Tag: Financial Reports

Full year results for the twelve months ended 31 December 2019

27 February 2020

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

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

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

Financial highlights

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

Engineer planning work near Cruachan Power Station dam and reservoir

Operational highlights

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

Engineer working at Rye House Power Station in Hertfordshire

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

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

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

Outlook – 2020

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

Will Gardiner, CEO of Drax Group said:

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

Drax Group CEO Will Gardiner

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

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

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

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

Operational review

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

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

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

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

Engineers inspect generator in Drax Power Station turbine hall, 2019

Power Generation – flexible, low-carbon and renewable generation

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

Opus Energy employees holding meeting in Northampton, 2019

Customers – growth in margin per MWh and customer meters

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

Other financial information

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

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Notice of Full Year Results announcement, presentation and webcast arrangements

19 February 2020

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

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

Results presentation meeting and webcast arrangements

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

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

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

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

Event Title: Drax Group plc: Full Year Results

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

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

Start Date: Thursday 27 February 2020

Delete Date: Thursday 31 December 2020

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

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

Website: www.drax.com

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

END

Acquisition Bridge Facility refinancing completed

24 July 2019

Investors

Private placement

The £375 million private placement with infrastructure lenders comprises facilities with maturities between 2024 and 2029(2).

ESG Facility

The £125 million ESG facility matures in 2022. The facility includes a mechanism that adjusts the margin based on Drax’s carbon emissions against an annual benchmark, recognising Drax’s continued commitment to reducing its carbon emissions as part of its overall purpose of enabling a zero-carbon, lower cost energy future.

Together these facilities extend the Group’s debt maturity profile beyond 2027 and reduce the Group’s overall cost of debt to below 4 percent. 

Enquiries:

Drax Investor Relations:
Mark Strafford
+44 (0) 1757 612 491

Media:

Drax External Communications:
Matt Willey
+44 (0) 7711 376 087 

Website: www.drax.com

Note

(1)  Drax Corporate Limited drew £550 million under an acquisition bridge facility on 2 January 2019 used to partially fund the acquisition of ScottishPower Generation Limited for initial net consideration of £687 million. £150 million of the acquisition bridge facility was repaid on 16 May 2019.

(2)  £122.5 million in 2024, £122.5 million in 2025, £80 million in 2026 and £50 million in 2029.

Half year results for the six months ended 30 June 2019

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

Financial highlights

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

Operational highlights

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

Progress with strategic initiatives

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

Outlook

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

Will Gardiner, Chief Executive of Drax Group said:

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

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

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

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

Operational review

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

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

Power Generation – Flexible, low-carbon and renewable generation

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

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

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

Group financial information

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

Notes:

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

Read full Report   |   View investor presentation   |   Sign up or watch webcast   |   Read press release

Full year results for the twelve months ended 31 December 2018

26 February 2019

Investors
Biomass domes
RNS Number: 0765R
Drax Group PLC
Adjusted(1)Total
Twelve months ended 31 December20182017 Restated(2)20182017 Restated(2)
Key financial performance measures
EBITDA (£ million)(3)250229
Profit / (loss) before tax (£ million)37514(204)
Basic earnings / (loss) per share (pence)10.40.75.0(41.3)

Good financial performance

  • Group Adjusted EBITDA up 9% to £250 million
  • Continued strong cash generation and balance sheet
    • 3x net debt to Adjusted EBITDA (2017: 1.6x net debt to Adjusted EBITDA)
    • Net cash from operating activities of £311 million (2017: £315 million)
    • Net debt(4) of £319 million (2017: £367 million)
  • Dividend growth – 15% increase in dividend per share – 14.1 pence per share (2017: 12.3 pence per share)
  • £50 million share buy back programme completed
  • Total profit before tax of £14 million includes gains principally related to foreign currency hedging of £38 million (2017: Total loss before tax of £204 million including unrealised losses of £177 million)

Dam and reservoir, Cruachan Power Station

Acquisition of ScottishPower Generation has accelerated strategy

  • 6GW multi-site, multi-technology portfolio of pumped storage, hydro and gas
  • Strong strategic fit with UK’s need for flexible, low carbon and renewable generation
  • High quality earnings with expected returns significantly in excess of weighted average cost of capital

