns.”
On 15 November 2018, the General Court of the European Union issued a ruling annulling the European Commission’s 2014 decision not to undertake a more detailed investigation of the UK Government’s scheme establishing the Capacity Market (the “Ruling”). The Ruling imposed a “standstill period” while the European Commission completes a further state aid investigation into the Capacity Market. Payments to generators scheduled under existing capacity agreements and the holding of future capacity auctions have been suspended.
Cruachan Power Station on Loch Awe, Argylle and Bute
Contracted capacity payments make up a significant proportion of the earnings of the Portfolio. For the period from 1 January 2019 to 30 September 2022, the Cruachan pumped storage hydro asset has contracted capacity payments of £29 million, the Galloway run-of-river hydro assets have contracted capacity payments of £5m million, and the Combined Cycle Gas Turbine assets have contracted capacity payments of £122 million in aggregate.
Drax notes the UK Government’s statement in response to the Ruling that it is working closely with the European Commission to aid their investigation and to seek a timely state aid re-approval decision for the Capacity Market. The UK Government also confirmed that the Ruling does not change its belief that Capacity Market auctions are the most appropriate way to deliver secure electricity supplies at the lowest cost and that the Ruling was decided on procedural grounds and did not constitute a direct challenge to the design of the Capacity Market itself.
Based on the information available and legal advice it has received, Drax believes that the most likely outcome is that the European Commission will re-approve the existing Capacity Market in its current or a broadly similar form.
Despite the above, Drax recognises there is some uncertainty whether the contracted capacity payments for the 2018/19 Capacity Market year, which are currently suspended, will be paid by the UK Government. To mitigate the risk that these payments are not received for the 2018/19 Capacity Market year, Drax has agreed with Iberdrola certain amendments to the agreement signed on 16 October 2018.
Drax and Iberdrola have agreed a risk sharing mechanism in respect of capacity payments for the period 1 January 2019 to 30 September 2019, worth £36 million. If less than 100% of these payments are received and the gross profit of the Portfolio for the full year 2019 (the “2019 Gross Profit”) is lower than expected, Drax will receive a payment from Iberdrola of up to £26 million. The mechanism also gives Iberdrola the opportunity to earn an upside of up to £26 million if less than 100% of these payments are received but the Portfolio performs better than expected in 2019(1).
Under these arrangements, if less than 100% of these capacity payments are received:
If subsequently Drax receives any capacity payments in respect of the period 1 January 2019 to 30 September 2019, Drax will pay 72% of those amounts to Iberdrola capped at the amount paid by Iberdrola to Drax under the mechanism above.
Drax and Iberdrola have agreed that capacity payments due to the Portfolio in respect of the period before completion will be passed through to Iberdrola.
Any payments pursuant to the arrangements with Iberdrola will be cash adjustments to the consideration and not included in EBITDA(2).
Based on Drax’s expectations of the position that is most likely to be achieved in relation to the Capacity Market following the Ruling, Drax believes the Acquisition represents an attractive opportunity to create significant value for shareholders and is expected to deliver returns significantly in excess of Drax’s weighted average cost of capital.
Drax has considered other possible outcomes for the Capacity Market which are less likely but may ensue and if they did the financial effects of the Acquisition may be adversely affected.
Drax believes that if the more plausible of these outcomes were to ensue the returns from the Acquisition would still be in excess of the Drax’s weighted average cost of capital.
Drax has not attempted to quantify the effect if the less plausible of these other outcomes were to ensue – if there were no Capacity Market or similar mechanism or if significant structural changes were made to the Capacity Market. Drax sees these as a remote possibility and notes that in those circumstances it believes the loss or reduction of capacity payments could be mitigated by increases in wholesale power prices.
The Acquisition strengthens Drax’s ability to pay a growing and sustainable dividend. Drax remains committed to its capital allocation policy and to its current £50 million share buy-back programme, with £42 million of shares purchased to date.
