Tag: Financial Reports

Half year results for the six months ended 30 June 2024

26 July 2024

Investors

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

29 February 2024

Financial News

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.

 

Half year results for the six months ended 30 June 2023

27 July 2023

Financial News

RNS Number: 3301H
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Six months ended 30 June20232022
Key financial performance measures
Adjusted EBITDA (£ million)(1)(2)(excl. Electricity Generator Levy) (EGL)(3)453225
Adjusted EBITDA (£ million)(1)(2)(incl. EGL)417225
Net debt (£ million)(4)1,2741,116
Adjusted basic EPS (pence)(1)46.020.0
Dividend (pence per share)9.28.4
Total financial performance measures from continuing operations
Operating profit (£ million)392207
Profit before tax (£ million)338200

Will Gardiner, Drax Group CEO

Will Gardiner, CEO of Drax Group, said:

“In the first half of 2023, we delivered a strong system support and generation performance, providing dispatchable, renewable power for millions of UK homes and businesses. Drax Power Station remained the UK’s single largest provider of renewable energy by output during the period.

“We continue to focus on our role as the UK’s leading generator of flexible renewable power and our ambition to be a world leader in carbon removals. To that end, in the US, we have made good progress screening options for BECCS projects which can deliver long-term, large-scale carbon removal and attractive opportunities for growth.

“We are excited about the opportunity for BECCS in the UK and are in formal discussions with the UK Government to facilitate the transition to BECCS at Drax Power Station by 2030. Our plans could create thousands of new jobs in the Humber region, help the UK meet its carbon removals targets and support long-term energy security.”

Financial highlights – strong financial performance and returns to shareholders

  • Adjusted EBITDA (excl. EGL) of £453 million up 101% (H1 2022: £225 million)
    • Driven by system support services and dispatchable, renewable generation
  • Strong liquidity and balance sheet – £586 million of cash and committed facilities at 30 June 2023
    • Expect Net debt to Adjusted EBITDA (incl. EGL) to be significantly below 2 times target at the end of 2023
  • Sustainable and growing dividend – expected full year dividend up 10% to 23.1 p/share (2022: 21.0 p/share)
    • Interim dividend of 9.2 p/share (H1 2022: 8.4 p/share) – 40% of full year expectation
  • £150 million share buy-back programme ongoing(5)

2023 outlook

  • Full year expectations for Adjusted EBITDA and EGL unchanged and in line with analysts’ consensus estimates(6), inclusive of increased development expenditure on US BECCS
  • For the remainder of 2023 Drax will present Adjusted EBITDA including and excluding EGL

Progressing options for £7 billion of strategic growth opportunities 2024-2030, primarily BECCS

  • Ambition for the development of over 20Mt pa of carbon removals – 14Mt pa by 2030
    • New-build BECCS – two sites selected in US – targeting c.6Mt pa by 2030
    • Evaluating additional sites for greenfield and brownfield BECCS in US
    • Drax Power Station – targeting 8Mt pa by 2030
  • Targeting 8Mt pa of pellet production capacity and 4Mt pa of third-party sales by 2030
  • Targeting 600MW expansion of Cruachan Pumped Storage Power Station by 2030
    • Planning approval granted (July 2023)

UK BECCS

  • UK BECCS investment paused, subject to further clarity on support for BECCS at Drax Power Station
  • Formal discussions with UK Government – bridging mechanism between end of current renewable schemes in 2027 and BECCS

Operational review

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

  • Adjusted EBITDA £48 million (H1 2022: £45 million)
  • Integrated supply chain model supports resilience and opportunities in a challenging market
    • Producer, user and seller of biomass pellets across multiple international markets
  • Production of 1.9Mt (H1 2022: 2.0Mt)
    • Unplanned outages, wind damage at Port of Baton Rouge and temporary suspension of production at one site due to wildfires, partially offset by production at the Demopolis plant
    • Ongoing disruption in H2 from wildfires and industrial action by Canadian transport workers in July
  • Increase in production cost (maintenance, labour, transport, energy and fibre costs) offset by revenue growth
  • Progressing development of new Longview pellet plant and Aliceville expansion
    • Investment of c.$300 million, operational 2025, 0.6Mt of new capacity
  • Third-party sales – heads of terms agreed for sale of 0.5Mt of biomass over five years to a Japanese customer

