Slide 1: Half Year Results
2022 Half Year Results 26 July 2022
Slide 2: Presenters
Presenters Will Gardiner: Andy Skelton: Chief Executive Officer Chief Financial Officer 26 July 2022 2
Slide 3: Agenda
Agenda Future Positive Operational Review Financial Review Strategy Update 26 July 2022 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 and Our Ambition
Our Purpose Enabling a zero carbon, lower cost energy future Our Ambition To be a carbon negative company by 2030 26 July 2022 5
Slide 6: H1-22 Highlights
H1-22 Highlights Strong financial and operational performance A leading provider of UK dispatchable renewable power with plans to deliver negative emissions – Robust integrated biomass model with options for value through supply chain Strategic – Progress with negative emissions (BECCS) – £3bn fully
Slide 7: Future Positive
Future Positive 26 July 2022 7
Slide 8: Future Positive: People, Nature, Climate Positive
Future Positive Strategic ambition underpinned by safety, sustainability and biomass cost reduction - Diversity and inclusion programme – inclusive management, promoting Safety is key People Positive social mobility via graduate, apprenticeships and work experience Total Recordable Incident - Contin
Slide 9: Operational Review
Operational Review 26 July 2022 9
Slide 10: Pellet Production – Operational Review
Pellet Production – Operational Review Increased production capacity, continued focus on cost reduction Increase in production driving earnings Adjusted EBITDA Production cost - 54% increase in production - 13% increase in Adjusted EBITDA £45m $146/t(1/2) (H1-21: £40m) (FY-21: $143/t) 2% increase in
Slide 11: Pellet Production – Strong Long-term Order Book
Pellet Production – Strong Long-term Order Book 3rd party supply and own-use Attractive 3rd party supply business Diversified long-term offtake US$4.4bn of contracted sales to 3rd parties >21Mt of contracted sales to 3rd parties Sales to Asia Contracts extending to mid-2030s Sales to Europe High-qua
Slide 12: Generation – Operations
Generation – Operations Adjusted EBITDA(1) System support(2) % of UK UK’s largest source of renewable power by output £205m £71m renewables (H1-21: £186m) (H1-21: £63m) 11%(3) (Q2 2020 to Q1 Biomass performance 2021: 12%) - Optimisation of biomass generation and logistics to support UK security of s
Slide 13: Generation – Trading and Optimisation
Generation – Trading and Optimisation Supporting security of supply though reprofiling biomass supply and generation Strong contracted power sales on ROC and hydro 2022-2024 Contracted power sales 2022 2023 2024 - 25.4TWh contracted at £95.9/MWh 21 July 2022 ROC (TWh)(1) 11.7 8.8 4.5 -Average achiev
Slide 14: Customers
Customers Renewable power and decarbonisation services to high-quality I&C and Corporate customers Strong operational and financial performance - Continued improvement in Adjusted EBITDA - Sale of forward hedged power not required by customers 100% renewable supply offering - Efficient route to mark
Slide 15: Financial Review
Financial Review 26 July 2022 15
Slide 16: Financial Summary
Financial Summary Strong financial and operational performance Total Cash and Cash Generated from Net Debt Committed Facilities Operation June 2022(3) June 2022 £185m £1,101m Adjusted £539m (H1-21: £138m) (H1-21: £1,029m) (Dec-21: £549m) Expect to be significantly below 2x EBITDA(1) Net Debt to Adju
Slide 17: Pellet Production Cost
Pellet Production Cost 35% of target reductions achieved over last three years Further savings in H1 offset by targeted inflationary increases and commissioning costs Biomass FOB(1) cost 2018-2021 2% increase in H1-22 $166/t $161/t $153/t $143/t - Increase in utility costs (> 20% increase) 2018 2019
Slide 18: Adjusted EBITDA Bridge H1-21 to H1-22
Adjusted EBITDA Bridge H1-21 to H1-22 21% increase in Adjusted EBITDA £m 300 19 29 35 200 5 14 35 100 225 186 0 30 June 2021 Pellet Biomass Pumped storage / Discontinued gas Customers Innovation, 30 Jun 2022 Adjusted EBITDA Production generation hydro generation and other BECCS Adjusted EBITDA and O
Slide 19: Capital Investment