Daldowie Fuel Plant, Glasgow
Based on recent power and commodity prices and assuming that all contracted capacity payments are received, the Portfolio is expected to generate EBITDA in 2019 in a range of £90 million to £110 million, from gross profits of £155 million to £175 million, of which around two thirds is expected to come from non-commodity market sources, including system support services, capacity payments, ROCs(3) and the Daldowie energy-from-waste plant.
If, in light of the Ruling, the contracted capacity payments payable in 2019 in respect of the Portfolio are not received or accrued in 2019, the expected EBITDA for the Portfolio in 2019 would be reduced by up to £47 million (from a range of £90 million to £110 million) down to a range of £43 million to £63 million before considering mitigating factors. Drax believes that the arrangements agreed with Iberdrola mitigate in economic terms the majority of the risk that those suspended capacity payments will not be paid.
Assuming performance in line with current expectations and if all capacity payments due in 2019 are received before the end of 2019, net debt to EBITDA is expected to fall to Drax’s long-term target of around 2x by the end of 2019. If capacity payments are not received in 2019, net debt to EBITDA is expected to fall to around 2x during 2020.
Following the Ruling, £7 million of contracted capacity payments relating to 2018, principally in relation to Drax’s remaining two coal-fired units, will not be paid as and when expected. Taking this into account, and following Drax’s recent good trading performance and assuming continued good operational availability for the remainder of the year, Drax’s full year EBITDA outlook remains in line with previous expectations, with net debt to EBITDA expected to be around 1.5x for the full year, excluding the impact of the Acquisition.
On 1 November 2018, the Competition and Markets Authority informed Drax that it had no further questions in connection with the proposed Acquisition at that stage, which resulted in the competition condition under the Acquisition agreement being satisfied. Completion of the Acquisition is therefore currently expected to occur on 31 December 2018 assuming that the shareholder approval condition is satisfied by that date.
A combined shareholder circular and notice of general meeting containing the unanimous recommendation of the Board to approve the Acquisition will be posted as soon as practicable.
Drax expects to announce its full year results for the year ending 31 December 2018 on 26 February 2019.
| 2019 Gross Profit £m | Implied EBITDA based on 2019 Gross Profit £m | Payment made to / (by) Drax capped at £26m £m* |
|---|---|---|
| 119 or lower | 54 or lower | 26 |
| 129 | 64 | 19 |
| 139 | 74 | 12 |
| 149 | 84 | 4 |
| 155 | 90 | 0 |
| 165 | 100 | 0 |
| 175 | 110 | -7 |
| 185 | 120 | -14 |
| 195 | 130 | -22 |
| 201 or higher | 136 or higher | -26 |
Drax Investor Relations:
Mark Strafford
+44 (0) 1757 612 491
+44 (0) 7730 763 949
Drax External Communications:
Matt Willey
+44 (0) 7711 376 087
Ali Lewis
+44 (0) 7712 670 888
+44 (0) 207 742 6000
Robert Constant
Jeanette Smits van Oyen
Carsten Woehrn
+44 (0) 20 7653 4000
James Agnew
Jonathan Hardy
Cutting carbon emissions is the headline environmental policy for the 195 countries signed up to the Paris Climate Agreement – and so it should be. Decarbonisation is crucial to keeping global warming below 2oC and avoiding or at least mitigating potentially dire consequences for our planet, its people and biodiversity.
However, centuries of pumping out carbon dioxide (CO2) from factories, vehicles and power plants means it’s not enough just to reduce output. Countries must also work on CO2 removal (CDR) from the atmosphere. Implemented at scale, what’s also known as Greenhouse Gas Removal (GGR) could mean a country or facility removing more CO2 than it emits – effectively giving it negative emissions.
Achieving this is not only advantageous to combating climate change, it’s essential. A new report from the Intergovernmental Panel on Climate Change (IPCC) explores 116 scenarios in which global warming is kept to 1.5 oC of pre-industrial levels (more ambitious than the Paris Agreements 2oC). Of these scenarios, 101 use negative emissions technologies (NETs) at a scale of between 100 to 1,000 gigatonnes* over the 21st century.
Given the scale of the ambition, the task of capturing enough carbon to be truly negative will need to rely on many sources. Here are some of the techniques, technologies, and innovations aiming to push the world towards negative emissions.