Generation – renewable generation and system support services

  • UK’s largest source of renewable power by output, primarily biomass generation at Drax Power Station
    • 9% of annualised UK renewables(7)
  • Adjusted EBITDA (excl. EGL) £457 million up 123% (H1 2022: £205 million)
    • Adjusted EBITDA (incl. EGL) £421 million up 106% (H1 2022: £205 million, £nil EGL)
  • Biomass generation – strong system support and renewable generation performance
    • Period-on-period reduction in generation
      • Maintenance – first major planned outage completed, second major planned outage in H2 2023 and forced outage on one unit due to a transformer issue – unit back in service
    • Higher achieved power price and value from system support
    • Higher biomass costs
  • Pumped storage and hydro – strong system support and generation performance
    • £154 million Adjusted EBITDA (excl. EGL) (H1 2022: £53 million)
    • Includes forward sale of peak power (winter 2022)
    • Increased level of wind capacity, intermittency and volatility underpin long-term need for dispatchable generation
  • Coal – no generation in 2023 – currently decommissioning following formal closure (March 2023)
  • As at 21 July 2023, Drax had 28.1TWh of power hedged between 2023 and 2025 on its ROC, pumped storage and hydro generation assets at an average price of £150.0/MWh(8)
    • Excludes sales under the CfD mechanism, which remains available subject to good ROC unit operational performance and market conditions
Contracted power sales 21 July 2023202320242025
Net ROC, hydro and gas (TWh(8/9/10))11.711.25.2
Average achieved £ per MWh162.7147.5126.2
Lower expected level of ROC generation in 2023 due to major planned outages on two units

Customers – renewable power sales to high-quality Industrial & Commercial (I&C) customers

  • Adjusted EBITDA of £37 million (H1 2022: £24 million) reflects continued improvement in I&C portfolio
    • 8.0TWh of power sales to I&C customers – c.16% increase compared to H1 2022 (6.9TWh)

Other financial information

Adjusted EBITDA and EGL

  • Accrued costs for EGL for the first time in H1 2023 and reported EGL within Adjusted EBITDA
    • H1 charge of £35 million
    • H2 charge expected to increase significantly reflecting higher achieved power price in H2
  • For the remainder of 2023 Drax will present Adjusted EBITDA including and excluding EGL

Profits

  • Total operating profit of £392 million (H1 2022: £207 million), including £85 million mark-to-market gain on derivative contracts
  • Total profit after tax of £247 million (H1 2022: £148 million profit after tax, including an £8 million non-cash charge from revaluing deferred tax balances) includes an increase in the headline rate of corporation tax in the UK from 19% to 25% from 1 April 2023
  • Depreciation and amortisation of £109 million (H1 2022: £121 million)

Capital investment

  • Capital investment of £210 million (H1 2022: £60 million) – primarily maintenance and development of OCGTs
  • 2023 expected capital investment of £520-580 million
    • Includes £120-140 million maintenance, including two major planned outages on biomass units; £30 million enhancements; £340-380 million strategic, including OCGT and pellet plant developments
    • OCGTs – c.900MW – three new-build sites in England and Wales, commissioning in 2024 – continuing to evaluate options for these projects, including their potential sale
    • Reduction in expected annual investment due to pause in investment in UK BECCS

Cash and interest

  • Group cost of debt c.4.6%
  • Cash generated from operations £404 million (H1 2022: £185 million)
  • Net debt of £1,274 million (31 December 2022: £1,206 million), including cash and cash equivalents of £125 million (31 December 2022: £238 million)

Capital allocation policy – unchanged

  • Continue to assess capital requirements in line with the current policy
    • Considerations include the timing of capital deployment, leverage profile, any dilution from share issuance and divestment of non-core assets

Full year results for the twelve months ended 31 December 2022

23 February 2023

Financial News

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

Half year results for the six months ended 30 June 2022

26 July 2022

Investors

RNS Number: 6883T
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Six months ended 30 JuneH1 2022H1 2021
Key financial performance measures
Adjusted EBITDA (£ million)(1)(2)225186
Continuing operations225165
Discontinued operations – gas generation-21
Net debt (£ million)(3)1,1011,029
Adjusted basic EPS (pence)(1)20.014.6
Interim dividend (pence per share)8.47.5
Total financial performance measures from continuing operations
Operating profit (£ million)20784
Profit before tax (£ million)20052

Drax CEO, Will Gardiner [click to view/download]

Will Gardiner, CEO of Drax Group, said:

“As the UK’s largest generator of renewable power by output, Drax plays a critical role in supporting the country’s security of supply. We are accelerating our investment in renewable generation, having recently submitted planning applications for the development of BECCS at Drax Power Station and for the expansion of Cruachan Pumped Storage Power Station.

