Slide 1: 2023 Full Year Results
2023 Full Year Results 29 February 2024
Slide 2: Presenters
Presenters Will Gardiner Chief Executive Officer Andy Skelton Chief Financial Officer 2
Slide 3: Our Purpose
Our Purpose To enable a zero carbon, lower cost energy future Our People Valued members of a winning team with a worthwhile mission 3
Slide 4: Overview
Overview 2023: Strong financial performance and balance sheet, with additional returns to shareholders • Adj. EBITDA growth driven by system support services, renewable generation, and energy solutions • Strong liquidity and balance sheet • Progressing options for long-term growth Delivering for sta
Slide 5: Drax Business Today
Drax Business Today Asset portfolio and developments aligned to global energy transition and energy security Flexible generation & Pellet production Biomass Pellet Attractive options for 1 2 3 4 energy solutions and sales generation Production long-term growth c.0.4GW Pumped storage >5Mt pa of capac
Slide 6: Flexible Generation and Energy Solutions
1 Flexible Generation and Energy Solutions Targeting post 2027 recurring Adj. EBITDA of >£250m pa 1.4GW portfolio of pumped storage, hydro and OCGTs Adj. EBITDA (£m) development aligned to growing system needs 500 Active in all areas of UK power system 400 Supported by new pumped storage and OCGTs(1
Slide 7: Capital Allocation in Pumped Storage and Hydro
1 Capital Allocation in Pumped Storage and Hydro Five-year payback on original investment in flexible generation, opportunities for further investment Five-year payback 2024-2027 upgradeon 2018 and acquisition expansion of pumped of Cruachan I 2025–2030 development of Cruachan II storage, hydro and
Slide 8: Pellet Production and Sales
2 Pellet Production and Sales Targeting post 2027 recurring Adj. EBITDA >£250m pa from c.5Mt output Geographically diversified supply chain with opportunities for trading and optimisation Diversified North American supply chain • 18 operational pellet plants and developments • c.5Mt of operational p
Slide 9: Biomass Generation
3 Biomass Generation 2024-2026: Long-term: Strong forward power hedges, primarily from biomass generation Strategic asset – flexible, renewable power and carbon removals Contracted power sales (26 Feb-24) 2024 2025 2026 Net RO, hydro and gas (TWh)(1) 10.8 9.3 2.2 Average achieved £ per MWh(2) 149.0
Slide 10: Attractive Options for Long-term Growth
4 Attractive Options for Long-term Growth Options for c.£4bn of growth investment in energy transition and security of supply by 2030 Additional investment opportunities in 2030s rom BECCS Ambition for >20Mt pa of carbon removals from BECCS • UK – targeting first unit (4Mt pa) by 2030 in line with G
Slide 11: Financial & Operational Review
Financial & Operational Review A strong performance delivering high levels of renewable generation and system support services, utilising the Group’s flexible, vertically- integrated biomass supply chain and dispatchable generation assets to support security of supply
Slide 12: Financial Summary
Financial Summary Strong financial performance Adj. EBITDA (excl. EGL)(1/2) Total Cash and Cash Generated from Net Debt £1,214m Committed Facilities Operations December 2023(3) (2022: £731m) December 2023 £1,111m £1,084m £639m (2022: £320m) (December 2022 £1,206m) (December 2022: £698m) Adj. EBITDA
Slide 13: High-quality Asset Base Underpins Current and Future Earnings and Cash Flow
High-quality Asset Base Underpins Current and Future Earnings and Cash Flow Targeting >£500m of post 2027 recurring Adj. EBITDA from flex. gen. & energy solutions, and pellet production Flex gen & Pellet Biomass Options for 2023 Adj. EBITDA 1 energy 2 production and 3 generation 4 long-term Total (i
Slide 14: Balance Sheet
Balance Sheet Strong balance sheet and liquidity Maturity profile (as at February 2024) (£m) 800 600 Strong cash generated from operations • 2023: £1,111m (after £155m inflow of collateral) 400 • 2022: £320m (after £407m outflow of collateral) 200 0 Reduction in net debt 2024 2025 2026 2027-28 2029-
Slide 15: Capital Investment
