Tag: results

Half year results for the six months ended 30 June 2024

RNS Number: 9278X
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Six months ended 30 JuneH1 2024H1 2023
Key financial performance measures
Adjusted EBITDA(1)(2)(3)(£ million)515417
Net debt(4)(£ million)1,0351,274
Adjusted basic EPS(1)(pence)65.646.0
Dividend per share (pence)10.49.2
Total financial performance measures
Operating profit (£ million)518392
Profit before tax (£ million)463338

Will Gardiner, CEO of Drax Group, said:

Will Gardiner, Drax Group CEO

“Drax has delivered a strong operational performance, playing an important role supporting the UK energy system with dispatchable, renewable power, keeping the lights on for millions of homes and businesses, while supporting thousands of jobs throughout our supply chain.

“As well as celebrating 50 years of operations in 2024, we are excited about the opportunities for Drax Power Station, including bioenergy with carbon capture and storage (BECCS). Both the National Grid ESO and the UK’s Climate Change Committee have recently reiterated that BECCS is important for the UK to achieve its decarbonisation goals.

“We look forward to working with the new UK Government to help grow the economy and take steps urgently to deliver a net zero electricity system by 2030. We believe that Drax and our partners across the Humber and Scotland can accelerate growth, create thousands of new jobs and channel billions in private investment into carbon capture and green energy projects, subject to the right government policies to support regional development plans.

“Outside of the UK, through our plans for global BECCS, we are continuing to develop opportunities to provide long-term, large-scale carbon removals and attractive opportunities for growth as part of a potentially trillion-dollar market.”

Financial highlights – strong operational and financial performance

  • Adj. EBITDA growth driven by renewable generation, pellet production and Industrial & Commercial (I&C)
  • Strong liquidity and balance sheet
    • £515 million of cash and committed facilities at 30 June 2024
    • £682 million of new facilities maturing 2027-2029 and repayment of £949 million(5) of shorter dated maturities
  • Sustainable and growing dividend – expected full year dividend up 12.6% to 26.0 p/share (2023: 23.1 p/share)
    • Interim dividend of 10.4 p/share (H1 2023: 9.2 p/share) – 40% of full year expectation
  • Up to £300 million two-year share buyback to commence in Q3 2024

Financial outlook

  • Full year 2024 expectations for Adj. EBITDA around the top end of analysts’ consensus estimates(6)
  • Outlook for 2025 Adj. EBITDA underpinned by a strong hedge book – fully hedged on RO units

Progress in H1 towards >£500 million EBITDA post 2027 from FlexGen & Energy Solutions and Pellet Production

  • FlexGen & Energy Solutions – targeting post 2027 recurring Adj. EBITDA of >£250 million
    • Continued development of three new OCGTs (c.900MW)
    • Sale of non-core SME customer meters
  • Pellet Production – targeting post 2027 recurring Adj. EBITDA >£250 million
    • Increased production, including Aliceville expansion
    • Pipeline of opportunities for sales in existing and new markets, including sustainable aviation fuel (SAF)

Biomass generation – Drax Power Station

  • Biomass generation – 2.6GW of flexible 24/7 renewable generation – important role in UK energy security
    • >£1 billion of est. post-tax operating cash flow (Jan 2024 to Mar 2027) underpinned by forward power hedges
    • Expect long-term value from bridging mechanism, BECCS and other opportunities
    • Bridging mechanism – targeting clarity in 2024, ongoing discussions with UK Government

Attractive opportunities to invest for long-term growth linked to energy transition and security of supply

  • Options for c.£4 billion of growth investment by 2030, with additional investment through 2030s
    • UK BECCS – targeting first unit (4Mt pa) by 2030 in line with UK ambition, with second unit (4Mt pa) to follow
    • Global BECCS – first potential site shortlisted, targeting operations from 2030
    • Pumped Storage – targeting 600MW expansion of Cruachan Power Station, FID 2026, operational by 2030