“As a leading producer of sustainable wood pellets we continue to invest in expanding our pellet production in order to supply the rising global demand for renewable power generated from biomass. We have commissioned new biomass pellet production plants in the US South and expect to take a final investment decision on up to 500,000 tonnes of additional capacity before the end of the year.

“As carbon removals become an increasingly urgent part of the global route to Net Zero, we are also making very encouraging progress towards delivering BECCS in North America and progressing with site selection, government engagement and technology development.

“In the UK and US we have plans to invest £3 billion in renewables that would create thousands of green jobs in communities that need them, underlining our position as a growing, international business at the heart of the green energy transition.”

Financial highlights

  • Adjusted EBITDA £225 million up 21% (H1 2021: £186 million)
  • Strong liquidity and balance sheet – £539 million of cash and committed facilities at 30 June 2022
    • Expect to be significantly below 2 times Net Debt to Adjusted EBITDA by the end of 2022
  • Sustainable and growing dividend – expected full year dividend up 11.7% to 21.0 p/share (2021: 18.8 p/share)
    • Interim dividend of 8.4 p/share (H1 2021: 7.5 p/share) – 40% of full year expectation

Engineers at Cruachan Power Station

Progress with strategy in H1 2022

  • To be a global leader in sustainable biomass – targeting 8Mt of capacity and 4Mt of sales to 3rd parties by 2030
    • Addition of 0.4Mt of operational pellet production capacity
    • New Tokyo sales office opened July 2022
  • To be a global leader in negative emissions
    • BECCS – UK – targeting 8Mt of negative emissions by 2030
    • Planning application submitted and government consultation on GGR business models published with power BECCS business model consultation expected “during the summer”
    • BECCS – North America – targeting 4Mt of negative emissions by 2030
    • Ongoing engagement with policy makers, screening of regions and locations for BECCS
  • To be a leader in UK dispatchable, renewable power
    • >99% reduction in scope 1 and 2 emissions from generation since 2012
    • UK’s largest generator of renewable power by output – 11% of total
    • Optimisation of biomass generation and logistics to support security of supply at times of higher demand
    • Planning application submitted for 600MW expansion of Cruachan and connection agreement secured

Outlook for 2022

  • Expectations for full year Adjusted EBITDA unchanged from 6 July 2022 update which reflected optimisation of biomass generation and logistics to support UK security of supply this winter when demand is high, a strong pumped storage performance and agreement of a winter contingency contract for coal

Future positive – people, nature, climate

  • People
    • Diversity and inclusion programme – inclusive management, promoting social mobility via graduates, apprenticeships and work experience programmes
    • Continued commitment to STEM outreach programme

An apprentice working in the turbine hall at Drax Power Station, North Yorkshire

  • Nature and climate
    • Science-based sustainability policy fully compliant with current UK and EU law on sustainable sourcing and aligned with UN guidelines for carbon accounting
    • Biomass produced using sawmill and forest residuals, and low-grade roundwood, which often have few alternative markets and would otherwise be landfilled, burned or left to rot, releasing CO2 and other GHGs
    • Increase in sawmill residues used by Drax to produce pellets – 67% of total fibre (FY 2021: 62%)
    • 100% of woody biomass produced by Drax verified against SBP, SFI, FSC®(4) or PEFC Chain of Custody certification with third-party supplier compliance primarily via SBP certification

Operational review

Pellet Production – increased production, flexible operations to support UK generation, addition of 0.4Mt of capacity 

  • Adjusted EBITDA up 13% to £45 million (H1 2021: £40 million)
    • Pellet production up 54% to 2.0Mt (H1 2021: 1.3Mt) (including Pinnacle since 13 April 2021)
  • Addition of c.0.4Mt of new production capacity
    • Commissioning of Demopolis and Leola, expect to reach full production capacity in H2 2022
  • Total $/t cost of $146/t(5) – 2% increase on 2021 ($143/t(5))
    • Increase in utility costs in Q2-22 (>20% increase)
    • Fuel surcharge – barge and rail to port (> 10% increase)
    • Commissioning costs at Demopolis and Leola plants
    • Net reduction in other costs, inclusive of optimisation of supply chain to meet reprofiling of Generation
    • No material change in fibre costs
  • Areas of focus for further savings – wider range of sustainable biomass fibre, continued focus on operational efficiency and improvement, capacity expansion, innovation and technology
  • Continue to target final investment decision on up to 0.5Mt of new capacity in H2 2022