Good progress with strategic initiatives

  • Successful low-cost conversion of fourth biomass unit
  • Third US biomass pellet plant commissioned and fully operational
  • Progress with biomass cost reduction programme including sawmill co-location and rail spur development
  • Commenced BECCS(5) pilot project and equity investment in C-Capture – technology proven with CO2 captured
  • Development of B2B Energy Supply customer and IT platform

Outlook

  • Continued growth in Adjusted EBITDA, cash generation and dividend
  • Integration of ScottishPower Generation
  • Continue to expect Capacity Market to be reinstated on same or similar basis
  • Attractive investment options for growth: biomass cost reduction, biomass capacity expansion and new gas

Will Gardiner, Chief Executive of Drax Group plc, said:

“Drax is now one of the leading generators of flexible, low carbon and renewable electricity in the UK. As the grid decarbonises, our ability to support intermittent renewables will become increasingly important as we strive to deliver our purpose of enabling a zero carbon, lower cost energy future.

“Drax performed well in 2018. Our commitment to operating safely and sustainably remains at our core. We commissioned our third pellet production plant, which contributed to our good results. After a difficult first quarter for our Power Generation business, we delivered strong availability and financial results. Whilst the year was challenging for our B2B Energy Supply business, we continued to grow our customer base and are investing in the significant opportunity created by smart meters.

“We are confident in our ability to continue growing our earnings and advancing our strategy through the year. We have attractive investment opportunities throughout our business, and while short-term uncertainty over the Capacity Market remains, we look forward to developing those opportunities in a disciplined fashion.”

Operational review

Pellet Production – Focus on good quality pellets at lowest cost

  • Adjusted EBITDA of £21 million (2017: £6 million)
    • 64% increase in production to 1.351 million tonnes (2017: 0.822 million tonnes)
    • LaSalle Bioenergy (LaSalle) commissioned and fully operational – 0.5Mt pellet capacity – performing well
    • 10% reduction in cost per tonne
  • Biomass cost reduction initiatives – future benefits
    • Co-location and offtake agreement with Hunt Forest Products for low-cost sawmill residues at LaSalle
    • LaSalle rail spur – $10/tonne reduction in transport cost to Baton Rouge port facility – commissioning 2019
    • Relocation of administration from Atlanta to Monroe – greater operational focus and savings

Power Generation – Optimisation of portfolio, system support services and development of decarbonisation projects

  • Adjusted EBITDA of £232 million (2017: £238 million)
    • Impact of rail unloading outage and generator outage on one ROC(6) unit in Q1 2018
    • Lower margins from coal generation – coal and carbon costs
    • System support revenue of £79 million (2017: £88 million) – specific Black Start contract in Q1 2017
    • Suspension of Capacity Market – £7 million of revenues not accrued in Q4 2018
    • Optimisation of ROC generation, biomass operations and procurement of third party biomass volumes
    • Biomass earnings benefited from conversion of fourth unit and insurance proceeds on historic outages
  • Electricity output (net sales) down 8% to 18.3TWh (2017: 20.0TWh)
    • 75% of generation from biomass (2017: 65%)
  • Strong biomass availability – 91% (2017: 79%)
    • Reduced biomass generation in Q1 2018 offset by strong unit availability Q2-Q4 2018

B2B Energy Supply – Profitable business, growth in customer meters, challenging market environment

  • Adjusted EBITDA of £28 million (2017: £29 million)
    • 5% increase in customer meters to 396,000 (2017: 376,000)
    • Increase in bad debt and provisioning reflecting challenging environment
    • Mutualisation of renewable costs associated with competitor failure
    • Higher gas costs due to weather and mutualisation
    • Benefit of full year of Opus Energy (2017: 10.5 months)
    • 22% growth in gross profit to £143 million (2017: £117 million)
  • Development of flexibility and system support market
  • Continued investment in next generation systems to support growth and operational efficiency

Group financial information

  • Total basic earnings per share of 5.0 pence, includes write-off of coal-specific assets (£27 million) following fourth biomass unit conversion, costs associated with acquisition and on-boarding of ScottishPower Generation, restructuring costs in Opus Energy and Pellet Production (£28 million), and unrealised gains on derivative contracts (£38 million)
  • Tax credit of £6 million includes benefit of Patent Box claims – corporation tax rate of 10% on profits arising from the use of biomass innovation
  • Capital investment of £142 million
    • Maintaining operational performance (£55 million), enhancement (£40 million), strategic (£35 million) and other (£12 million)
  • Net debt of £319 million, including cash and cash equivalents of £289 million (31 December 2017: £367 million)