Capital returns

  • In line with our capital allocation policy and reflecting (a) a strong balance sheet, (b) investment requirements and (c) the mitigation of equity dilution expected to arise from share schemes, Drax will commence a share buyback programme for the purchase of up to £300 million of Drax shares over a two-year period, expected to begin in Q3 2024
  • Drax remains committed to its current capital allocation policy, which remains unchanged and will continue to assess its capital requirements in line with the current policy

Operational and financial review

£ millionH1 2024H1 2023(7)
Adj. EBITDA breakdown515417
Biomass generation393226
Pellet production6543
Pumped storage and hydro76141
Energy solutions - I&C3627
Energy solutions - SME(14)7
Global BECCS (20)(6)
Innovation, Capital Projects and Other(21)(20)

Pellet Production – supporting UK generation and sales to third parties

  • Improved operational and financial performance versus H1 2023
    • 2.0Mt of pellets produced (H1 2023: 1.9Mt) and improved margin
  • Development of new capacity
    • Aliceville expansion commissioned H1 2024 (130kt)
    • Longview pellet plant (450kt)

Generation – energy security with dispatchable renewable generation and system support services

  • Pumped storage and hydro – performance supportive of post 2027 Adj. EBITDA target
    • Strong system support earnings with lower forward power sales, as expected, compared to H1 2023
    • Progressing c.£80 million refurbishment and upgrade (40MW) of Cruachan underpinned by 15-year Capacity Market agreement (>£220 million)
  • Biomass generation – increased level of renewable generation and continuing system support role
    • 7.0TWh – c.32% increase on H1 2023 (5.3TWh)
    • Single major planned outage on track, expected to complete August 2024
  • Strong contracted power and renewables position
    • As at 22 July 2024 c.£3.1 billion of forward power sales between 2024 and 2026 on RO biomass, pumped storage and hydro generation assets – 25.8TWh at an average price of £120.7/MWh(8/9)
    • RO generation – fully hedged in 2024 and 2025, with >£1 billion of associated ROCs
    • A further 4.7TWh of CfD generation contracted for 2024/25
Contracted power sales 22 July 2024202420252026
Net RO, hydro and gas (TWh)(8)11.010.04.8
Average achieved £ per MWh(9)150.9107.179.7
CfD (TWh)3.90.8-

Energy Solutions (Customers) – renewable power sales and energy services

  • Strong underlying I&C performance
    • Increase in achieved margin offsetting small reduction in power sales – 7.6TWh (H1 2023: 8.0TWh)
    • Growing value from 100% renewable power products
    • Development of Energy Solutions business including system support services via demand response, and electric vehicle services following acquisition of BMM (August 2023)
  • SME business (Opus Energy)
    • Asset sale of majority of Opus Energy’s meter points (c.90,000) (expected to complete Q3 2024), reflecting focus on core I&C business
    • Employee consultation process underway to reflect reduced customer base

Other financial information

Capital investment

  • Capital investment of £147 million (H1 2023: £210 million)
  • 2024 FY expected capital investment of c.£360-400 million – growth, maintenance and other
    • Growth – c.£270 million, primarily the development of a new pellet plant (Longview), three new OCGTs (continuing to evaluate options for these projects) and refurbishment of Cruachan units 3 and 4
    • Maintenance – c.£100 million, including major planned outage at Drax Power Station

Cash and balance sheet

  • Cash generated from operations £400 million (H1 2023: £404 million)
  • Net working capital outflow (£93 million) inclusive of an increase in renewable certificate assets
  • Net debt at 30 June 2024 of £1,035 million (31 December 2023: £1,084 million), including cash and cash equivalents of £263 million (31 December 2023: £380 million)
  • £682 million of new loan facilities maturing 2027-2029 and repayment of £949 million(5) of shorter dated maturities
    • New c.£383 million term-loan facilities, maturing 2027-2029
    • New €350 million Eurobond, maturing 2029
    • Repaid £347 million of infrastructure facilities, maturing 2025-2026
    • Repaid $500 million US bond, maturing 2025
    • Repaid €106 million of €250 million Eurobond through tender offer, bond maturing 2025
    • Repaid £120 million collateral facility in July 2024