Generation – increased recognition of value of long-term security of supply from biomass and pumped storage

  • Adjusted EBITDA from continuing operations £205 million up 24% (H1 2021: £165 million)
    • Optimisation of biomass generation and logistics to support 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
    • Four small, planned biomass outages completed in H1, supporting higher planned generation in H2-22
    • Strong portfolio system support performance (balancing mechanism, ancillary services and optimisation)
    • Higher cost of sales – logistics optimisation, biomass and system costs
  • Six-month extension of coal at request of UK government – winter contingency contract for security of supply
    • Closure of coal units in March 2023 following expiration of agreement with ESO at end of March 2023
    • Fixed fee and compensation for associated costs, including coal
    • Remain committed to coal closure and development of BECCS, with no change to expected timetable
  • As at 21 July 2022, Drax had 25.4TWh of power hedged between 2022 and 2024 on its ROC and hydro generation assets at an average price of £95.9/MWh, with a further 2.3TWh equivalent of gas sales (transacted for the purpose of accessing additional liquidity for forward sales from ROC units and highly correlated to forward power prices) plus additional sales under the CfD mechanism
Contracted power sales 21 July 2022202220232024
ROC (TWh(6))11.78.84.5
Average achieved £ per MWh87.298.3109.5
Hydro (TWh)0.30.1-
-Average achieved £ per MWh133.1242.0-
Gas hedges (TWh equivalent)(0.1)0.51.9
-Pence per therm361.0145.8135.0
Lower expected level of ROC generation in 2023 due to major planned outages on two units

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

  • Adjusted EBITDA of £24 million (H1 2021: £5 million loss) – continued improvement following impact of Covid-19
    • principally in the SME business
    • Includes benefit of excess contracted power sold back into merchant market
  • Continued development of Industrial & Commercial (I&C) portfolio
    • 9TWh of power sales – 21% increase compared to H1 2021 (5.7TWh)
    • Focusing on key sectors to increase sales to high-quality counterparties supporting generation route to market
    • Energy services to expand the Group’s system support capability and customer sustainability objectives
  • SME – increasingly stringent credit control in SME business to reflect higher power price environment

Other financial information

  • Total operating profit from continuing operations of £207 million (H1 2021: £84 million), including £130 million mark-to-market gain on derivative contracts and £27 million of exceptional costs
  • Total profit after tax from continuing operations of £148 million includes an £8 million non-cash charge from revaluing deferred tax balances following confirmation of UK corporation tax rate increases from 2023 (H1 2021: £6 million loss including a £48 million non-cash charge from revaluing deferred tax balances)
  • Capital investment of £60 million (H1 2021: £71 million) – primarily maintenance
    • Full year expectation of £290–£310 million, includes £120 million for Open Cycle Gas Turbine projects, £20 million BECCS FEED and site preparation, and £10 million associated with new pellet capacity, subject to final investment decision (FID)
  • Depreciation and amortisation of £121 million (H1: £89 million) reflects inclusion of Pinnacle for a full six months, plant upgrades and accelerated depreciation of certain pellet plant equipment in line with planned capital upgrades
  • Group cost of debt below 3.6%
  • Cash Generated from Operations £185 million (H1 2021: £138 million)
  • Net Debt of £1,101 million (31 December 2021: £1,044 million), including cash and cash equivalents of £288 million (31 December H1 2021: £317 million)
    • Continue to expect Net Debt to Adjusted EBITDA significantly below 2 times by end of 2022, reflecting optimisation of generation and logistics to deliver higher levels of power generation and cash flows in H2 2022

View complete half year report

View Investor Presentation

Webcast Live Event

Full year results for the twelve months ended 31 December 2021

24 February 2022

Investors

RNS Number : 6410C
Drax Group PLC
24 February 2022

Twelve months ended 31 December20212020
Key financial performance measures
Adjusted EBITDA (£ million) (1)(2)398412
Continuing operations378366
Discontinued operations – gas generation2046
Net debt (£ million) (3)1,044776
Adjusted basic EPS (pence) (1)26.529.6
Total dividend (pence per share)18.817.1
Total financial performance measures from continuing operations
Operating profit / (loss) (£ million)197(156)
Profit / (loss) before tax (£ million)122(235)

Will Gardiner, CEO of Drax Group, said:

Drax Group CEO Will Gardiner

Drax Group CEO Will Gardiner

“2021 was a transformational year for Drax as we became the world’s leading sustainable biomass generation and supply company, whilst continuing to invest in delivering positive outcomes for the climate, nature and people.

