Drax Group Plc · LSE:DRX
Drax — Merger or Acquisition (October 2018)
19 slides from Drax's merger presentation, Oct 16, 2018
Slide 1: Acquisition of flexible, low-carbon and renewable UK power generation from Iberdrola
Drax Group Acquisition of flexible, low-carbon and renewable UK power generation from Iberdrola 16 October 2018
Slide 2: Agenda
Agenda Introduction Will Gardiner – Group CEO Portfolio Andrew Koss – CEO Drax Power Funding and Process Den Jones – Interim Group CFO Summary Will Gardiner 2
Slide 3: Executive Summary
Executive Summary Acquisition of flexible, low-carbon and renewable generation for £702m in cash A unique and complementary portfolio Pumped storage, hydro and gas-fired generation Aligned with UK energy needs Aligned with Drax generation strategy Compelling strategic benefits A strong financial cas
Slide 4: Acquisition of Generation Assets for £702m
Acquisition of Generation Assets for £702m A unique UK portfolio of flexible, low-carbon and renewable generation Pumped storage 2019 EBITDA forecast Cruachan (440MW) £90-110m Hydro High quality earnings Galloway and Lanark run-of-river hydro (126MW) 2/3 of 2019 gross profit from non-commodity sourc
Slide 5: Acquisition Aligned with Changing UK Energy System
Acquisition Aligned with Changing UK Energy System Transition to a low-carbon economy requires flexible and low-carbon energy More decarbonisation required to achieve 80% reduction by 2050(1) Electrification of heating and transport Absolute increase in power demand Renewables will drive increased i
Slide 6: Compelling Strategic Benefits
Compelling Strategic Benefits Flexible, low-carbon and renewable generation and system support Increased earnings potential aligned with system support needs Biomass, pumped storage, hydro and gas are dispatchable assets Optionality from new gas development Expansion of Drax’s flexible, low-carbon a
Slide 7: Financial Benefits
Financial Benefits A strong financial case Sustainable and high quality earnings Two thirds of gross profit from non-commodity sources – System support – Index-linked ROCs and capacity payments – Daldowie Increased visibility of long-term earnings Attractive financial returns Expected returns signif
Slide 8: Portfolio
Portfolio Andrew Koss CEO Drax Power
Slide 9: Pumped Storage
Pumped Storage Large-scale storage and flexible low-carbon generation Cruachan Power Station – 440MW Highly flexible large-scale storage – 2 x 120MW and 2 x 100MW – Full load in 30 seconds >35% of UK’s pumped storage capacity by volume – Long duration storage – operation of all units for over 16 hou
Slide 10: Run-of-River Hydro
Run-of-River Hydro Renewable generation and storage Galloway and Lanark – 126MW Flexible hydro with storage capabilities and renewable support – Lanark – 17MW output – Galloway – 109MW output – combined run-of-river and storage Services and earnings – ROC support extending to 2027 – Ancillary servic
Slide 11: Combined Cycle Gas Turbine
Combined Cycle Gas Turbine Strategically located system support and power generation Damhead Creek, Rye House and Shoreham Strategically located assets in South-east England Flexible large-scale generation – Damhead Creek (805MW), Rye House (715MW) and Shoreham (420MW) Services and earnings – System
Slide 12: Biomass
Biomass Daldowie biomass-from-waste 50kt plant Processed Sludge Pellets (PSP) from waste water Firm offtake contract with Scottish Water 12
Slide 13: Other Benefits
Other Benefits Attractive options Damhead Creek II Strong cultural fit Trading portfolio benefits Reduced exposure to gas People and engineering capabilities 13
Slide 14: Funding and Process
Funding and Process Den Jones Interim Group CFO
Slide 15: Funding and Process
Funding and Process Funding Debt bridge facility agreed Competitively priced, below current cost of debt Net debt / EBITDA around 2x by end of 2019 Supportive of credit rating and reduced risk profile Assess options for long-term financing strategy in 2019 Dividend and capital allocation Strengthens
Slide 16: EBITDA 2017 to 2019
EBITDA 2017 to 2019 Significant increase in EBITDA – capacity payments, grid access, lower corporate recharge and growing demand for system support services and current power prices EBITDA bridge 2017 to 2019 (£m) 90-110 9 8 42 36 2017 actual Contracted capacity Grid access Lower corporate Other 201
Slide 17: Summary
Summary Will Gardiner Group CEO
Slide 18: Summary
Summary Flexible, low-carbon and renewable generation and system support A unique and complementary portfolio Pumped storage, hydro and gas-fired generation Aligned with UK energy needs Aligned with Drax generation strategy Compelling strategic benefits A strong financial case Class 1 transaction Su
Slide 19: Drax Group
Drax Group Acquisition of flexible, low-carbon and renewable UK power generation from Iberdrola