Weyerhaeuser Nursery, Camden, Alabama
CDR doesn’t have to utilise complex tech and chemistry. The planet’s natural carbon cycle already removes and stores huge amounts of carbon from the atmosphere – primarily through trees. The world’s forests have absorbed as much as 30% of annual global human-generated CO2 emissions over the last few decades.
Regenerating depleted forests (reforestation), planting new forests (afforestation), and protecting and helping existing forests thrive through active management can all contribute to offsetting emissions.
The IPCC report estimates that reforestations and afforestation could potentially capture 0.5 and 3.6 billion tonnes of CO2 a year at a cost of USD$5 to $50 (£3.90 to £39) per metric tonne.
There are potential drawbacks of extensive afforestation. It could compete with food crops, as well as reducing the reflection of heat and light back into space that arid lands currently offer to prevent global warming.
Europe’s first BECCS pilot project at Drax Power Station
Biomass on its own is an important fuel source in lowering emissions from industries such as power generation. On one hand, it’s created by organic material, which during its lifetime absorbs carbon from the atmosphere (often enough to offset emissions from transportation and combustion). On another, it creates a sustainable market for forestry products, encouraging landowners to responsibly manage forests, which in turn can lead to growing forests and increased CO2 absorption.
But when combined with carbon capture and storage (CCS or CCUS) technology it becomes a negative carbon emissions process, known as BECCS. Drax is partnering with carbon capture company C-Capture in a £400,000 pilot to develop CCS technology, which will remove a tonne of carbon from its operations a day. Combined with the carbon removed by the forests supplying the biomass, it could turn Drax into the world’s first negative emissions power station.
Beyond just storing the captured carbon underground, however, it can be used to create a range of products, locking in and making use of the carbon for much longer.
The IPCC report estimates between 0.5 and 5 billion metric tonnes of carbon could be captured globally this way at a cost of $100 to $200 (£80-160) per metric tonne.
Mangrove roots
It’s not only forests of fast-growing pines or eucalyptus that remove CO2 from the atmosphere. In fact, coastal vegetation such as mangroves, salt marshes and sea grasses suck in and store carbon in soil at a greater rate than plants on land. The carbon stored in these waterside ecosystems is known as ‘blue carbon’.
Human encroachment and development on coastlines has depleted these environments. However, efforts are underway to regenerate and expand these hyper-absorbent ecosystems –turning them into carbon sinks that can remove more emissions from the atmosphere than conventional forests. Apple is currently throwing its financial weight behind a mangrove expansion project in Colombia to try and offset its global operations.
Beyond costal mangroves, the ocean is full of plants that use CO2 to photosynthesise – in fact, the oceans are thought to be one of the world’s largest carbon sinks. But there are some people who think we could enhance marine plants’ absorption abilities.
Eelgrass Bed
One such approach involves injecting iron nutrients into the ocean to prompt a bloom in microscopic plants called phytoplankton, which float in the upper part of the ocean absorbing the CO2 absorbed from the atmosphere. When the plants eventually die they then sink trapping the absorbed carbon on the seabed.
An additional positive effect would be an increase in dimethyl sulphide, which marine plants emit. This could alter the reflectivity of clouds that absorb water from the ocean and further act to cool the earth.
Plants absorbing CO2 through photosynthesis is the most-commonly known part of the carbon cycle, however, rocks also absorb CO2 as they weather and erode.
The CO2 usually reaches the rock in the form of rain, which absorbs CO2 from the atmosphere as it falls. It then reacts with the rocks, very slowly breaking them down, and forming a bicarbonate that is eventually washed into the ocean, locking the carbon on the seabed.
The problem is it takes a long time. One idea that seeks to use this natural process more effectively is to speed it up by pulverising rocks and spreading the resulting powder over a larger area to absorb more CO2 from rain and air.
Natural rock weathering currently absorbs around 0.3% of global fossil fuel emissions annually, but the IPCC estimates at scale it could capture 2 and 4 billion metric tons at a cost of between $50 and $200 (£39-160) per metric ton. This approach also requires extensive land use and has not been trialled at scale.