“Over the past ten years Drax has invested over £2 billion in renewable energy and has plans to invest a further £3 billion this decade, supporting the global transition to a low-carbon economy. Our investment has reduced our emissions from power generation by over 95% and we are the UK’s largest producer of renewable power by output. We are proud to be one of the lowest carbon intensity power generators in Europe – a significant transformation from being the largest coal power station in Western Europe.

“We have significantly advanced our plans for bioenergy with carbon capture and storage (BECCS) in the UK and globally. By 2030 we aim to deliver 12 million tonnes of negative emissions and lead the world in providing a critical technology which scientists agree is key to delivering the global transition to net zero.”

Financial highlights

  • Adjusted EBITDA £398 million (2020: £412 million)
  • Strong liquidity and balance sheet – £549 million of cash and committed facilities at 31 December 2021
    • Expect to be below 2x net debt to Adjusted EBITDA by the end of 2022
  • Total dividend – 10% increase to 18.8 pence per share (2020: 17.1 pence per share)
    • Proposed final dividend of 11.3 pence per share (2020: 10.3 pence per share)

Strategic highlights

  • Acquisition of Pinnacle Renewable Energy Inc. for C$385 million (£222 million) (enterprise value of C$796 million)
  • Sale of Combined Cycle Gas Turbine (CCGT) generation assets for £186 million
  • Development of the world’s leading sustainable biomass generation and supply company
    • Supply – 17 pellet plants and developments across three major fibre baskets, production capacity of c.5Mt pa
    • 22Mt (c.$4.5 billion) of long-term contracted sales to high-quality customers in Asia and Europe
    • 14Mt of own-use sales through 2026
    • Generation – 2.6GW of biomass generation – UK’s largest source of renewable power by output
  • Development of BECCS in UK
    • East Coast Cluster – selected as one of two priority carbon capture and storage clusters
    • Government – BECCS included in Net Zero Strategy and Interim Bioenergy Strategy
    • Drax Power Station – planning application started, technology partner selected and FEED study commenced

Strategic outlook – growth plans aligned with global low-carbon growth

  • To be a global leader in sustainable biomass
    • Targeting 8Mt pa of production capacity and 4Mt pa of biomass sales to third parties by 2030
  • To be a global leader in negative emissions
    • Targeting 12Mt pa of negative CO2 – UK and international BECCS
  • To be a UK leader in dispatchable, renewable generation
    • Key system support role for biomass and expansion of Cruachan Pumped Storage Power Station
  • All underpinned by continued focus on safety, sustainability and biomass cost reduction
  • Investments totalling £3bn in period to 2030, fully funded through cash generation
    • Pellet production, UK BECCS and Cruachan expansion

Future positive – people, nature, climate

  • CO2 – >95% reduction in generation emissions since 2012 – sale of CCGT generation assets and end of commercial coal in March 2021 and closure in September 2022 following fulfilment of Capacity Market agreements
  • Sustainable biomass sourcing
    • Science-based sustainability policy compliant with current UK and EU law on sustainable biomass
    • Biomass produced using sawmill and forest residuals, and low-grade roundwood, which often have few alternative markets and would otherwise be landfilled, burned or left to rot, releasing CO2 and other GHGs
    • Significant increase in sawmill residues used by Drax to produce pellets – 57% of total fibre (2020: 21%)
    • 100% of woody biomass produced by Drax verified against SBP, SFI, FSC®(4) or PEFC Chain of Custody certification with third-party supplier compliance primarily via SBP certification
    • Glasgow Declaration launched at COP26 to establish a world-wide industry standard on biomass sustainability
  • People – Diversity, Equity and Inclusion – female representation in the UK business increased to 36% (2020:34%)
  • Governance – two new North America based Non-Executive Directors – Kim Keating and Erika Peterman

Operational review

Pellet Production – acquisition of Pinnacle, capacity expansion and biomass cost reduction