View complete full year report

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Half year results for the six months ended 30 June 2018

Investors
RNS Number :  5142V
Drax Group PLC
Six months ended 30 JuneH1 2018H1 2017
Key financial performance measures
EBITDA (£ million)(1)102121
Underlying earnings (£ million)(2)79
Underlying earnings per share (pence)(2)1.62.2
Interim dividends (pence per share)5.64.9
Net cash from operating activities (£ million)112197
Net debt (£ million)(3)366372
Statutory accounting measures
Operating profit/(loss) (£ million)12(61)
Loss before tax (£ million)(11)(104)
Reported basic loss per share (pence)(1)(21)

Financial and Operational Highlights

  • H1 EBITDA lower year on year due to two unplanned outages, other areas performing well
  • Statutory loss before tax includes lower level of H1 EBITDA and asset write off
  • Refinancing complete – swapped floating for fixed rate debt with 7.5-year maturity
  • Sustainable and growing dividend
    • Increase in 2018 interim dividend to £22.4 million (5.6 pence per share) (H1 2017: £20 million)
    • Expected 2018 full year dividend of £56 million
    • Ongoing £50 million share buy-back programme – £13 million at 30 June 2018

Good progress with strategic initiatives, on track to deliver long-term objectives

  • Third biomass pellet plant, LaSalle Bioenergy, commissioning ahead of plan – full capacity Q1 2019
  • Conversion of fourth biomass generating unit on schedule and budget, commissioning late summer
  • Programme for long-term reduction in biomass cost including sawmill co-location and rail spur investment
  • Confident in growing requirement for system support services over coming years
  • Development of options for future generation:
    • Coal-to-gas repowering – detailed planning application accepted for review June 2018
    • Four OCGTs(4) – two projects in next capacity market auction, planning applications accepted for review for remaining two projects
  • B2B Energy Supply delivering solid progress to grow number of customer meters

2018 outlook

  • Full year financial expectations unchanged
    • Generation – fourth biomass unit conversion, improved margins, on target availability and capacity payments
    • Continued growth in Pellet Production and B2B Energy Supply
  • Capital Markets Day, 13 November

Will Gardiner, Chief Executive of Drax Group plc, said:

“Drax continues to be at the heart of decarbonising UK energy, securing government support to convert a fourth unit to biomass and piloting a Bioenergy Carbon Capture and Storage project, supporting the UK Government’s carbon capture and storage ambitions.

“Full year EBITDA expectations remain unchanged. However, first half EBITDA was lower, principally due to two specific generation outages. We made excellent progress with our Pellet Production business, driving down costs while producing at record levels and our B2B Energy Supply business continues to increase customer numbers. We also remain on track with our investment projects: the conversion of a fourth unit to biomass, and the development of our OCGT and coal-to-gas repowering options.

“We remain focused on safe and efficient operations and returns to shareholders and expect to declare a full year dividend of £56 million for 2018.”

Group Financial Review

  • Increase to operating profit includes unrealised gains on derivative contracts of £24 million (2017: loss £86 million)
  • Decrease in underlying earnings per share – principally reflects lower EBITDA from biomass generation in H1 2018 vs H1 2017
  • Reported basic earnings per share – a loss of 1.0 pence, which includes write off of coal-specific assets (£27 million) following commencement of fourth biomass unit conversion, largely offset by unrealised gains on derivative contracts (£24 million)
  • Tax – tax credit reflecting benefit of Patent Box claims
  • Capital investment of £46 million, full year investment expectation unchanged at £100–£110 million
    • Core maintenance (£50 million), improvement and optimisation projects (£20-£30 million) and conversion of a fourth biomass unit (£30 million)
  • Net debt of £366 million (31 Dec 2017: £367 million), including cash on hand of £245 million

Operational Review

Pellet Production – Good quality pellets at lowest cost

  • EBITDA up £14 million to £10 million
    • 80% increase in pellet production to 0.7 million tonnes (H1 2017: 0.4 million tonnes)
    • 12% reduction in cost per tonne
  • LaSalle Bioenergy (LaSalle) commissioning complete, full capacity Q1 2019
  • Biomass cost reduction initiatives
    • Co-location and offtake agreement with Hunt Forest Products for low-cost sawmill residues at LaSalle
    • Investment in LaSalle rail spur (£11 million) – reduced transport cost to Baton Rouge port facility