Notes:

Full year results for the twelve months ended 31 December 2023

RNS Number : 8820E
Drax Group PLC
29 February 2023

Twelve months ended 31 December20232022
Key financial performance measures
Adjusted EBITDA (excl. EGL)(1)(2)(3) (£ million)1,214731
Electricity Generator Levy (EGL)(3) (£ million)(205)-
Adjusted EBITDA (incl. EGL)(1)(2)(3) (£ million)1,009731
Net debt(4) (£ million)1,0841,206
Net debt to Adjusted EBITDA (incl. EGL)1.1x1.6x
Adjusted basic EPS (1) (pence)119.685.1
Dividend per share (pence)23.121.0
Total financial performance measures
Operating profit (£ million)908146
Profit before tax (£ million)79678

Will Gardiner, CEO of Drax Group, said:

Will Gardiner, Drax Group CEO

“Drax performed strongly in 2023 and we remained the single largest provider of renewable power by output in the UK. We have created a business which plays an essential role in supporting energy security, providing dispatchable, renewable power for millions of homes and businesses, particularly during periods of peak demand when there is low wind and solar power.

“Policy support for our UK BECCS project continues to progress and we remain in formal discussions with the UK Government to ensure Drax Power Station can play a long-term role in UK energy security, creating thousands of jobs during construction and helping the country reach Net Zero.

“We have made further progress in our ambition to be a world leader in carbon removals and have visibility of high-quality, long-term earnings to 2042 and a strong balance sheet which supports returns to shareholders and investment in growth, both in the UK and internationally.”

Financial highlights – strong financial performance and returns to shareholders

  • Adj. EBITDA growth driven by system support services, renewable generation, and energy solutions (Customers)
  • Strong liquidity and balance sheet – £639 million of cash and committed facilities at 31 December 2023
  • New £258 million term-loan facilities with 2027-2029 maturities (February 2024)
  • Proposed final dividend of 13.9 pence per share (2022: 12.6 pence per share) – 10% increase
  • £150 million share buyback programme concluded(5)

Current business and targets provide strong long-term foundation for balance sheet, dividend and investment

  • Flexible generation and energy solutions portfolio – targeting post 2027 recurring Adj. EBITDA of >£250 million
    • Pumped storage, hydro, Open Cycle Gas Turbines (OCGTs) and energy solutions
    • Operating in power, renewable, system support and capacity markets
    • c.£580 million of capacity payments to 2042 – existing and new capacity, including Cruachan refurbishment
  • Pellet production – targeting post 2027 recurring Adj. EBITDA >£250 million from own-use and third-party sales
  • Biomass generation – 2.6GW of flexible renewable generation
    • Strong forward hedges support firm cash flows (2024-2026) with additional value from uncontracted power
    • Expect long-term value from bridging mechanism and BECCS

Financial outlook

  • Full year 2024 expectations for Adj. EBITDA in line with analysts’ consensus estimates(6)
  • Expect to repay Q4 2025 debt maturities through cash generation and refinancing activities in 2024
  • Outlook for 2025 Adj. EBITDA underpinned by a strong hedge book – >90% hedge of power on RO units

Attractive opportunities to invest for long-term growth linked to energy transition and security of supply

  • Options for c.£4 billion of growth investment by 2030, with additional investment through 2030s
    • UK BECCS – targeting first unit (4Mt pa) by 2030 in line with UK ambition, with second unit (4Mt pa) to follow – good progress over last 12 months
    • UK Government Biomass Strategy (August 2023) highlights important role for BECCS
      • Planning consent granted for two units (January 2024)
      • Consultation on BECCS bridging mechanism (January – February 2024)
      • MoU with Harbour Energy and bp to assess options for transportation and storage of CO2 (February 2024)
      • Ongoing formal discussions with UK Government regarding bridging mechanism and BECCS
    • Global BECCS – targeting first project (3Mt pa) by 2030 – site selected in US South, moving to FEED in 2024
    • Targeting 600MW expansion of Cruachan Power Station (pumped storage) by 2030, planning consent granted
  • Targeting 8Mt pa of pellet production capacity by 2030, subject to clarity on UK BECCS
  • Ambition for the development of over 20Mt pa of carbon removals through 2030s