  • Adjusted EBITDA (including Pinnacle since 13 April 2021) up 65% to £86 million (2020: £52 million)
    • Pellet production up 107% to 3.1Mt (2020: 1.5Mt), with 1.2Mt sales to third parties and increased own-use
    • Total $/t cost of production down 7% to $143/t(5) (2020: $153/t(5))
  • Developments in US southeast (2021-22) – addition of c.0.6Mt of new production capacity
    • Completion of LaSalle and Morehouse plant expansions
    • Commissioning of Demopolis and first satellite plant (Leola)
    • Commencement of construction of second satellite plant (Russellville)
  • Further opportunities for growth and cost reduction – increased production capacity, sales to third parties, continued operational efficiencies and improvement, wider range of sustainable biomass and technical innovation

Generation – dispatchable renewable generation and system support services

  • UK’s largest generator of renewable power by output – 12% of total
  • Adjusted EBITDA from discontinued CCGT generation assets £20 million (2020: £46 million)
  • Adjusted EBITDA from continuing operations £352 million (2020: £400 million)
    • Biomass – 5% increase in generation less major planned outage on CfD unit (successfully completed November 2021), higher cost from historic foreign exchange hedging and system charges
    • Pumped storage / hydro – good operational performance
    • Strong portfolio system support role (balancing mechanism, ancillary services and optimisation)
    • Limited role for coal in H2 at request of system operator
  • Ongoing cost reductions to support operating model for biomass generation at Drax Power Station from 2027
    • Reduction in fixed cost base – end of commercial coal operations March 2021, closure September 2022
    • Third biomass turbine upgrade, delivering improved thermal efficiency and lower maintenance cost
    • Trials to expand range of lower cost sustainable biomass – up to 35% blend achieved in test runs on one unit
  • As at 21 February 2022, Drax had 20.4TWh of power hedged between 2022 and 2024 on its ROC and hydro generation assets at £70.2/MWh, with a further 0.9TWh equivalent of gas sales (transacted for the purpose of accessing additional liquidity for forward sales from ROC units and highly correlated to forward power prices) plus additional sales under the CfD mechanism
Contracted power sales 21 February 2022202220232024
ROC (TWh(6))10.96.92.4
ROC (£ per MWh)70.070.070.6
Hydro (TWh)0.2--
Hydro (£ per MWh)90.9--
Gas hedges (TWh equivalent)(7)0.50.4
Pence per therm105101
CfD(6/8) typical annual output c.5TWh and current strike price £118.5/MWh

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

  • Adjusted EBITDA of £6 million inclusive of impact of mutualisation changes and Covid-19 (2020: £39 million loss)
  • Continued development of Industrial & Commercial (I&C) portfolio
    • Focusing on key sectors to increase sales to high-quality counterparties supporting generation route to market
    • Energy services to expand the Group’s system support capability and customer sustainability objectives
  • Rebranding of the Haven Power I&C business to Drax Energy Solutions
  • Closure of Oxford and Cardiff offices as part of Small & Medium-Size (SME) strategic review and continuing to evaluate options for SME portfolio to maximise value and align with strategy

Other financial information

  • Total operating profit from continuing operations of £197 million (2020: £156 million loss, including exceptional costs totalling £275 million principally in respect of the announced closure of coal operations)
  • Total profit after tax from continuing operations of £55 million including a £49 million non-cash charge from revaluing deferred tax balances following confirmation of UK corporation tax rate increases from 2023 (2020: loss of £195 million)
  • 2021 capital investment of £230 million (2020: £183 million) – continued investment in biomass strategy
  • 2022 expected capital investment of £230–250 million – £70-80 million maintenance, £20 million enhancements, £110-120 million strategic, (primarily biomass and BECCS), and £30 million other (primarily safety and systems)
    • Excludes any material investment in non-core Open Cycle Gas Turbine developments – continuing to evaluate options, including sale, but continue to invest as appropriate to fulfil obligations under the Capacity Market agreements and to maximise value from any sale. In the event of a sale Drax expects to recover any capital expenditure incurred during 2022, which could total up to £100 million
  • Group cost of debt below 3.5%
    • Refinancing of Canadian facilities (July 2021) with lower cost ESG facility following Pinnacle acquisition
  • Net debt of £1,044 million (31 December 2020: £776 million), including cash and cash equivalents of £317 million (31 December 2020: £290 million)
    • Expect net debt to Adjusted EBITDA below 2x by the end of 2022
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; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected. 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

Management will host a webcast presentation for analysts and investors at 11:00am (UK Time) on Thursday 24 February 2022.

