Slide 1: Half Year Results 2023
2023 Half Year Results 27 July 2023
Slide 2: Presenters
Presenters Will Gardiner Chief Executive Officer Andy Skelton Chief Financial Officer 2
Slide 3: Agenda
Agenda • Operational Review • Financial Review • Strategy Update 3
Slide 4: Forward Looking Statements
Forward Looking Statements This presentation 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
Slide 5: Our Purpose, Our People, Our Ambition
Our Purpose Enabling a zero carbon, lower cost energy future Our People Valued members of a winning team with a worthwhile mission Our Ambition To be a carbon negative company by 2030 5
Slide 6: H1-23 Highlights
H1-23 Highlights Strong financial and operational performance, returns to shareholders, development of BECCS options Financials • 101% increase in Adjusted EBITDA (excluding Electricity Generator Levy) • 10% increase in dividend per share • £150m share buy-back programme ongoing Operations • High le
Slide 7: Operational Review
Operational Review 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 8: Pellet Production
Pellet Production Production and sales to support UK generation, and third party sales 7% increase in Adjusted EBITDA • Integrated supply chain model supports production and supply in a challenging Adjusted EBITDA operational environment £48m 5% reduction in production (H1-22: £45m) • Unplanned outa
Slide 9: Generation
Generation Strong renewable generation and system support performance Biomass Adjusted EBITDA EGL(1) System support(2) • Two major planned outages over summer 2023 • Forced outage on one unit due to transformer issue – unit returned to service (excl. EGL) £35m £127m £457m (H1-22: n/a) (H1-22: £71m)
Slide 10: Generation – Pumped Storage and Hydro
Generation – Pumped Storage and Hydro Strong system support and renewable generation performance Pumped storage and hydro portfolio Adjusted EBITDA(1) Generation(2) £154m 0.3TWh (H1-22: £53m) (H1-22: 0.2TWh) H1 performance • Strong system support performance • Pumped storage – forward power sales (Q
Slide 11: Customers
Customers Renewable power and decarbonisation services to high-quality I&C and corporate customers Strong operational and financial performance Adjusted EBITDA Drax I&C power sales • Continued improvement in Adjusted EBITDA • Sale of forward hedged power not required and lower system costs £37m 8.0T
Slide 12: Financial Review
Financial Review A strong performance utilising the Group’s flexible, vertically- integrated biomass supply chain and dispatchable generation assets to support UK security of supply and value creation for the Group Committed to capital allocation policy
Slide 13: Financial Summary
Financial Summary Strong financial performance Adjusted Total Cash and Cash Generated from Net Debt Committed Facilities Operations June 2023(2) EBITDA (excl. EGL)(1) £453m June 2023 £404m £1,274m (H1-22: £225m) £586m (H1-22: £185m) (H1-22 £1,116m) (Dec-22: £698m) Adjusted Adjusted Interim Dividend
Slide 14: Adjusted EBITDA Bridge
Adjusted EBITDA Bridge 101% increase in Adjusted EBITDA £m 13 500 101 19 21 400 151 35 300 3 453 200 417 100 225 0 H1 2022 Pellet Biomass Pumped Customers Innovation, Global H1 2023 EGL H1 2023 Adjusted EBITDA Production storage capital BECCS Adjusted EBITDA Adjusted EBITDA / hydro projects (excl. E
Slide 15: Capital Investment
Capital Investment Investment in core assets and strategy 2023 estimate Key areas Investment Maintenance Includes two major planned biomass outages £120-140m Enhancement Efficiency and operational improvements £30m Strategic and growth Biomass, BECCS and OCGT £340-380m Other Health, safety, environm
Slide 16: Balance Sheet
Balance Sheet Strong balance sheet and liquidity supporting Expect significantly Total cash and Maturity power sales and system support activities <2x Net debt to committed facilities profile to 2030 Adjusted EBITDA June 2023 incl. EGL by end of £586m 2023 (Dec-22: £698m) Facilities in place to supp
Slide 17: 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 3. Sustainable and growing beyond investment dividend requirements 17
Slide 18: 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 18
Slide 19: Attractive Opportunities to Invest for Long-term Growth
Attractive Opportunities to Invest for Long-term Growth £7bn of strategic investment opportunities aligned with climate solutions, net zero and energy security Attractive opportunities for long-term growth and positive climate, nature and people outcomes Ambition for >20Mt pa of carbon removals from
Slide 20: UK BECCS
UK BECCS Drax ready to invest c.£2bn in UK BECCS, pending clarity from UK Government Supportive of deployment of Power-BECCS by 2030 – progress in H1 2023 • Reaffirmed commitment to 5Mt of carbon removals pa by 2030 (and 23Mt by 2035) • June 2023 – consultation on UK Emissions Trading Scheme (ETS) –
Slide 21: 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 Scientific and political support for BECCS New-build BECCS illustrative site details • IPCC – median requirement of 2.8 billion tonnes of ca
