AGM Statement

Drax holds its Annual General Meeting at 11:30am today at The Grand Hotel and Spa, Station Rise, York.  At this meeting Philip Cox, Chairman of Drax, will make the following comments:

“The Annual Report and Accounts were published on 10 March and therefore I hope that you’ve had time to review them. By way of a reminder, our principal performance indicators and operational achievements for 2016 are summarised on the screen. 

2016 was a pivotal year for Drax, marking the completion of the biomass transformation project which commenced in 2012, and the announcement of a new strategy to deliver long-term sustainable value for our shareholders.

Our underlying earnings for 2016 at £140 million was in line with our guidance, although £29 million below 2015. This reflects the continuation of challenging commodity markets and the removal of Climate Change Levy (CCL) exemptions. However, we were pleased to be able to partly offset the impact of these factors with a focus on flexible system support, the prompt and balancing markets, ancillary services and improving retail margins, all of which are important parts of our strategy to develop broader, non-commodity exposed earnings. 

Against a background of low wholesale electricity prices, the Group has again delivered strong operational performance. This is not something we take for granted and it remains at the core of our strategy.

Following a comprehensive review, initiated in 2015, the Group’s new strategy has been defined and is based on creating a more diversified earnings base that will produce higher-quality returns in the long term.

Central to this strategy, Drax aims to play an increasing role in the way energy is generated, supplied and used for a better future. We announced our new strategy to the market in December. Evidence of delivering on the new strategy can already be seen in the acquisition of Opus Energy and four projects to develop rapid-response Open Cycle Gas Turbine (OCGT) generation plants and most recently we have made progress in our plans to expand our biomass pellet self-supply capability with the provisional acquisition of a new biomass pellet plant in Louisiana.

Sustainably sourced biomass generation remains at the heart of your business and we were delighted to be able to complete the full conversion of our third biomass generating unit, resulting in Drax delivering 16 per cent of the UK’s renewable electricity. 

Biomass is the most cost-effective large scale renewable and with the right policy frameworks we could become 100% renewable through the full conversion of our three remaining coal units and we could do this well before 2025, supporting the Government’s objective to remove unabated coal from the system.

Through our strategy your Board remain focused on optimising the value of the Group as well as remaining alert to opportunities for growth.

The sustainable biomass we use to provide energy is at the heart of our business. Because this must be sustainable we always strive to ensure all our pellets comply with our policy. We are well aware of the obligations we have to society, and specifically the communities in which we are located, as well as the wider environment. 

We take these obligations very seriously. 

And, I’d like to remind you our shareholders of our guiding principles:

• We never work in countries that lack proper regulation.
• We never cause deforestation or forest decline.
• We never source from areas that are officially protected or where our activities would harm endangered species.
• We only take wood from working forests that grow back and stay as forests.
• We require all our suppliers to pass tough screening and sustainability audits, conducted by independent auditors.
• We only source wood from countries that already have huge working forests where we provide another market for low grade material that solid-wood industries, such as construction and furniture manufacture, aren’t using.

This year there are a larger number of resolutions than usual as a result of the submission of a new Remuneration Policy for consideration by shareholders and a number of other resolutions as set out in the Notice of Meeting.  Following comments by shareholder advisory bodies and discussions with major shareholders, I want to be clear that all payments and awards made to directors are in line with our remuneration policy, although I acknowledge that some elements of remuneration structure could have been better explained in the previous year’s Directors’ Remuneration Report.”        

Enquires:

Investor Relations

Mark Strafford        +44 (0) 1757 612491

Media 

Paul Hodgson +44 (0) 1757 612026

Website: www.drax.com

Notes:

(1)  The principal performance indicators and operational achievements for 2016 which were  “summarised on the screen” were as follows:

During 2016:

• Total revenue – £2,950 million
  (2015: £3,065 million)
• Gross Profit was £376 million
  (2015: £409 million)
• EBITDA – £140 million
  (2015: £169 million)
• Net debt – £93 million
  (2015: £187 million)
• Underlying basic earnings – 5 pence per share
  (2015: 11 pence per share)
• Total recordable injury rate – 0.22
  (2015: 0.31)
• Percentage of UK renewable electricity generated – 16% ⁽¹⁾
  (2015: 16%)
• Biomass generation – 65%
  (2015: 43%)

^Note

^{(1)    Drax estimates that it produced around 16% of the renewable electricity generated under support schemes covered by the Levy Control Framework.}