Capital allocation policy unchanged – continue to assess capital requirements in line with the current policy

Sustainability

  • Compliance with TCFD reporting requirements
  • Science Based Targets initiative (SBTi) targets approved
  • Forum for the Future BECCS Done Well report and publication of initial Drax response

National Audit Office (NAO) and Ofgem

  • NAO review of UK Government’s biomass strategy published (January 2024)
    • Outlines opportunities to develop standards consistent with existing statements from UK Government
    • Highlights UK Government’s commitment to biomass and its long-term role in delivering UK targets
  • Ofgem – annual assessment of compliance with Renewables Obligation (RO) scheme (May 2023) – “Good” rating
  • Ofgem – investigation of annual biomass profiling reporting under RO scheme (ongoing)

Operational and financial review

£ million20232022
Adj. EBITDA breakdown (incl. EGL)1,009731
Pellet production89134
Pumped storage and hydro230171
Biomass generation703525
Energy solutions (Customers)7226
Corporate, innovation, Global BECCS and other(7)(8)(85)(125)

Pellet Production – production and sales supporting UK generation and sales to third parties

  • Robust performance in a challenging environment
  • Progressing development of new Longview pellet plant, and Aliceville expansion complete
    • Investment of c.$300 million adding c.0.6Mt of new capacity
  • Pipeline of new third-party sales opportunities
    • 5Mt contract to Japan over five years, commenced in 2023
    • Letter of Intent for sale of up to 1Mt of biomass to European utility, for projects incl. Sustainable Aviation Fuel

Generation – energy security with dispatchable renewable generation and system support services

  • Pumped storage and hydro – strong system support and generation performance
    • Includes forward sale of peak power (Q1 2023), system support services, renewables and capacity payments
  • Biomass generation – strong system support and renewable generation performance
    • Period-on-period reduction in output reflects two major planned outages
    • Higher achieved power price and value from system support, but higher biomass costs
  • As at 26 February >£2.8 billion of forward power sales between 2024 and 2026 on RO biomass, pumped storage and hydro generation assets – 22.3TWh at an average price of £127.3/MWh(9/10)
    • RO generation – fully hedged in 2024 and >90% hedged in 2025
    • A further 2.6TWh of CfD generation contracted for 2024

Contracted power sales as at 26 February 2024

2024

2025

2026
Net RO, hydro and gas (TWh)(9)10.89.32.2
Average achieved £ per MWh(10)149.0111.189.6
CfD (TWh)2.6

Energy Supply (Customers) – renewable power and energy services

  • Strong Industrial and Commercial (I&C) performance with 7% increase in power sales – 15.8TWh (2022: 14.8TWh), stable margins on contracted sales and lower balancing costs
  • Growing value from 100% renewable power products
  • Development of energy solutions business including system support services via demand response, and electric vehicle services following acquisition of BMM (August 2023)
  • Impairment of Opus Energy of £69 million, following transfer of renewables activities to Drax Energy Solutions (along with £145 million of Goodwill) and the previously announced ending of gas sales

Other financial information

Capital investment

  • Capital investment of £519 million (2022: £255 million)
    • £187 million maintenance and other, including two major planned outages on biomass units
    • £332 million growth, including £189 million OCGTs and £76 million pellet plant developments
  • 2024 expected capital investment of £410-450 million
  • OCGTs – c.900MW – three new-build sites, commissioning in H2 2024
    • Continuing to evaluate options for these projects