Capital Investment Investment in core assets and strategy 2024 Estimate 2023 Actual Key areas £m £m Growth Biomass, BECCS, OCGTs and enhancement projects ~290 332 Maintenance Includes major planned biomass outages ~100 143 Other Health, safety, environment and IT ~40 44 Total 410-450 519 Growth – ta
Slide 16: Capital Allocation Policy
Capital Allocation Policy Implemented in 2017, designed to support strategy 1. Maintain credit rating 2. Invest in core business 4. Return surplus capital beyond 3. Sustainable and growing dividend investment requirements 16
Slide 17: Operational and strategic pillars
Operational and strategic pillars Safety, compliance and sustainability Opportunities to develop and improve existing systems 17
Slide 18: Safety
Safety Enhanced reporting and disclosure, with opportunities to deliver further improvements Total Recordable Injury Rate (TRIR) 0.44 0.38 0.29 0.22 0.22 2019 2020 2021 2022 2023 Increase in 2022 • First full year of Pinnacle and wider scope of reporting Improvements in 2023 • Investment in training
Slide 19: Regulation and Compliance
Regulation and Compliance Continued development of reporting and disclosure, with opportunities to deliver further improvements The Government’s Support for Biomass Annual audit of biomass sustainability (May 2023) • Review of UK Government’s Biomass Strategy • Annual assessment of compliance with t
Slide 20: Sustainability
Sustainability Continued development of sustainability Sustainability developments BECCS Done Well: Conditions for Success for BECCS • Compliance with TCFD reporting requirements • Forum for the Future set out • SBTi targets approved 30 conditions for success • TNFD pilot complete • Initial Drax res
Slide 21: Strategy Update
Strategy Update Objective 1: to be a global leader in carbon removals Objective 2: to be a global leader in sustainable biomass pellets Objective 3: to be a UK leader in dispatchable, renewable generation 21
Slide 22: BECCS at Drax Power Station
BECCS at Drax Power Station Clarity on bridging mechanism and progress on BECCS expected in 2024 Targeting first BECCS unit online by 2030 Progress in 2023 • 1st unit (4Mt pa) by 2030, 2nd unit to follow • UK Government Biomass Strategy (August 2023) • Planning consent granted for two BECCS units (J
Slide 23: Drax Power Station Post 2027
Drax Power Station Post 2027 Value for Money of BECCS at Drax Bridging mechanism from 2027 to BECCS BECCS at Drax Power Station from 2030 onwards An effective way to help support energy security The only credible option for near-term, large-scale carbon GW removals available to meet the UK targets 9
Slide 24: Global BECCS
Global BECCS Developing a pipeline of project options in North America to provide attractive investment opportunities in long-term, large-scale carbon removals Prioritising development in US South New-build BECCS illustrative site details • Supportive environment under Inflation Reduction Act • Prox
Slide 25: Overview
Overview 2023: Strong financial performance and balance sheet, with additional returns to shareholders • Adj. EBITDA growth driven by system support services, renewable generation, and energy solutions • Strong liquidity and balance sheet • Progressing options for long-term growth Delivering for sta
Slide 26: Appendices
Appendices 29 February 2024 drax
Slide 27: Capacity Market
Capacity Market 1 and 15-year contracts provide strong underpin for investment in flexible generation business c. £580m(1) of capacity agreements agreed Capacity agreements profile and illustration (£m) Asset Payment period Value £m Pumped storage 1 year contracts (2024-2028) 68 60 Pumped storage 15
Slide 28: Drax UK Portfolio
Drax UK Portfolio Flexible, renewable generation, system support and energy solutions with opportunity for carbon removals Flexible generation and energy solutions • 440MW pumped storage • 125MW hydro • 900MW OCGTs • 16TWh I&C energy solutions Pumped storage Hydro Biomass generation OCGTs • 2.5GW Bi
Slide 29: Generation – OCGTs
Generation – OCGTs Flexible, dispatchable generation and system support assets, commissioning in H2 2024 3 x 299MW units designed for system support with ability to provide reactive power, inertia and other non-generation services Multiple earnings opportunities aligned with system needs • Peak powe