Capital Investment Investment to drive operational efficiency, strategic initiatives and growth 2022 estimate Key areas Investment Maintenance Maintain operational performance £70-80m Enhancement Efficiency and operational improvements £20m UK BECCS £20m New pellet plants (subject to FID) £10m Strat
Slide 20: Balance Sheet
Balance Sheet Long-term structures in place to support growth Facilities in place to support growth and decarbonisation Expect significantly <2x Net Debt to £539m cash and Maturity profile - Infrastructure facilities extend maturity profile to 2030 Adjusted EBITDA by committed facilities to 2030 - E
Slide 21: Sources and Uses of Cash – Fully Funded Investment Plan to 2030
Sources and Uses of Cash – Fully Funded Investment Plan to 2030 Investment funded by existing cash generation and EBITDA growth consistent with long-term target of 2x Net Debt Strategic capital investments Sources (2022-2030) - Pellet plants, UK BECCS, Cruachan II Investment and funding - Investment
Slide 22: Clear Capital Allocation Policy
Clear 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 26 July 2022 22
Slide 23: Strategy Update
Strategy Update 26 July 2022 23
Slide 24: Strategic Objectives
Strategic Objectives Positioning Drax for growth opportunities linked to global renewable energy and decarbonisation initiatives Objective 1: to be a global leader in sustainable biomass pellets Pellet Production - 3rd party sales, own-use, cost reduction, fibre sourcing and technology Objective 2:
Slide 25: Milestones for 2022
Milestones for 2022 Making good progress on milestones for progressing strategy through 2022 Biomass pellet - Expect to take final investment decision on up to 0.5Mt of new capacity production - Establishment of Tokyo field office Biomass pellet - Establishment of European business development sales
Slide 26: Development of UK BECCS
Development of UK BECCS Drax Power Station – targeting 8Mt pa of negative emissions from BECCS by 2030, on track for FID in 2024 H1-22 H2-22 Technology Technology - FEED study progressing well - Coal “winter contingency” contract – delay coal - Early stage site preparation commenced infrastructure r
Slide 27: International BECCS
International BECCS Targeting 4Mt pa of negative emissions from new-build BECCS outside UK by 2030 Supportive regulatory developments in USA Good progress with milestones - Inclusion of BECCS as an eligible technology under - State and Federal level engagement in USA, including Louisiana, Department
Slide 28: Outlook
Outlook Drax strategic objectives closely aligned with net zero policies, providing attractive opportunities for long-term growth UK and international policies increasingly support the use of biomass, BECCS and the role of dispatchable generation - Targeting 4Mt pa of 3rd party pellet sales by 2030
Slide 29: Half Year Results
2022 Half Year Results 26 July 2022
Slide 30: Appendices
Appendices Group Adjusted EBITDA Climate Positive Group Income Statement – Continuing Operations Sustainable Biomass Sourcing and Carbon Life Cycle Group Income Statement – Adjusted Results Sources of Biomass Supply – Continuing and Discontinued Operations Merchant Forward Commodity Prices Consolida
Slide 31: Group Adjusted EBITDA
Group Adjusted EBITDA High-quality, enduring earnings from a multi-technology portfolio and integrated value chain H1-22 H1-21 Business unit Assets Capacity Adjusted Adjusted EBITDA (£m) EBITDA (£m) 17 pellet plants and developments in c.5Mt Canada and USA Pellet Production Access to 4 deep water po
Slide 32: Group Income Statement – Continuing Operations
Group Income Statement – Continuing Operations H1-22 H1-21 In £m Adjusted Exceptional Total Adjusted Exceptional Total Revenue 3,621 (64) 3,557 2,177 (3) 2,174 Cost of sales (3,135) 194 (2,941) (1,807) 23 (1,784) Gross profit 486 130 616 370 20 390 Operating and administrative expenses (235) (2) (23
Slide 33: Group Income Statement – Adjusted Results – Continuing and Discontinued Operations
