Slide 1: 2020 Full Year Results
2020 Full Year Results 25 February 2021
Slide 2: Agenda and Presenters
Agenda Presenters Operational Review Will Gardiner, CEO Financial Review Andy Skelton, CFO Biomass Strategy Update 25 February 2021 2
Slide 3: 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 financial
Slide 4: Our Purpose, Our Strategy, Our Ambition
Our Purpose Enabling a zero carbon, lower cost energy future Our Strategy We will build a long-term future for sustainable biomass We will be the leading provider of power system stability We will give our customers control of their energy Our Ambition To be a carbon negative company by 2030 25 Febr
Slide 5: Operational Review
Operational Review 25 February 2021 5
Slide 6: 2020 Performance Highlights
2020 Performance Highlights Strong performance, delivering for stakeholders, progressing biomass strategy Financial - Growth in Adjusted EBITDA inclusive of impact of Covid-19 - Strong balance sheet – 1.9x net debt to Adjusted EBITDA - Sustainable and growing dividend – 7.5% recommended increase for
Slide 7: Progress Towards a Carbon Negative Future
Progress Towards a Carbon Negative Future >85% reduction in absolute scope Sale of CCGTs End of commercial coal Pioneering options for 1 & 2 CO2e emissions since 2012 No new CCGT development generation negative emissions by 2030 Major decarbonisation since 2012 European utility CO2 intensity (tCO2/G
Slide 8: End of Coal Generation and Sale of CCGTs
End of Coal Generation and Sale of CCGTs Key milestones in the path to becoming a carbon negative company – decisions aligned with UK’s 2050 net zero objective End of commercial coal generation (March 2021) - Completion of Capacity Market agreements (September 2022) - Asset obsolescence charge – £22
Slide 9: Safety and Sustainability
Safety and Sustainability Achieving a positive long-term economic, social and environment impact Total Recordable Injury Rate Renewable generation (%) TCFD supporter Sustainability credentials (TRIR) 0.29 80% 77% Climate A- 0.22 Forests B 2019 2020 2019 2020 UN Sustainable Development Scope 1&2 carb
Slide 10: Generation Adjusted EBITDA
Generation Adjusted EBITDA(1) System support(2) % of UK UK’s largest source of renewable power £446m £118m renewables (2019: £408m) (2019: £120m) 11%(3) (Q4 2018 to Q1 2019: 12%) 9% increase in Adjusted EBITDA(1) - Increased biomass generation Strong operational performance Portfolio Biomass Hydro a
Slide 11: Trading and Optimisation
Trading and Optimisation Forward power sales provide revenue visibility, while retaining flexibility to provide system support services Strong contracted power sales for Generation 2021-2023 Contracted Generation power position - 24.4TWh contracted at £48.5/MWh Contracted Power at 19 February 2021 2
Slide 12: Pellet Production
Pellet Production 63% increase in Adjusted EBITDA – increased production, improved quality, reduced costs Strong operational performance Adjusted EBITDA Pellet production Production cost - 7% increase in production £52m 1.5Mt $153/t(1) - Improved quality (2019: £32m) (2019: 1.4Mt) (2019: $161/t) - 5
Slide 13: Customers
Customers Supporting customers, managing impact of Covid-19, focus on underlying strength in portfolio Principal impact of Covid-19 (c.£60m) reflected in SME business Adjusted EBITDA Bad debt - Reduction in demand £(39)m £43m - MtM cost in selling back hedged commodity positions (2019: £17m) (2019:
Slide 14: Financial Review
Financial Review 25 February 2021 14
Slide 15: Financial Summary
