REG - Drax Group Plc - Annual Financial Report
27/02/2025 07:15
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RNS Number : 6261Y Drax Group PLC 27 February 2025
27 February 2025
DRAX GROUP PLC (Symbol: DRX)
FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2024
Strong operational and financial performance, increasing visibility on
long-term outlook
Twelve months ended 31 December 2024 2023
Key financial performance measures
Adjusted EBITDA((1/2/3)) (£ million) 1,064 1,009
Net debt((4)) (£ million) 992 1,220
Adjusted basic EPS((1)) (pence) 128.4 119.6
Dividend per share (pence) 26.0 23.1
Total financial performance measures
Operating profit (£ million) 850 908
Profit before tax (£ million) 753 796
Will Gardiner, CEO of Drax Group, said: "Drax has delivered a strong
operational and financial performance while supporting UK energy security. We
produced over 25% more dispatchable renewable power in 2024, keeping the
lights on for millions of homes and businesses, while supporting thousands of
jobs throughout our supply chain.
"Signing a Heads of Terms with the UK Government for a new low-carbon
dispatchable CfD for Drax Power Station is a major milestone for the business
and provides the basis on which the site continues to generate electricity for
the country, especially when the wind isn't blowing, and the sun isn't
shining.
"This is an investment in security of supply, which provides a net saving for
consumers and helps deliver the Government's Clean Power 2030 goal. It also
offers a potential pathway for long-term growth for our business, including
options for the development of BECCS and a data centre at Drax Power Station.
"We are making good progress with our growth ambitions for Flexible
Generation, Pellet Production and our international carbon removals business,
Elimini. Our strong balance sheet supports returns to shareholders and the
development of options for long-term growth, both in the UK and
internationally."
Financial highlights
· 5% growth in Adj. EBITDA driven by increased renewable generation and
improved Pellet Production performance
· Strong liquidity and balance sheet
· £0.7 billion of new debt with maturities 2027-2029, £0.9 billion of
shorter dated maturities repaid
· £806 million of cash and committed facilities, 0.9x Net debt to Adj.
EBITDA
· Sustainable and growing dividend - proposed final dividend of 15.6
pence per share (2023: 13.9 pence per share)
· Expected full year dividend up 12.6% to 26.0 pence per share (2023:
23.1 pence per share)
· £300 million share buyback((5))
· c.£150 million complete to date, third £75 million tranche expected
to commence shortly
Other highlights
· Drax Power Station - UK's largest power station and source of
renewables - 5% of UK power, 10% of UK renewables
· Non-binding Heads of Terms agreed for low-carbon dispatchable CfD for
Drax Power Station
· Potential for >1.2GW data centre at Drax Power Station, through
2030s, shortlist of developers
· Launch of Elimini (Global BECCS) carbon removals business
· Sale of non-core Opus Energy SME customer meters
· Heads of Terms agreed with SAF developer for 1Mt pa multi-year
biomass sales from 2029, potential for 3Mt pa
· £80 million (40MW) expansion of Cruachan, operational 2027,
underpinned by 15-year Capacity Market agreement
Financial outlook
· Full year 2025 expectations for Adj. EBITDA in line with analyst
consensus estimates((6))
· Drax Power Station >£1 billion of estimated post-tax operating
cash flow (2025 to 2027) underpinned by forward power hedges and renewable
certificates
Targeting post 2027 Adj. EBITDA of £600-700m pa from FlexGen, Pellet
Production and Biomass Generation((7))
· FlexGen and Energy Solutions - targeting post 2027 recurring Adj.
EBITDA of >£250 million
· Pumped storage, hydro, Open Cycle Gas Turbines (OCGTs) and Energy
Solutions
· Pellet Production - targeting post 2027 recurring Adj. EBITDA
>£250 million
· Pipeline of opportunities for sales in existing and new markets,
including SAF, and own-use
· Positioned to capture value in supply chain as a producer, user and
seller of biomass in the global market
· Biomass Generation - targeting average Adj. EBITDA of £100-200
million pa (Apr-27 to Mar-31)
· Based on low-carbon dispatchable CfD across four units, flexible
generation and ancillary services
· Further opportunity from additional merchant generation
Capital allocation policy unchanged
· Maintain a strong balance sheet
· Invest in the core business
· Short-term - capital returns, investment in existing business and
commissioning of OCGTs
· Medium-term - expansion of FlexGen to provide a full range of system
support services and technologies
· Long-term options for growth
· FlexGen - long duration storage (Cruachan II) subject to attractive
investment framework
· Data centre - potential for >1.2GW data centre at Drax Power
Station through 2030s, shortlist of developers
· Carbon removals - development of pipeline of options for growth and
value creation, including BECCS at Drax Power Station and Elimini
· Pay a sustainable and growing dividend
· Return surplus capital beyond investment requirements
· £300 million share buyback commenced August 2024 - c.£150 million
complete in first seven months, third £75 million tranche to commence shortly
Sustainability - continued development of approach to sustainability processes
and reporting
· Launch of new Sustainability Framework - Climate, Nature and People
Positive targets
· Full alignment with Task Force on Climate-related Financial
Disclosure (TCFD) reporting requirements and voluntary Taskforce on
Nature-related Financial Disclosure (TNFD) reporting
· SBTi - 2030 targets validated, validating 2040 targets
· CDP - increase in Forest rating (A- ratings for Climate and Forest)
Operational and financial review
£ million 2024 2023
Adj. EBITDA breakdown 1,064 1,009
Pumped Storage and Hydro 138 230
Energy Solutions - Industrial & Commercial (I&C) 81 102
- Small and (30) (30)
Medium-sized Enterprise (SME)
FlexGen & Energy Solutions 188 302
Pellet Production 143 89
Biomass Generation 814 703
Elimini (47) (57)
Innovation and Capital Projects (34) (28)
FlexGen & Energy Solutions - flexible generation and system support
services
· Pumped Storage and Hydro - performance supportive of post 2027 Adj.