Cash and balance sheet

  • Cash generated from operations £1,111 million (after £155 million inflow of collateral) (2022: £320 million, after £407 million outflow of collateral)
  • Net debt at 31 December 2023 of £1,084 million (31 December 2022: £1,206 million), including cash and cash equivalents of £380 million (31 December 2022: £238 million)
  • Good progress on financing activities
    • ESG term loan, extended maturity to 2026 and reduced size to C$200 million (November 2023)
    • £144 million of infrastructure facilities repaid (January 2024)
    • Extension of £300 million revolving credit facility to 2026 (January 2024)
    • New £258 million term-loan facilities with 2027-2029 maturities (February 2024)

Forward Looking Statements

This announcement may contain certain statements, expectations, statistics, projections and other information that are, or may be, forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans, beliefs, and objectives for the management of future operations of Drax Group plc (“Drax”) and its subsidiaries (the “Group”), are not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although Drax believes that the statements, expectations, statistics and projections and other information reflected in such statements are reasonable, they reflect the Company’s current view and no assurance can be given that they will prove to be correct. Such events and statements involve risks and uncertainties. Actual results and outcomes may differ materially from those expressed or implied by those forward-looking statements. There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; uncertainty as to future investment and support achieved in enabling the realisation of strategic aims and objectives; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected, including the impact of prevailing economic and political uncertainty, the impact of strikes, the impact of adverse weather conditions or events such as wildfires. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so.

Webcast Arrangements

Management will host a webcast presentation for analysts and investors at 9:00am (GMT), Thursday 29 February 2024.

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 (GMT) on Thursday 29 February 2024 for download at: https://www.drax.com/investors/announcements-events-reports/presentations/

Event Title: Drax Group plc: Full Year Results
Event Date: Thursday 29 February 2024
Event Time: 9:00am (GMT)
Webcast Live Event Link: https://secure.emincote.com/client/drax/drax028
Conference call and pre-register Link: https://secure.emincote.com/client/drax/drax028/vip_connect
Start Date:  Thursday 29 February 2024
Delete Date:  Saturday 1 March 2025
Archive Link: https://secure.emincote.com/client/drax/drax028

For further information, please contact: [email protected]

 Website: www.drax.com

View investor presentation here

 

 

 

Notes:

(1) Financial performance measures prefixed with “Adjusted” are stated after adjusting for exceptional items (including impairment of non-current assets, proceeds from legal claims, change in fair value of financial instruments and impact of tax rate changes). Adj. EBITDA and EPS measures exclude earnings from associates and amounts attributable to non-controlling interests.
(2) Earnings before interest, tax, depreciation, amortisation, other gains and losses and impairment of non-current assets, excluding the impact of exceptional items and certain remeasurements, earnings from associates and earnings attributable to non-controlling interests.
(3) In December 2022, the UK Government confirmed the details of a windfall tax – the Electricity Generator Levy (EGL) – on renewable and low-carbon generators, implemented in 2023 and running to 31 March 2028. The EGL applies to the three biomass units operating under the RO scheme and run-of-river hydro operations. It does not apply to the Contract for Difference (CfD) biomass or pumped storage hydro units. Following review, we have concluded that EGL will be accounted for as a levy within Gross Profit and therefore Adj. EBITDA. For 2023 we have presented Adj. EBITDA including and excluding EGL for ease of comparison.
(4) Net debt is calculated by taking the Group’s borrowings, adjusting for the impact of associated hedging instruments, and subtracting cash and cash equivalents. Net debt excludes the share of borrowings and cash and cash equivalents attributable to non-controlling interests.
Borrowings includes external financial debt, such as loan notes, term loans and amounts drawn in cash under revolving credit facilities, net of any deferred finance costs.
(5) Following completion of the share buyback programme Drax has c.384.7 million shares in issue, with a further c.40.3 million held in treasury.
(6) As of 21 February 2024, analyst consensus for 2024 Adj. EBITDA (incl. EGL) was £968 million, with a range of £882 – 1,097million. The details of this company collected consensus are displayed on the Group’s website. https://www.drax.com/investors/announcements-events-reports/presentations/
(7) In 2023 a review of the mechanism for corporate recharges was performed, leading to a greater proportion being recharged to business units, primarily Generation. The remaining £85 million in 2023 is comprised of £57 million for Global BECCS (2022: £14 million) and £28 million of other corporate and innovation costs, including the development of options for pumped storage expansion (2022: £24 million) and intercompany eliminations. 2022 is not restated in the table, but footnote 8, below includes a restated Adj. EBITDA breakdown for 2022 which includes the cost reallocation on the same basis as 2023.
(8) The table shows Adj. EBITDA breakdown with 2022 restated inclusive of the cost reallocation exercise described in footnote 7.