Slide 30: Group Adj. EBITDA
Group Adj. EBITDA High-quality earnings from a multi-technology portfolio and integrated supply chain 2022 Restated FY23 Adj. FY22 Adj. for cost Business unit Assets Capacity EBITDA (£m) EBITDA (£m) reallocation (£m)(2) 18 pellet plants and developments in Canada and US Pellet Production >5Mt 89 134
Slide 31: Adj. EBITDA Bridge
Adj. EBITDA Bridge £m 1,200 1,000 800 600 1,214 1,009 400 731 200 0 2022 Pellet Biomass Pumped Customers Innovation, Global 2023 EGL 2023 Adjusted Production storage capital BECCS Adjusted Adjusted EBITDA & hydro projects EBITDA EBITDA and other (incl. EGL) (excl. EGL) 2023: £89m 2023: £933m 2023: £
Slide 32: Group Income Statement
Group Income Statement 2023 2022 In £m Adj. Exceptional Total Adj. Exceptional Total Revenue 7,842 283 8,125 8,159 (384) 7,775 Cost of sales (5,884) (83) (5,967) (6,838) 86 (6,752) Electricity Generator Levy (205) - (205) - - - Gross profit 1,753 200 1,954 1,322 (298) 1,023 Operating and administrat
Slide 33: Pellet Production and Sales
Pellet Production and Sales Robust performance in a challenging environment 2023 In £m 2023 2022 • Lower output – higher unplanned outage rate and port restrictions • Increased maintenance and labour costs Revenue 822 803 • Higher proportion of sales to fulfil long-term third-party legacy contracts
Slide 34: Generation
Generation High levels of flexible, renewable generation and system support services supporting decarbonisation of energy system and security of supply In £m 2023 2022 2023 2022 Revenue Generation Adj. EBITDA (incl. EGL) (£m)(1) 933 696 Power sales 4,981 5,603 System support and optimisation 343 243
Slide 35: Energy Solutions (Customers)
Energy Solutions (Customers) Renewable power and energy solutions Strong operational and financial performance in I&C business In £m 2023 2022 • Strong underlying performance of I&C supply portfolio • Effective route to market to maximise value of large-scale renewable generation Revenue 4,958 4,143
Slide 36: Group Cash Flow Statement
Group Cash Flow Statement In £m 2023 2022 Adj. EBITDA (incl. EGL) 1,009 731 Working capital (excluding collateral) (47) 4 Collateral 155 (407) Other (6) (8) Cash generated from operations 1,111 320 Debt service and other interest (95) (74) Tax (180) (39) Net cash from operating activities 836 208 Ca
Slide 37: Group Net Debt Bridge
Group Net Debt Bridge £m 1,400 1,200 149 86 1,000 (64) 180 800 95 441 600 1,206 1,084 400 200 (1,009) 0 31 Dec 2022 Adjusted Capital Debt Tax Equity Share Working 31 December Net debt EBITDA expenditure service dividends buyback capital 2023 (incl. EGL) & other paid & other Net debt interest 37
Slide 38: Power Generation and System Support Services
Power Generation and System Support Services Drax portfolio provides a full suite of services Pump Hydro Biomass OCGTs Nuclear Wind Solar System support(2) storage Power generation Power Yes Yes Yes Yes Yes Yes Yes £[xxx]m (FY22: £175m) Renewable Renewable Yes Yes Yes No No Yes Yes power generation
Slide 39: Renewable Energy Guarantees of Origin (REGO)
Renewable Energy Guarantees of Origin (REGO) Through its biomass and hydro activities Drax is able to deliver 24/7 renewable power Growing demand for renewable power has led to growth in renewable certification schemes REGOs • Certificate scheme which demonstrates electricity has been generated from
Slide 40: Merchant Forward Commodity Prices
Merchant Forward Commodity Prices Baseload Power Price (£/MWh) Peak Power Price (£/MWh) 500 500 450 450 400 400 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 Jan-22 Apr-22 Aug-22 Nov-22 Mar-23 Jul-23 Oct-23 Feb-24 Jan-22 Apr-22 Aug-22 Nov-22 Mar-23 Jul-23 Oct-23 Feb-24 SUM-2 4 WIN-24 SUM
Slide 41: Merchant Carbon Prices
Merchant Carbon Prices UKA Carbon (£/t) EU ETS Carbon (€/t) 120 120 110 110 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 20 30 10 20 0 10 Jan-22 Apr-22 Jul-22 Oct-22 Feb-23 May-23 Aug-23 Dec-23 Jan-22 Apr-22 Aug-22 Nov-22 Mar-23 Jul-23 Oct-23 Feb-24 Dec-24 Dec-25 Dec-26 Dec-24 Dec-25 Dec-26 Source
Slide 42: Forward Looking Statements
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 financia
Slide 43: Full Year Results
2023 Full Year Results 29 February 2024