Slide 22: Summary
Summary Strong financial and operational performance, returns to shareholders, development of BECCS options Near-term focus on renewable generation and system support services • Utilising Group’s flexible, vertically-integrated biomass supply chain and dispatchable generation assets to support secur
Slide 23: Half Year Results 2023
2023 Half Year Results 27 July 2023
Slide 24: Appendices
Appendices Group Adjusted EBITDA Drax Role in UK System Support and Energy Security Group Income Statement Electricity Generator Levy Segmental Adjusted EBITDA Merchant Forward Commodity Prices Pellet Production – Adjusted EBITDA Merchant Forward Carbon Prices Generation – Adjusted EBITDA Customers
Slide 25: Group Adjusted EBITDA
Group Adjusted EBITDA High-quality earnings from a multi-technology portfolio and integrated supply chain H1-23 Adjusted H1-22 Adjusted Business unit Assets Capacity EBITDA (£m) EBITDA (£m) 18 pellet plants and developments in Canada and US Pellet Production Access to five deep water ports >5Mt 48 4
Slide 26: Group Income Statement
Group Income Statement H1-23 H1-22 In £m Adjusted Exceptional Total Adjusted Exceptional Total Revenue 3,964 126 4,090 3,621 (64) 3,557 Cost of sales (3,167) (41) (3,208) (3,135) 194 (2,941) Electricity Generator Levy (35) - (35) - - - Gross profit 762 85 847 486 130 616 Operating and administrative
Slide 27: Segmental Adjusted EBITDA
Segmental Adjusted EBITDA Innovation, H1-23 Power Pellet Customers Adjustments(1) Capital Projects, Consolidated In £m Generation Production BECCS and other Adjusted EBITDA (excl. EGL) 457 48 37 (9) (80) 453 EGL (35) - - - - (35) Adjusted EBITDA (incl. EGL) 421 48 37 (9) (80) 417 Innovation, H1-22 P
Slide 28: Pellet Production – Adjusted EBITDA
Pellet Production – Adjusted EBITDA In £m H1-23 H1-22 Revenues 386 358 Cost of sales (239) (242) Gross profit 147 116 Operating costs (99) (71) Adjusted EBITDA 48 45 28
Slide 29: Generation – Adjusted EBITDA
Generation – Adjusted EBITDA In £m H1-23 H1-22 Revenue Power sales 2,722 2,549 System support and optimisation 195 91 System support and optimisation ROC sales 300 396 £m H1-23 H1-22 CfD payment to LCCC (58) (8) System support and optimisation Capacity Market income 2 8 Revenues 195 91 Gas sales to
Slide 30: Customers – Adjusted EBITDA
Customers – Adjusted EBITDA In £m H1-23 H1-22 Revenue 2,648 1,668 Cost of sales Cost of power and gas purchases (1,774) (934) Grid charges (361) (319) Other costs (418) (325) (2,553) (1,578) Gross profit 95 90 Operating costs (39) (40) Bad debt charge (19) (26) Adjusted EBITDA 37 24 30
Slide 31: Group Cash Flow Statement
Group Cash Flow Statement In £m H1-23 H1-22 Adjusted EBITDA (incl. EGL) 417 225 Working capital and other (13) (40) Cash generated from operations 404 185 Debt service and other interest (46) (32) Tax (102) (9) Net cash from operating activities 256 144 Capital investment (159) (83) Purchase of equi
Slide 32: Group Net Debt Bridge
Group Net Debt Bridge £m 1,400 110 17 1,200 102 51 46 1,000 159 800 417 1,206 1,274 600 400 200 0 31 Dec 2022 Adjusted Capital Debt Tax Equity Share Working 30 June 2023 Net debt EBITDA expenditure service dividends buyback capital Net debt (incl. EGL) & other paid & other interest 32
Slide 33: Contracted Generation Power Sales
Contracted Generation Power Sales Contracted power sales 21 July 2023 2023 2024 2025 Net ROC, hydro and gas (TWh)(1/2) 11.7 11.2 5.2 -Average achieved £ per MWh 162.7 147.5 126.2 Strong contracted power sales on ROC and Hydro 2023-2025 • 28.1TWh contracted at £150.0/MWh 1) Includes structured power
Slide 34: Drax Role in UK System Support and Energy Security
Drax Role in UK System Support and Energy Security Significant increase in demand – peaks (TWh) UK’s largest source of renewable energy by output • 4% of total annual power generation 100 • 9% of total annual renewable generation • Up to 52% of in-day peak renewable generation 50 2005 2008 2011 2014
Slide 35: Electricity Generator Levy
Electricity Generator Levy A levy on renewable and low-carbon generators • Applies to the biomass units operating under the Renewable Obligation scheme and run of river hydro operations • Does not apply to CfD biomass and pumped storage hydro units • Structured as a levy on power sales above a bench
Slide 36: Merchant Forward Commodity Prices
Merchant Forward Commodity Prices Baseload Power Price (£/MWh) Peak Power Price (£/MWh) 700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0 Mar-21 Jul-21 Oct-21 Jan-22 Apr-22 Aug-22 Nov-22 Feb-23 Jun-23 Mar-21 Jul-21 Oct-21 Jan-22 Apr-22 Aug-22 Nov-22 Feb-23 Jun-23 WIN-23 SUM-24 WIN-24 WIN-2
Slide 37: 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 30 40 20 30 10 20 0 10 May-21 Aug-21 Dec-21 Mar-22 Jun-22 Oct-22 Jan-23 Apr-23 Mar-21 Jul-21 Oct-21 Jan-22 Apr-22 Aug-22 Nov-22 Feb-23 Jun-23 Dec-23 Dec-24 Dec-25 Dec-23 Dec-24 Dec-25
Slide 38: Half Year Results 2023
2023 Half Year Results 27 July 2023