£ million20232022
Adj. EBITDA breakdown (incl. EGL)1,009731
Pellet production89125
Pumped storage and hydro230171
Biomass generation703453
Energy solutions (Customers)7220
Corporate, innovation, Global BECCS and other(85)(38)

(9) Includes 3.5TWh of structured power sales in 2025 and 2026 (forward gas sales as a proxy for forward power), transacted for the purpose of accessing additional liquidity for forward sales from RO units and highly correlated to forward power prices.
(10) Presented net of cost of closing out gas positions at maturity and replacing with forward power sales.

 

Full year results for the twelve months ended 31 December 2022

RNS Number : 7781Q
Drax Group PLC
23 February 2023

Twelve months ended 31 December20222021
Key financial performance measures
Adjusted EBITDA (£ million) (1)(2)731398
Net debt (£ million) (3)1,2061,108
Net debt to Adjusted EBITDA1.6x2.8x
Adjusted basic EPS (pence)(1) (1)85.126.5
Total dividend (pence per share)21.018.8
Total financial performance measures from continuing operations
Operating profit (£ million)146197
Profit before tax (£ million)78122

Will Gardiner, CEO of Drax Group, said:

Will Gardiner, Drax Group CEO

“Drax delivered a strong performance in 2022, and played a significant role in ensuring security of supply during a challenging year for the UK’s energy system.

“Our renewable generation – biomass, hydro and pumped storage – are a major source of power in the UK and during periods of peak demand when there was low wind and solar power, these assets collectively supplied up to 70% of the UK’s renewable power in certain periods.

“We believe that BECCS can become a world-leading solution for large-scale high-quality carbon removals and we are seeing increasing global policy support for its delivery.

“Drax stands ready to invest billions of pounds in the development of this technology and, following the introduction of the US Inflation Reduction Act, we are increasingly excited about the opportunities to deploy BECCS in the US. In response, the UK Government should accelerate its policy support for BECCS to make the UK a world leader in carbon removals, while attracting investment and delivering its net zero targets.

“Drax is a growing international business with strong cash returns which we are reinvesting to produce more renewable energy and deliver carbon removals while reducing our own carbon emissions. We aim to be at the heart of the energy transition, creating the jobs, renewable power and large-scale carbon removals that the world needs.”

Financial highlights – strong financial performance underpinning investment and a sustain and growing dividend

  • Adjusted EBITDA of £731 million up 84% (2021: £398 million)
  • Strong liquidity and balance sheet – £698 million of cash and committed facilities at 31 December 2022
    • 1.6x Net debt to Adjusted EBITDA – significantly below 2x target
  • Total dividend increased 11.7% to 21.0 pence per share (2021: 18.8 pence per share)
    • Proposed final dividend of 12.6 pence per share (2021: 11.3 pence per share)

Operational highlights – optimisation of supply chain and generation to support security of supply

  • UK’s largest source of renewable power by output – 11% of annualised total, 19% of peak (up to 70% in-day peak)

Strategy highlights – developing a pipeline for carbon removals, biomass and dispatchable, renewable power

  • Ambition to be a global leader in carbon removals
    • Global BECCS – developing a pipeline of projects in the US targeting long-term large-scale carbon removal
      • First new-build site chosen, with over 10 sites currently under evaluation
      • MoU agreed with large timberland owner to develop a pipeline of BECCS opportunities
      • MoU agreed with Respira for sale of 2Mt of carbon removals from new-build BECCS plants
    • UK BECCS – UK Government to confirm shortlisting for “Track 1” UK BECCS projects
  • Ambition to be a global leader in sustainable biomass – targeting 8Mt of capacity and 4Mt of third-party sales by 2030
    • Addition of 0.5Mt of operational pellet production capacity and final investment decision (FID) on 0.6Mt in 2023
  • Ambition to be a UK leader in dispatchable, renewable power
    • Aim to reach agreement regarding long-term incentives for biomass generation not operating as BECCS
    • Planning application submitted for 600MW expansion of Cruachan and connection agreement secured