Power Generation – Optimisation of existing assets and decarbonisation projects

  • EBITDA down £49 million to £88 million
    • Rail unloading building outage restricted operation of two ROC(5) units (January 2018)
    • Generator outage on one ROC(5) unit (February 2018)
    • System support and flexibility £36 million (H1 2017: £48 million) – lower due to specific Black Start contract (Q1 2017)
    • Offset by 2016 insurance proceeds and lower carbon cost following decision to convert a fourth unit to biomass
  • Electricity output (net sales) down 17% to 8.9TWh (H1 2017: 10.7TWh)
    • Two unplanned outages on ROC(5) units in Q1 and reduced coal generation
    • High biomass availability in Q2
  • 71% of generation from biomass (H1 2017: 68%)
  • Commenced Bioenergy Carbon Capture and Storage (BECCS) pilot project, £0.4 million cost

B2B Energy Supply – Profitable business with growth in customer meters

  • EBITDA up £4 million to £16 million
    • 9% increase in customer meter points to 387,000 (H1 2017: 356,000)
    • Increase in bad debt reflecting challenging business environment for some customers
  • Strong renewable proposition – 59% of sales renewable
  • Continued investment in next generation IT systems
  • Development of flexibility and system support market

Notes:

  1. EBITDA is defined as earnings before interest, tax, depreciation, amortisation and material one-off items that do not reflect the underlying trading performance of the business.
  2. Underlying earnings exclude unrealised gains on derivative contracts of £24m (H1 2017: unrealised losses of £86m) and material one-off items that do not reflect the underlying performance of the business (finance costs of £7m (2017: £24m), acquisition and restructuring costs of £3m (2017: £6m), write off of coal-specific assets of £27m (H1 2017: £Nil), and the associated tax effect.
  3. Borrowings less cash and cash equivalents.
  4. Open Cycle Gas Turbine.
  5. Renewable Obligation Certificate.

View complete half year report

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Notice of half year results announcement

17 July 2018

Investors
RNS Number : 9363U
Drax Group PLC

Drax Group plc (“Drax”) confirms that it will be announcing its Half Year Results for the six months ended 30 June 2018 on Tuesday 24 July 2018.

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

Results presentation meeting and webcast arrangements

Management will host a presentation for analysts and investors at 9:00am (UK Time), Tuesday 24 July 2018, at JP Morgan, 60 Victoria Embankment, London, EC4Y 0JP. 

Would anyone wishing to attend please confirm by e-mailing [email protected] or calling Christopher Laing at FTI Consulting on +44 (0)20 3319 5650. 

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

A copy of the presentation will be made available from 7:00am (UK time) on Tuesday 24 July 2018 for download at: www.drax.com>>investors>>results-reports-agm>> #investor-relations-presentations or use the link https://www.drax.com/investors/results-reports-agm/#investor-relations-presentations

Event Title:

Drax Group plc: Half Year Results

Event Date:

Tuesday 24 July 2018

Event Time:

9:00am (UK time)

Webcast Live Event Link:

https://cache.merchantcantos.com/webcast/webcaster/4000/7464/16531/105055/Lobby/default.htm

Start Date:

Tuesday 24 July 2018

Delete Date:

Monday 15 July 2019

Archive Link:

https://cache.merchantcantos.com/webcast/webcaster/4000/7464/16531/105055/Lobby/default.htm

For further information please contact Christopher Laing on +44 (0)20 3319 5650.

Website:

www.drax.com

                                                                                                                                    

Chairman’s statement

Philip Cox, Chairman, Drax Group

21 March 2018

Annual report

In 2017 we made significant progress with the strategy we announced in December 2016.

First, we completed the acquisition of Opus Energy – a leading challenger brand in the UK Small and Medium-sized Enterprise (SME) energy market; second, we acquired a third biomass pellet plant (LaSalle Bioenergy), which significantly increases our pellet production capacity; and third, we continued to develop options for flexible gas generation at four sites around the UK.

We also began developing longer-term options for growth, with the exploration of coal-to-gas repowering at Drax Power Station, as we look to provide new sources of flexible generation backed up by long-term capacity contracts. To support our strategy, we completed a refinancing in May and announced a new dividend policy in June.

At the same time, we have continued to provide a significant amount of the UK’s renewable electricity. With confirmation of Government support for further biomass generation at Drax Power Station we plan to continue our work to develop a low-cost solution for a fourth biomass unit conversion, allowing us to provide even more renewable electricity, whilst supporting system stability at minimum cost to the consumer.

