Drax Group Plc · LSE:DRX
Drax — Merger or Acquisition (February 2021)
29 slides from Drax's merger presentation, Feb 8, 2021
Slide 1: Proposed Acquisition of Pinnacle Renewable Energy Inc. (Pinnacle)
Proposed Acquisition of Pinnacle Renewable Energy Inc. (Pinnacle) 8 February 2021
Slide 2: Important Notice
Important Notice The contents of these presentation materials have been prepared by and are the sole responsibility of Drax Group plc (the "Company"). RBC Europe Limited ("RBC"), which is authorised by the Prudential Regulation Authority (the "PRA") and regulated in the United Kingdom by the Financi
Slide 3: Agenda
Agenda Overview of Proposed Acquisition Delivering Our Biomass Strategy Financial Summary Summary Presenters Will Gardiner, CEO Andy Skelton, CFO 8 February 2021 3
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 8 Febru
Slide 5: Overview of Acquisition
Overview of Acquisition 8 February 2021
Slide 6: Investment Highlights
Positions Drax as world’s leading sustainable Investment Highlights biomass generation and supply business Equity value of C$385 million(1) (£226 million(2)) - Acquisition supports development of options for a Enterprise Value of C$741 million(3) (£436 million(2)) long-term future for sustainable bi
Slide 7: About Pinnacle
About Pinnacle 2022 EBITDA 2.9Mt of A major producer and supplier of good-quality, low-cost sustainable biomass Consensus production C$99 million capacity in 2022 (includes capacity in (Contracted to 3rd parties development) and Drax) 2.9Mt of geographically diversified production capacity in strong
Slide 8: Delivering Our Biomass Strategy
Delivering Our Biomass Strategy 8 February 2021
Slide 9: Compelling Opportunity to Advance Drax Biomass Strategy
Compelling Opportunity to Advance Drax Biomass Strategy Pinnacle is a natural fit with Drax Drax biomass strategy How Pinnacle supports Drax biomass strategy 2.9Mt of additional production capacity from 2022 5Mt of self-supply capacity(1) - Contracted to 3rd parties and Drax Good-quality, low-cost
Slide 10: The World's Leading Sustainable Biomass Generation and Supply Business
The World’s Leading Sustainable Biomass Generation and Supply Business A large-scale vertically integrated producer and consumer of sustainable biomass in a competitive market Drax Biomass Vertically integrated Combined Drax & Pinnacle producer & consumer Enviva International Pinnacle suppliers Graa
Slide 11: Increased Global Reach and Presence in Third-party Markets
Increased Global Reach and Presence in Third-party Markets Combined Drax and Pinnacle supply chain supports enhanced security of supply Customer Backlog by Region (Q3-20) 12 long-term contracts in Japan and South Korea >1.3 million tonnes pa Western 2% C$4.6 billion Canada Commencing between 2021 an
Slide 12: Increased Global Reach and Presence in Third-party Markets
Increased Global Reach and Presence in Third-party Markets Long-term contracted sales to high-quality Asian and European counterparties C$6.7 billion third-party sales book (including Drax) Significant contracted volumes beyond 2027 High-quality Japanese, Korean and European counterparties [Date] 12
Slide 13: Global Growth Opportunities for Sustainable Biomass
Global Growth Opportunities for Sustainable Biomass Three opportunities underpinned by development of 5Mt low-cost self-supply chain Global wood pellet market outlook Third-party - 5Mt of low-cost biomass available for sale Increase in global demand (Mt) in next decade(1) - Growing and under-supplie
Slide 14: Integration Plan
Integration Plan Drax is committed to ensuring the safe, efficient and sustainable operation of the enlarged Group’s activities and will continue to invest accordingly to deliver this outcome Continuity of production - Focus on best practice – H&S, operational efficiency and sustainability Establish
Slide 15: Financial Summary
Financial Summary 8 February 2021
Slide 16: Strong Return on Investment