Future positive – climate, nature, people

  • Exiting gas sales on Customers SME business
  • Drax Power Station sustainability sourcing requirements are compliant with UK law on sustainable sourcing
  • Biomass produced using material from well-established forestry markets in the US, Canada and Europe
  • Subject to national and regional regulation and typically supported by, and independently monitored for compliance by, forest certification schemes such as: the Forestry Stewardship Council® (FSC)(4), Sustainable Forestry Initiative (SFI) and Programme for the Endorsement of Forest Certification© (PEFC)(5)
  • Launch of Drax Foundation to deliver community initiatives that support education and skills development in Science, Technology, Engineering and Maths (STEM), and that improve green spaces and enhance biodiversity within local communities

Operational review

Pellet Production – increased production, flexible operations to support UK generation, addition of 0.5Mt of capacity

  • Adjusted EBITDA up 56% to £134 million (2021: £86 million)
    • Production up 26% to 3.9Mt (2021: 3.1Mt, including Pinnacle since 13 April 2021)
    • Lower than planned production – delays achieving full production at new plants, North American rail restrictions and flexible production
  • Optimisation of supply chain supports value for the Group
    • Flexible production to support generation
    • Sales to third parties under long-term contracts
    • Spot sales and purchases
  • Addition of c.0.5Mt of production capacity – Demopolis, Leola and Russellville – completing commissioning and acquisition of Princeton
  • 6% year-on-year production cost increase to $152/t(6) (2021: $143/t(6))
    • Inflation impact on utility costs (>35%) and fuel surcharges (barge and rail transport to port (>20%))
  • Outlook – clear pathway to improved earnings profile
    • Incremental production at existing sites and addition of new capacity
    • Continued headwind from inflation in 2023
    • Development and introduction of new technologies and innovation, including c.£10 million R&D investment in a biomass sugar extraction plant
    • Increased use of residuals and a wider range of sustainable biomass materials

Generation – flexible operations and dispatch to capture value – increased system support and security of supply

  • Adjusted EBITDA £696 million up 87% (2021: £372 million)
    • Optimisation of generation and logistics to support UK security of supply at times of higher demand
      • Summer – lower power demand, lower power generation and sale of reprofiled biomass
      • Winter – maximise biomass deliveries to support increased generation at times of higher demand
    • Higher biomass and system costs reflecting a more challenging energy environment
  • Strong pumped storage and hydro performance – value from increased system support activity and generation
  • Six-month extension of coal at request of UK Government – winter contingency contract for security of supply
    • Units not called other than for testing
    • Closure of coal units in March 2023 following expiration of current agreement
  • As at 17 February 2023, Drax had 23.3TWh of power hedged between 2023 and 2025 on its ROC and hydro generation assets at an average price of £152.8/MWh, inclusive of equivalent gas sales (transacted for the purpose of accessing additional liquidity for forward sales from ROC units and highly correlated to forward power prices) and the cost of unwinding equivalent gas sales. Excludes any sales under the CfD mechanism.
Contracted power sales as at 17 February 2023202320242025
Net ROC, hydro and gas (TWh(7/8/9))12.49.01.9
-Average achieved £ per MWh (£ per MWh)158.1149.2135.7
Lower expected level of ROC generation in 2023 due to major planned outages on two units

Electricity pylons take flexible power generated from water stored in a reservoir at Cruachan Power Station in the Highlands into the national grid

Customers – renewable power under long-term contracts to high-quality I&C customers and decarbonisation products