Group Income Statement – Adjusted Results – Continuing and Discontinued Operations H1-22 H1-21 In £m Continuing Discontinued Total Continuing Discontinued Total Revenue 3,621 - 3,621 2,177 52 2,229 Cost of sales (3,135) - (3,135) (1,807) (32) (1,839) Gross profit 486 - 486 370 20 390 Operating expen
Slide 34: Consolidated Adjusted EBITDA – Continuing and Discontinued Operations
Consolidated Adjusted EBITDA – Continuing and Discontinued Operations Power Pellet Discontinued Customers Adjustments(1) Consolidated H1-22 £m Generation Production Segment Adjusted EBITDA 205 - 45 24 (5) 269 Innovation, Capital Projects and Other (44) Consolidated Adjusted EBITDA 225 Power Pellet D
Slide 35: Pellet Production – Adjusted EBITDA
Pellet Production – Adjusted EBITDA FOB total cost In £m H1-22 FY-21 USD$ H1-22 FY-21 Revenues 358 450 Cost of sales ($m) 312 367 Cost of sales (242) (267) Operating costs ($m) 92 132 Gross profit 116 183 Total cost ($m) 404 499 Operating costs (71) (97) 3rd party pass through volumes ($m) (62) (23)
Slide 36: Generation – Adjusted EBITDA – Continuing and Discontinued Operations
Generation – Adjusted EBITDA – Continuing and Discontinued Operations In £m H1-22 H1-21 Revenue System support and optimisation Power sales 2,549 1,236 £m H1-22 H1-21 System support and optimisation 91 82 System support and optimisation ROC sales 396 191 System support and optimisation revenues 91 8
Slide 37: Customers – Adjusted EBITDA
Customers – Adjusted EBITDA In £m H1-22 H1-21 Revenue 1,668 1,077 Cost of sales Cost of power and gas purchases (934) (442) Grid charges (319) (232) Other costs (325) (359) (1,578) (1,033) Gross profit 90 44 Operating costs (40) (41) Bad debt charge (26) (8) Adjusted EBITDA 24 (5) 26 July 2022 37
Slide 38: Group Cash Flow Statement – Continuing and Discontinued Operations
Group Cash Flow Statement – Continuing and Discontinued Operations In £m H1-22 H1-21 Adjusted EBITDA(1) 225 186 Working capital and other (40) (48) Cash generated from operations 185 138 Debt service and other interest (32) (31) Tax (9) 8 Net cash from operating activities 144 115 Capital investment
Slide 39: Group Net Debt Bridge
Group Net Debt Bridge £m 118 45 1,000 27 9 1,101 1,044 83 800 225 600 400 200 0 31 Dec 2021 Adjusted Capital expenditure Debt Tax Equity Working capital 30 June 2022 Net Debt EBITDA service dividends & other Net Debt paid 26 July 2022 39
Slide 40: Climate Positive
Climate Positive The world’s leading sustainable biomass generation and supply business – ambition to be carbon negative by 2030 >99% reduction in scope 1 and 2 generation CO2 since 2012 and >99% of generation from renewable and low-carbon sources >£2bn investment in renewables since 2012 1,000 Euro
Slide 41: 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 - Positive impacts in the areas where we source Objectives - Reduce C
Slide 42: Sources of Biomass Supply
Sources of Biomass Supply 3rd party and self-supply sources of fibre by location – H1-22 3rd party and self-supply sources of fibre by location – H1-21(1) Low Low Branches, Branches, Sawmill grade Agri. Sawmill grade Agri. tops and Thinnings Total tops and Thinnings Total residues round residues res
Slide 43: Merchant Forward Commodity Prices
Merchant Forward Commodity Prices Baseload Power Price (£/MWh) Peak Power Price (£/MWh) 500 600 450 550 400 500 450 350 400 300 350 250 300 200 250 150 200 150 100 100 50 50 0 0 Jul-20 Oct-20 Jan-21 Apr-21 Aug-21 Nov-21 Feb-22 Jun-22 Jul-20 Oct-20 Jan-21 Apr-21 Aug-21 Nov-21 Feb-22 Jun-22 WIN-22 SUM
Slide 44: Merchant Carbon Prices
Merchant Carbon Prices UKA Carbon (£/t) EU ETS Carbon (€/t) 110 110 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 May-21 Jul-21 Aug-21 Oct-21 Dec-21 Jan-22 Mar-22 May-22 Jun-22 Jul-20 Oct-20 Jan-21 Apr-21 Aug-21 Nov-21 Feb-22 Jun-22 Dec-22 Dec-23 Dec-24 Dec-22 Dec-23 Dec-24 Source: I
Slide 45: Merchant Forward Spreads
Merchant Forward Spreads Peak CSS (£/MWh) Peak DGS (£/MWh) Peak ROC Bark Spread (£/MWh) 260 260 260 240 240 240 220 220 220 200 200 200 180 180 180 160 160 160 140 140 140 120 120 120 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 - - - Jul-20 Jun-21 Jun-22 Jul-20 Jun-21 Jun-22 Jul-20 Jun-21 Jun-22
Slide 46: Half Year Results
2022 Half Year Results 26 July 2022