Strong Return on Investment Supportive of three biomass models and underpinned by long-term contracted sales to counterparties in Asia and Europe Estimated cost of acquisition Adjusted EBITDA (2019 actual) and consensus (C$million) - Equity consideration of C$385 million(1) (£226 million(2)) - Enter
Slide 17: Biomass Investment Strategy
Biomass Investment Strategy Target 5Mt of self-supply capacity at £50/MWh(1) by 2027 Significantly advances progress towards 5Mt of self-supply Enlarged group self-supply (Mt pa) - Pro-rata cost consistent with expected total investment of c.£600 million 2022 2027 - Total of 3.4Mt self-supply capaci
Slide 18: Funding, Capital Allocation and Process
Funding, Capital Allocation and Process Expected completion Q2/Q3 2021 Funding - Anticipate funding from cash and existing agreements - Proceeds from sale of gas assets completed January 2021 Capital allocation - Remain committed to current capital allocation policy - Strengthens ability to pay a su
Slide 19: Summary
Summary 8 February 2021
Slide 20: Summary of Acquisition
Positions Drax as world’s leading sustainable Summary of Acquisition biomass generation and supply business Equity value of C$385 million(1) (£226 million(2)) - Acquisition supports development of options for a Enterprise Value of C$741 million(3) (£436 million(2)) long-term future for sustainable b
Slide 21: Appendix
Appendix 8 February 2021
Slide 22: Pinnacle Portfolio
Pinnacle Portfolio Annual nameplate capacity of 2.9Mt from 2022 – a portfolio of geographically diversified North American assets 2.9Mt nameplate capacity Number of Capacity Pinnacle Share Operational - 2.5Mt operational plants (Mt pa) (Mt pa) - 0.4Mt development (commissioning 2021) British Columbi
Slide 23: Pinnacle Portfolio
Pinnacle Portfolio 2.9Mt capacity from a portfolio of geographically diversified North American assets Plant Location Status Commissioning Date Capacity (Mt pa) % ownership Williams Lake BC, Canada Operational 2004 0.2 100% Houston BC, Canada Operational 2006 0.2 30% Armstrong BC, Canada Operational
Slide 24: Pinnacle Portfolio – Canada
Pinnacle Portfolio – Canada Two strategic fibre baskets with good infrastructure and access to international biomass markets NW Territories 2.2Mt of capacity (operational and in development) British Columbia High Level - Nine operational plants in British Columbia and Alberta Smithers Transport and
Slide 25: Pinnacle Portfolio – USA
Pinnacle Portfolio – USA Strategic fibre basket in Southeastern US, close to Drax’s existing infrastructure 0.7Mt of capacity in Alabama (operational and in development) SC AL - Aliceville – operational AR - Demopolis – development Aliceville GA MS Demopolis Transport and logistics - Barge transit t
Slide 26: Positions Drax as World's Leading Sustainable Biomass Generation and Supply Business
Positions Drax as World’s Leading Sustainable Biomass Generation and Supply Business Increased optionality over use of biomass for own-use or third-party supply Combined capacity of 4.9Mt in 2022 Reduced cost of production - 17 pellet plants (including development) - Drax 2019 FOB US$161/t - 3 major
Slide 27: Enhanced Security of Supply – Enlarged and Diversified Supply Chain
Enhanced Security of Supply – Enlarged and Diversified Supply Chain 4.9Mt capacity (from 2022) – 17 pellet plants 3 major fibre baskets Baton Rouge Westview Fibreco(1) Mobile (1) 4 deep water ports Lavington Armstrong Entwistle Smithers Aliceville High Level Demopolis Amite Morehouse LaSalle William
Slide 28: Combined Drax and Pinnacle Pellet Production Portfolio
Combined Drax and Pinnacle Pellet Production Portfolio 4.9Mt capacity from a geographically diversified production portfolio in western Canada and Southeastern US Plant Location Status Commissioning Date Capacity (Mt pa) % ownership Williams Lake BC, Canada Operational 2004 0.2 100% Houston BC, Cana
Slide 29: Proposed Acquisition of Pinnacle Renewable Energy Inc. (Pinnacle)
Proposed Acquisition of Pinnacle Renewable Energy Inc. (Pinnacle) 8 February 2021