Financial Summary Strong financial performance Cash Generated from Net Debt 1.9x Net Debt Operations December 2020(3) to Adjusted EBITDA £413m £776m (December 2019: 2.1x) Adjusted (2019: £471m) (December 2019: £841m) EBITDA(1/2) £412m Proposed Final Dividend Total Dividend Adjusted Basic Earnings (2
Slide 16: Development of Biomass Self-supply to Expand Capacity and Reduce Cost
Development of Biomass Self-supply to Expand Capacity and Reduce Cost Plans for existing capacity run-rate savings of $64m ($35/t, £13/MWh(1)) by 2022 on 1.9Mt versus 2018 base Savings delivered 2019-2020 ($28m) 2019 2020 2022 - Low-cost fibre Savings versus 2018 base year (Act.) (Act.) (Est.) - LaS
Slide 17: Financial Impact of Covid-19
Financial Impact of Covid-19 2020 full year impact of Covid-19 on Adjusted EBITDA in line with expectation Expect reduced impact on Customers business in 2021 2020 (£m) Pellet Production - - Robust operations and supply chain throughout the year - Strong contracted position protected from lower powe
Slide 18: Adjusted EBITDA Bridge 2019 – 2020
Adjusted EBITDA Bridge 2019 – 2020 £m 600 62 5 7 500 20 (3) (33) 8 400 (56) 8 300 200 410 412 100 0 2019 Pellet Biomass Pumped Run of Gas Coal Customers Corporate Innovation 2020 Adjusted Production Storage River & other Adjusted EBITDA Hydro EBITDA Pellet Production Generation Customers Central cos
Slide 19: Capital Investment
Capital Investment Investment to drive operational efficiency, strategic initiatives and growth 2020 actuals Key areas Investment Maintenance Maintain operational performance £71m Discontinued ops Gas £30m Enhancement Efficiency and operational improvements £23m Strategic Biomass self-supply £46m Ot
Slide 20: Balance Sheet
Balance Sheet Long-term structures in place to support growth Facilities in place to support growth 1.9x net debt to - Infrastructure facilities extend maturity profile to 2030 £682m cash and Maturity profile EBITDA December committed facilities to 2030 - Eurobond replaced Sterling bond 2020 - ESG R
Slide 21: Clear Capital Allocation Policy
Clear Capital Allocation Policy Implemented in 2017, designed to support strategy Return surplus Maintain credit Invest in core Sustainable and capital beyond rating business growing dividend investment requirement Commitment to robust £190-210m in 2021 2020 expected full year dividend Additional in
Slide 22: Biomass Strategy Update
Biomass Strategy Update 25 February 2021 22
Slide 23: Create a Long-term Future for Sustainable Biomass
Biomass Strategy – Create a Long-term Future for Sustainable Biomass Three complementary models underpinned by ambition to development a 5Mt self-supply chain at £50/MWh(1) Global growth opportunities for sustainable biomass(2) (Mt) Third-party - 5Mt of low-cost biomass available for sale sales - Gr
Slide 24: Proposed Acquisition of Pinnacle
Positions Drax as world’s leading sustainable Proposed Acquisition of Pinnacle biomass generation and supply business Equity value of C$385m(1) (£226m(2)) - Acquisition supports development of options for a Enterprise Value of C$741m(3) (£436m(2)) long-term future for sustainable biomass - BECCS, 3r
Slide 25: Pinnacle Accelerates Supply Chain Capacity and Cost Reduction
Proposed Acquisition of Pinnacle Accelerates Supply Chain Capacity and Cost Reduction Supports all three options for long-term biomass use 2027 target Pro forma capacity including proposed acquisition of Pinnacle (Mt) - 5Mt of self-supply Sales to third parties Incremental required to reach 5Mt self