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 Thursday 24 February 2022 for download at: https://www.drax.com/investors/announcements-events-reports/presentations/

Event Title: Drax Group plc: Full Year Results
Event Date: Thursday 24 February 2022
Event Time: 11:00am (UK time)
Webcast Live Event Link:  https://secure.emincote.com/client/drax/drax019
Conference call and pre-register Link: https://secure.emincote.com/client/drax/drax019/vip_connect
Start Date:  Thursday 24 February 2022
Delete Date:  Friday 24 February 2023
Archive Link:  https://secure.emincote.com/client/drax/drax019

 

For further information, please contact: [email protected]

View investor presentation here

Half year results for the six months ended 30 June 2021

Investors
Engineers walking in front of sustainable biomass wood pellet storage dome at Drax Power Station, June 2021

RNS Number: 8333G
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Six months ended 30 JuneH1 2021H1 2020
Key financial performance measures
Adjusted EBITDA (£ million)(1)(2)186179
Continuing operations165160
Discontinued operations – gas generation2119
Net debt (£ million)(3)1,029792
Adjusted basic EPS (pence)(1)14.610.8
Interim dividend (pence per share)7.56.8
Total financial performance measures from continuing operations
Operating profit / (loss) (£ million)84(57)
Profit / (loss) before tax (£ million)52(85)

Will Gardiner, CEO of Drax Group, said:

“We have had a great first half of the year, transforming Drax into the world’s leading sustainable biomass generation and supply company as well as the UK’s largest generator of renewable power.

“The business has performed well, and we have exciting growth opportunities to support the global transition to a low-carbon economy.

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

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

“Drax has reduced its generation emissions by over 90%, and we are very proud to be one of the lowest carbon intensity power generators in Europe – a huge transformation for a business which less than a decade ago operated the largest coal power station in Western Europe.

“In the past six months we have significantly advanced our plans for Bioenergy with Carbon Capture and Storage (BECCS) in the UK and globally. By 2030 Drax could be delivering millions of tonnes of negative emissions and leading the world in providing a critical technology needed to tackle the climate crisis.

“We are pleased to be announcing a 10% increase in our dividend, and we remain committed to creating long-term value for all our stakeholders.” 

Financial highlights

Pinnacle named ship

  • Adjusted EBITDA from continuing and discontinued operations up £7 million to £186 million (H1 2020: £179 million)
  • Acquisition of Pinnacle Renewable Energy Inc. (Pinnacle) for cash consideration of C$385 million (£222 million) (enterprise value of C$796 million) and sale of gas generation assets for £186 million
  • Strong liquidity and balance sheet
    • £666 million of cash and committed facilities at 30 June 2021
    • Refinancing of Canadian facilities (July 2021) with lower cost ESG facility following Pinnacle acquisition
  •  Sustainable and growing dividend – expected full year dividend up 10% to 18.8 pence per share (2020: 17.1p/share)
    • Interim dividend of 7.5 pence per share (H1 2020: 6.8p/share) – 40% of full year expectation

Strategic highlights

Kentaro Hosomi, Chief Regional Officer EMEA, Mitsubishi Heavy Industries (MHI) at Drax Power Station, North Yorkshire

Kentaro Hosomi, Chief Regional Officer EMEA, Mitsubishi Heavy Industries (MHI) at Drax Power Station, North Yorkshire

  • Developing complementary biomass strategies for supply, negative emissions and renewable power
  • Creation of the world’s leading sustainable biomass generation and supply company
    • Supply – 17 operational plants and developments across three major fibre baskets with production capacity of 4.9Mt pa and $4.3 billion of long-term contracted sales to high-quality customers in Asia and Europe
    • Generation – 2.6GW of biomass generation – UK’s largest source of renewable power by output
  • >90% reduction in generation emissions since 2012
    • Sale of gas generation assets January 2021 and end of commercial coal March 2021
  • Development of BECCS
    • Planning application submitted for Drax Power Station and technology partner (MHI) selected
    • Participation in East Coast Cluster – phase 1 regional clusters and projects to be selected from late 2021
    • Partnerships with Bechtel and Phoenix BioPower evaluating international BECCS and biomass technologies
  • System support – option to develop Cruachan from 400MW to over 1GW – commenced planning approval process

 Outlook

  • Adjusted EBITDA, inclusive of Pinnacle from 13 April 2021, full year expectations unchanged