Soil is another major carbon sink. Plants and grasses that die and rot store carbon in the soil for long periods. However, modern farming techniques, such as intensive ploughing and fertilisation, causes carbon to be released and oxidised to form CO2.
Adjustments in farming methods could change this and, at scale, make agriculture carbon neutral. Straightforward techniques such as minimising soil disturbance, crop rotation and grassland regeneration could sequester as much as 5 billion tonnes of carbon into the soil annually, according to the IPCC, at potential zero cost.
A challenge to this method is that once soil is saturated it can’t hold any more carbon. That material would also be easily released if methods are not maintained in the future.
A way to super-charge how much carbon soil can store is to add a substance called biochar to the earth. A type of charcoal made by burning biomass, such as wood or farm waste, in the absence of oxygen, biochar can increase the amount of carbon locked into the soil for hundreds or thousands of years. It also helps soil retain water, and reduce methane and nitrogen emissions.
Biochar has only been trialled at a small scale but the IPCC estimates that between 0.5 and 2 billion metric tonnes could be captured annually through this means. However, it predicts a cost of between $30 and $120 (£23-94) per metric tonne. Additionally, producing biochar at scale would require large amounts of biomass that must be sustainably sourced.
CO2 is in the air all around us and so removing it from the atmosphere can effectively take place anywhere. Direct air capture (DAC or DACCS) proposes that the carbon capture and storage technology many power stations are now trialling can be carried out almost anywhere.
Swiss start-up Climeworks is one company attempting to make DAC viable. Its technology works by passing air through a surface that reacts with CO2 to form a compound, but releases the remaining air. The newly formed compound is then heated so the reactive chemical agent can be separated and reused. The CO2 is then stored underground with gas and water where it reacts with basalt and turns to stone in less than two years.
The main challenge for this technique is the cost – between $200 and $600 (£156-468) per metric tonne – and that it requires large amounts of energy, creating further demand for electricity.
Wood pellet storage domes at Drax Power Station, Selby, North Yorkshire
The primary challenge for negative emission technology as a whole is that so few have actually been implemented at a global scale. However, trials are in motion around in the world, including at Drax, to remove emissions and help limit the effects of climate change.
Even if the UK decarbonises heavily across all sectors of the economy by 2050, there’s still projected to be 130 MtCO2 (million tonnes of carbon dioxide) net emissions. But a Royal Academy/Royal Society report released earlier this year was optimistic. It concluded that the country can become net zero and do its part in mitigating man made climate change – with BECCS identified as the negative emissions technology best suited to take the leading role and at least cost.
RNS Number : 1079F
Drax Group PLC
Andy Skelton
Andy has been CFO at Fidessa Group plc, a UK listed global software and services business, since October 2015. He was previously Deputy CFO at CSR plc, before its acquisition in 2015 by Qualcomm Incorporated. Prior to joining CSR Andy held senior finance positions at Ericsson and Marconi, including two years as CFO of Ericsson Nikola Tesla. He has a BA in Accounting and Finance from Heriot Watt University and qualified as a chartered accountant in 1994.
Den Jones will remain with the Company until June 2019 to support the acquisition and integration of Scottish Power’s portfolio of pumped storage, hydro and gas-fired generation from Iberdrola. The acquisition is conditional upon the approval by Drax’s shareholders and clearance by UK Competition and Markets Authority.
“The Directors are delighted to welcome Andy to the Board of Drax. He brings a wealth of experience and skills, and will be a strong addition to the Drax team. I also extend the directors’ thanks to Den Jones who has done an excellent job as Interim CFO.”
There are no further matters which are required to be disclosed under Rule 9.6.13R of the Listing Rules of the Financial Services Authority.
Drax Investor Relations: Mark Strafford
Drax External Communications: Matt Willey
Website: www.drax.com
Mr Skelton’s remuneration will be in accordance with the Company’s remuneration policy and at an annual base salary of £355,000. No payments in respect of compensation for benefits lost on resignation from his previous employment will be made.
On 3 August 2018, an offer from ION Capital UK for the entire share capital of Fidessa was declared unconditional in all respects.
END