Slide 26: Biomass Cost Reduction
Biomass Cost Reduction Increased control of supply chain to reduce overall cost of biomass generation to £50/MWh(1) by 2027 170 160 150 140 130 120 110 100 $/tonne FOB US Gulf Drax 2018: Drax 2020: Drax/Pinnacle Drax 2022: Pinnacle 2019: Drax 2027: $166/t $153/t 2019 proforma: run-rate target $124/t
Slide 27: BECCS Development
BECCS Development Establish plans for Drax Power Station, develop wider opportunities for biomass and BECCS First phase – Two biomass units with BECCS by 2030 – Expected to commence planning application process (March 2021) – Complete pre-FEED in 2021 – Commence FEED study late 2021 subject to indic
Slide 28: Development of Policy to Support Carbon Clusters, Including BECCS
Development of Policy to Support Carbon Clusters, Including BECCS Progress in 2020, emerging clarity in 2021 2020 – Energy White Paper and 10-point plan - At least £1bn committed by UK Government to CCS infrastructure - Commitment to develop two clusters by 2025 (track-1) and a further two by 2030 (
Slide 29: 2021 Outlook
2021 Outlook Financial and operations - Flexible, renewable generation and system support - Safe and sustainable operations, including delivery of planned CfD outage - Increased biomass production and reduced cost - Sustainable and growing dividend Progress strategy to create a long-term future for
Slide 30: 2020 Full Year Results
2020 Full Year Results 25 February 2021
Slide 31: Appendices
Appendices Group Adjusted EBITDA UK Energy White Paper Group Income Statement – Continuing Operations Sustainable Biomass Sourcing and Carbon Life Cycle Group Income Statement Sources of Biomass Supply – Adjusted Results – Continuing and Discontinued Operations Merchant Forward Power Prices Consolid
Slide 32: 2020 Group Adjusted EBITDA
2020 Group Adjusted EBITDA High-quality, enduring earnings from a multi-technology portfolio and integrated value chain Business unit Assets Capacity EBITDA (£m) % of EBITDA Three pellet plants in US Gulf 1.6Mt Pellet Production Port of Baton Rouge 2.4Mt 52 13% Biomass(1) 2.6GW 333 81% Cruachan Pump
Slide 33: Group Income Statement – Continuing Operations
Group Income Statement – Continuing Operations 2020 2019 In £m Adjusted Exceptional Total Adjusted Exceptional Total Revenue 4,235 10 4,245 4,457 11 4,468 Cost of sales (3,435) (84) (3,519) (3,659) (132) (3,790) Gross profit 800 (74) 726 798 (121) 677 Adjusted EBITDA from continuing operations 366 -
Slide 34: Group Income Statement – Adjusted Results
Group Income Statement – Adjusted Results – Continuing and Discontinued Operations 2020 2019 In £m Continuing Discontinued Total Continuing Discontinued Total Revenue 4,235 206 4,441 4,457 246 4,703 Cost of sales (3,435) (127) (3,562) (3,659) (177) (3,836) Gross profit 800 79 879 798 69 867 Adjusted
Slide 35: Consolidated Adjusted EBITDA
Consolidated Adjusted EBITDA Power Pellet Customers Adjustments Consolidated 2020 £m Generation Production Segment Adjusted EBITDA 446(1) 52 (39) 3 462 Central Costs (38) Innovation and capital projects (12) Consolidated Adjusted EBITDA 412 Power Pellet Customers Adjustments Consolidated 2019 £m Gen
Slide 36: Generation – Adjusted EBITDA
Generation – Adjusted EBITDA In £m 2020 2019 Revenue System support and optimisation Power sales 2,164 2,258 £m 2020 2019 System support and optimisation 146 143 System support and optimisation ROC sales 1,024 1,102 Balancing mechanism, Ancillary Services and 146 143 CfD income 342 260 portfolio opt