Operational review

Pellet Production – acquisition of Pinnacle, capacity expansion and biomass cost reduction

close-up of truck raising and lowering

  • Sustainable sourcing
    • Biomass produced using forestry residuals and material otherwise uneconomic to commercial forestry
    • Science-based sustainability policy fully compliant with current UK, EU law on sustainable sourcing aligned with UN guidelines for carbon accounting
    • All woody biomass verified and audited against FSC®(4), PEFC or SBP requirements
  • Adjusted EBITDA (including Pinnacle since 13 April 2021) up 60% to £40 million (H1 2020: £25 million)
    • Pellet production up 70% to 1.3Mt (H1 2020: 0.8Mt)
    • Cost of production down 8% to $141/t(5) (H1 2020: $154/t(5))
  • Near-term developments in US Southeast (2021-22)
    • Commissioning of LaSalle expansion, Demopolis and first satellite plant in H2
  • Other opportunities for growth and cost reduction
    • Increased production capacity, supply of biomass to third parties and expansion of fuel envelope to include lower cost biomass

Generation – flexible and renewable generation

  • 12% of UK’s renewable electricity, strong operational performance and system support services
  • Adjusted EBITDA down 14% to £185 million (H1 2020: £214 million)
    • Biomass – Lower achieved power prices and higher GBP cost of biomass reflecting historical power and FX hedging
    • Strong system support (balancing mechanism, Ancillary Services and optimisation) of £70 million (H1 2020: £66 million) – additional coal operations and continued good hydro and pumped storage performance, in addition to coal operations
    • Coal – utilisation of residual coal stock in Q1 2021 and capture of higher power prices
  • Pumped storage / hydro – good operational and system support performance
    • £34 million of Adjusted EBITDA (Cruachan, Lanark, Galloway schemes and Daldowie) (H1 2020: £35 million)
  • Ongoing cost reductions to support operating model for biomass at Drax Power Station from 2027
    • End of commercial coal operations in March, formal closure September 2022 – reduction in fixed cost base
    • Major planned outage for biomass CfD unit – August to November 2021 – including third turbine upgrade delivering improved thermal efficiency and lower maintenance cost, supporting lower cost biomass operations
    • Trials to expand range of lower cost biomass fuels – up to 35% load achieved in test runs on one unit
  • Strong contracted power position – 29.3TWh sold forward at £52.1/MWh 2021-2023. Opportunities to capture higher power prices in future periods, subject to liquidity
As at 25 July 2021202120222023
Fixed price power sales (TWh) 15.99.14.3
-      CfD(6)3.80.6-
-      ROC10.88.44.0
-      Other1.30.10.3
At an average achieved price (£ per MWh)51.752.452.7

Customers – renewable electricity and services under long-term contracts to high-quality I&C customer base

 

  • Adjusted EBITDA loss of £5 million inclusive of £10-15 million impact of Covid-19 (H1 2020 £37 million loss inclusive of £44 million impact of Covid-19)
  • Continuing development of Industrial & Commercial (I&C) portfolio
    • Focusing on key sectors to increase sales to high-quality counterparties supporting generation route to market
    • Energy services expand the Group’s system support capability and customer sustainability objectives
  • Closure of Oxford and Cardiff offices as part of SME strategic review and the rebranding of the Haven Power I&C business to Drax
  • Continue to evaluate options for SME portfolio to maximise value and alignment with strategy

Other financial information

  • Total operating profit from continuing operations of £84 million including £20 million mark-to-market gain on derivative contracts and acquisition related costs of £10 million and restructuring costs of £2 million
  • Total loss after tax from continuing operations of £6 million including a £48 million charge from revaluing deferred tax balances following announcement of future UK tax rate changes
  • Total loss after tax from continuing operations of £6 million including a £48 million charge from revaluing deferred tax balances following confirmation of UK corporation tax rate increases from 2023
  • Capital investment of £71 million (H1 2020: £78 million) – continued investment in biomass strategy
    • Full year expectation of £210–230 million, includes pellet plant developments – LaSalle expansion, satellite plants and commissioning of Demopolis
  • Group cost of debt now below 3.5% reflecting refinancing of Canadian facilities in July 2021
  • Net debt of £1,029 million (31 December 2020: £776 million), including cash and cash equivalents of £406 million (31 December 2020: £290 million)
    • 5x net debt to Adjusted EBITDA, with £666 million of total cash and committed facilities (31 December 2020: £682 million)
    • Continue to expect around 2.0x net debt to Adjusted EBITDA by end of 2022
View complete half year report View investor presentation Listen to webcast