  • Adjusted EBITDA of £26 million (2021: £6 million) – continued improvement in profitability post impact of Covid-19
  • Continued development of Industrial & Commercial (I&C) portfolio
    • 14.8TWh of power sales – 24% increase compared to 2021 (11.9TWh)
    • Commencement of new supply contracts to three major high-quality customers supporting generation route to market

Other financial information

Profits

  • Total operating profit from continuing operations of £146 million (2021: £197 million), including £298 million mark-to-market loss on derivative contracts and £25 million of exceptional costs
  • Total profit after tax of £83 million (2021: £55 million profit after tax from continuing operations, including a £49 million non-cash charge from revaluing deferred tax balances)
  • Depreciation, amortisation, impairment, loss on disposal and exceptional items of £286 million (2021: £209 million) reflects inclusion of Pinnacle for a full 12 months, plant upgrades and accelerated depreciation of certain pellet plant equipment in line with planned capital upgrades and asset impairment of £17 million

Capital investment

  • 2022 capital investment of £255 million (2021: £238 million) – includes c.£90 million from OCGT projects
  • 2023 expected capital investment of £570 – £630 million
    • £120 million maintenance, including two major planned outages on biomass units; £30 million enhancements; £430 million strategic – includes >£200 million OCGT and >£100 million pellet plant developments

Cash and interest

  • Group cost of debt below 4.2%
  • Cash Generated from Operations £320 million (2021: £354 million), inclusive of collateral payments (2021: £168 million inflow) typically associated with higher commodity prices and expected to unwind through 2023 and 2024
    • £234 million of collateral placed in 2022 (2021: £173 million held)
  • Net debt of £1,206 million (31 December 2021: £1,108 million), including cash and cash equivalents of £238 million (31 December 2021: £317 million)
    • 1.6x Net debt to Adjusted EBITDA, inclusive of temporary collateral outflows – significantly below 2x target
    • 1.3x Net debt to Adjusted EBITDA, excluding collateral

Capital allocation policy – unchanged

  • Maintain a strong balance sheet
  • Invest in the core business and strategy, including new biomass pellet plants, the development of options for BECCS, and the expansion of pumped storage power station at Cruachan
  • Pay a sustainable and growing dividend
  • Return surplus capital to shareholders – if there is a build-up of capital, the Board will consider the most appropriate mechanism to return this to shareholders
    • Considerations include – timing of capital deployment, leverage profile, prevention of dilution and divestment of non-core assets

2023 financial and operational outlook

  • Continued optimisation of biomass supply chain and generation to create value for the Group
  • Baseload ROC generation, plus two planned major outages
  • CfD unit held in reserve – operation subject to good ROC unit operational performance and market conditions
  • Biomass generation cost >£100/MWh
  • Forward selling of pumped storage and hydro underpins expectations
  • Electricity Generator Levy applicable to ROC and hydro assets, but not pumped storage, CfD or coal

Forward Looking Statements

This announcement may contain certain statements, expectations, statistics, projections and other information that are, or may be, forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans, beliefs, and objectives for the management of future operations of Drax Group plc (“Drax”) and its subsidiaries (the “Group”), are not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although Drax believes that the statements, expectations, statistics and projections and other information reflected in such statements are reasonable, they reflect the Company’s current view and no assurance can be given that they will prove to be correct. Such events and statements involve risks and uncertainties. Actual results and outcomes may differ materially from those expressed or implied by those forward-looking statements. There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; uncertainty as to future investment and support achieved in enabling the realisation of strategic aims and objectives; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected, including the impact of prevailing economic and political uncertainty. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so.

Results presentation and webcast arrangements

Event Title: Drax Group plc: Full Year Results
Event Date: Thursday 23 February 2023
9:00am (UK time)
Webcast Live Event Link: https://secure.emincote.com/client/drax/drax024
Conference call and pre-register Link: https://secure.emincote.com/client/drax/drax024/vip_connect
Start Date: Thursday 23 February 2023
Delete Date: Thursday 23 February 2024
Archive Link:  https://secure.emincote.com/client/drax/drax024

For further information, please contact: [email protected]

View investor presentation here