Slide 37: Pellet Production – Adjusted EBITDA
Pellet Production – Adjusted EBITDA Drax US production cost In £m 2020 2019 2020 2019 Revenues 231 229 Cost of sales ($m) (164) (185) Cost of sales (127) (145) Operating costs ($m) (67) (68) Gross profit 104 84 Total cost ($m) (231) (253) Operating costs (52) (52) Other adjustments ($m) (3) (26) Adj
Slide 38: Customers – Adjusted EBITDA
Customers – Adjusted EBITDA In £m 2020 2019 Revenue 2,119 2,269 Cost of sales Cost of power and gas purchases (858) (971) Grid charges (464) (468) Other costs (713) (696) (2,035) (2,135) Gross profit 84 134 Operating costs (80) (99) Bad debt charge (43) (18) Adjusted EBITDA (39) 17 25 February 2021
Slide 39: Group Cash Flow Statement
Group Cash Flow Statement In £m 2020 2019 Adjusted EBITDA(1) 412 410 Working capital and other 1 61 Cash generated from operations 413 471 Debt service (59) (48) Tax(2) (48) (10) Net cash from operating activities 306 413 Capital investment (174) (171) Acquisition of subsidiaries - (692) Net refinan
Slide 40: Group Net Debt Bridge
Group Net Debt Bridge 1.9x net debt to Adjusted EBITDA 31 December 2020 £m 2.1x net debt to 1.9x net debt to Adjusted EBITDA Adjusted EBITDA 412 800 1 841 65 776 48 600 59 400 174 200 0 31 Dec 2019 Adjusted Capital Debt Tax Equity Working capital 31 Dec 2020 Net debt EBITDA expenditure service divid
Slide 41: UK Energy White Paper
UK Energy White Paper Description of biomass and BECCS By 2022, we will establish the role which BECCS can play in reducing carbon emissions across the economy and, as part of a wider biomass strategy, set out how the technology could be deployed. Biomass is unique amongst renewable technologies in
Slide 42: Sustainable Biomass Sourcing and Carbon Life Cycle
Sustainable Biomass Sourcing and Carbon Life Cycle Science-led biomass sourcing policy ensures long-term sustainability and contribution to natural environment Key principles Biomass generation carbon life cycle - No deforestation - No carbon debt - More standing volume in forest area than before Ob
Slide 43: Sources of Biomass Supply
Sources of Biomass Supply Drax Group sources of fibre by location – 2020 Drax Group sources of fibre by location – 2019 Low Low Branches, Branches, Sawmill grade Agri. Sawmill grade Agri. tops and Thinnings Total tops and Thinnings Total residues round residues residues round residues bark bark wood
Slide 44: Merchant Forward Power Prices
Merchant Forward Power Prices Seasonal Power Price (£/MWh) Peak Power Price (£/MWh) 70 80 60 70 60 50 50 40 40 30 30 20 20 10 10 Feb-19 May-19 Aug-19 Nov-19 Mar-20 Jun-20 Sep-20 Jan-21 Feb-19 May-19 Aug-19 Nov-19 Mar-20 Jun-20 Sep-20 Jan-21 Summer21 Winter21 Summer22 Winter22 Summer23 Summer21 Winte
Slide 45: Merchant Forward Commodity Prices
Merchant Forward Commodity Prices EU ETS Carbon (€/t) Power Price (£/MWh) 50 70 60 40 50 30 40 30 20 20 10 10 Feb-19 May-19 Aug-19 Nov-19 Mar-20 Jun-20 Sep-20 Jan-21 Feb-19 May-19 Aug-19 Nov-19 Mar-20 Jun-20 Sep-20 Jan-21 Dec21 Dec22 Dec23 Summer21 Winter21 Summer22 Winter22 Summer23 Source: ICE Sou
Slide 46: Merchant Forward Spreads
Merchant Forward Spreads Peak CSS (£/MWh) Peak DGS (£/MWh) Peak ROC Bark Spread (£/MWh) 20 10 60 10 50 40 - - 10 Feb-19 Aug-19 Mar-20 Sep-20 30 20 (10) (10) 10 - - (20) Feb-19 Aug-19 Mar-20 Sep-20 (20) Feb-19 Aug-19 Mar-20 Sep-20 Jul-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20 Jun-20 Summer21 Winter21 Sum
Slide 47: 2020 Full Year Results
2020 Full Year Results 25 February 2021