Opus Energy performed well, delivering on the plans we set out at the time of acquisition and, in North America, LaSalle Bioenergy is successfully commissioning. This performance alongside safety, sustainability and expertise in our core markets acts as a strong base from which the business can grow and deliver long-term sustainable value.

We have a major role to play in supporting the UK energy system, as it becomes increasingly ambitious in decarbonising, first the electricity sector and subsequently transport and heating. In doing so, through our flexible, low-carbon and customer- focused approach we aim to deliver higher quality earnings, with a reduction in commodity exposure alongside opportunities for growth.

Our people – employees and contractors – remain a key asset of the business. Their safety remains at the centre of our operational philosophy and we have performed well in this regard, although we continue to work to improve our performance across the Group.

Results and dividend

EBITDA in 2017 of £229 million was significantly ahead of 2016 (£140 million).

This increase was principally from producing high levels of renewable power from sustainable biomass. We also benefited from our growing B2B Energy Supply and Pellet Production businesses. Through these activities we are improving the visibility of our earnings.

In June we announced a new dividend policy. This policy is to pay a dividend which is sustainable and expected to grow as the implementation of the strategy generates an increasing proportion of stable earnings and cash flows. In determining the rate of growth in dividends the Board will take account of contracted cash flows, the less predictable cash flows from the Group’s commodity based business and future investment opportunities. If there is a build-up of capital the Board will consider the most appropriate mechanism to return this to shareholders.

At the 2017 half year results we confirmed an interim dividend of £20 million (4.9 pence per share) representing 40% of the full year expected dividend of £50 million (12.3 pence per share) (2016: £10 million, 2.5 pence per share). Accordingly, the Board proposes to pay a final dividend in respect of 2017 of £30 million, equivalent to 7.4 pence per share. In addition, the Board has decided to announce a £50 million share buy-back programme, which will take place during 2018, which is consistent with our capital allocation policy.

Corporate governance

In September, Dorothy Thompson CBE announced her intention to stand down as Group Chief Executive Officer (CEO). I would like to thank Dorothy for her enormous contribution to the Group over the last 13 years. During her tenure Dorothy led the transformation of the business and leaves the Group in a strong position with a clear strategy that lays the foundations for further success in a changing energy sector.

Dorothy is succeeded by Will Gardiner, who was previously Group Chief Financial Officer (CFO) and a key architect of the strategy. His appointment follows a thorough review of internal and external candidates and is a natural progression after two years working alongside Dorothy developing a strategy which I am confident will create significant benefits for all Drax’s stakeholders.

A process to appoint a permanent CFO is underway and Den Jones has been appointed as Interim CFO. Den is highly experienced, having previously served as CFO of both Johnson Matthey and BG Group. Drax remains committed to the highest standards of corporate governance. The Board and its committees play an active role in guiding the Company and leading its strategy. We greatly value the contribution made by our Non-Executive Directors (NEDs) and during a time of transition their role is especially important.

We indicated last year that we were seeking additional NEDs with experience in sustainability and energy supply to complement our already experienced Board. I am therefore delighted to welcome two new NEDs to the Drax Board. Firstly, David Nussbaum, whose in-depth knowledge of sustainability will support our continued focus in this area; and secondly, Nicola Hodson, whose experience in technology, business transformation and energy, will provide real value as the Group delivers its strategy.

Sustainability remains at the heart of the business, both the specific sustainability of biomass and more broadly the long-term sustainability of the business. As such I am pleased to note that alongside this year’s annual report and accounts the Group has published a comprehensive overview of our sustainability progress in 2017 on our website.

Full details of our corporate governance can be found on page 64 of the 2017 annual report.

Our people

As the Group grows I would also like to welcome colleagues from Opus Energy and our other developments. On-boarding is proceeding well and by working together in our common goal to help change the way energy is generated, supplied and used, we are creating real value for all stakeholders.

I must thank all the employees and contractors who have worked so hard to help the Group succeed in the last 12 months. It is through their skill, expertise and hard work that we are able to deliver our strategy for the business.

My sincere thanks to colleagues for their commitment and hard work.

It only remains for me to say that your Board remains totally committed to the complementary aims of delivering sustainable long-term value for the Group, and of helping our country build a low-carbon economy.

Read the Drax Group plc annual report and accounts 2017