EBITDA target
· Strong system support earnings with lower forward power sales, as
expected, vs 2023
· Progressing c.£80 million refurbishment and upgrade (40MW) of
Cruachan underpinned by 15-year Capacity Market agreements (>£220 million)
· I&C
· Maintaining margin in line with 2023, some reduction in volume
· Development of Energy Solutions business including system support
services via demand response, and electric vehicle services following
acquisition of BMM (August 2023)
· SME (Opus Energy)
· Sale of majority of Opus Energy's meter points completed September
2024, with remaining meter points sale agreed February 2025 - reflects focus
on core I&C business and exit from SME market
Biomass Generation - UK energy security with dispatchable renewable generation
and system support services
· Biomass generation - increased level of renewable generation and
continuing system support role
· 14.6TWh - 27% increase (2023: 11.5TWh)
· Single major planned outage, completed ahead of schedule
· Strong contracted power and renewables position
· As at 24 February 2025 c.£1.9 billion of forward power sales between
2025 and Q1 2027 on RO biomass, pumped storage and hydro generation assets -
20.2TWh at an average price of £93.7/MWh((8/9))
· RO generation - fully hedged in 2025 and c.80% 2026, with >£1
billion of associated ROCs
· A further 3.1TWh of CfD generation contracted for 2025
Contracted power sales as at 24 February 2025 2025 2026 2027
Net RO, hydro and gas (TWh)((8)) 10.6 8.2 1.4
Average achieved £ per MWh((9)) 108.8 76.8 78.4
CfD (TWh) 3.1 - -
Pellet Production - North American supply chain supporting UK energy security
and sales to third parties
· Strong improvement in operational and financial performance vs 2023
· 5% increase in production vs 2023 (4.0Mt, 2023: 3.8Mt)
· Deliveries weighted towards own-use - more reflective of current
market for long-term large-scale supply
· Development of new capacity
· Aliceville expansion commissioned H1 2024 (130kt)
· Potential long-term offtake opportunity for >60% of Drax current
pellet production capacity
· Heads of terms agreed with Pathway Energy for 1Mt pa multi-year
biomass sales from 2029
· Potential for additional 2Mt pa through 2030s
Other financial information
Capital investment
· Capital investment of £332 million (2023: £519 million)
· Growth - £212 million, including £90 million OCGTs, £64 million
pellet plants and £34 million Cruachan turbine upgrade
· Maintenance and other - £121 million, including one major planned
outage on biomass unit
· 2025 expected capital investment of c.£180-220 million
· Growth - c.£90 million, primarily OCGTs and Cruachan turbine upgrade
· Maintenance and other - c.£110 million, including Cruachan
transformer upgrade
Cash and balance sheet
· Cash generated from operations of £1,135 million (2023: £1,111
million)
· Net working capital inflow of £122 million inclusive of an increase
in renewable assets
· Net debt at 31 December 2024 of £992 million (31 December 2023:
£1,220 million), including cash and cash equivalents of £356 million (31
December 2023: £380 million)
· >£0.7 billion of new debt maturing 2027-2029 and repayment of
>£0.9 billion of shorter dated maturities
· New c.£442 million term-loan facilities, maturing 2027-2029
· New €350 million Euro bond, maturing 2029
· Repaid £347 million of infrastructure facilities, maturing 2024-2026
· Repaid $500 million US bond, maturing 2025
· Repaid €106 million of €250 million Euro bond through tender
offer, bond maturing 2025
· Repaid £120 million collateral facility in July 2024
Notes:
(1) Financial performance measures prefixed with "Adjusted/Adj." are
stated after adjusting for exceptional items and certain remeasurements
(including certain costs in relation to the disposal of the SME meters,
impairment of non-current assets, proceeds from legal claims, change in fair
value of financial instruments and impact of tax rate changes). Adj. EBITDA
and EPS measures exclude earnings from associates and amounts attributable to
non-controlling interests.
(2) Earnings before interest, tax, depreciation, amortisation, other gains
and losses and impairment of non-current assets, excluding the impact of
exceptional items and certain remeasurements, earnings from associates and
earnings attributable to non-controlling interests.
(3) In January 2023 the UK Government introduced the Electricity Generator
Levy (EGL) which runs to 31 March 2028. The EGL applies to the three biomass
units operating under the RO scheme and run-of-river hydro operations. It does
not apply to the Contract for Difference (CfD) biomass or pumped storage hydro
units. EGL is included in Adj. EBITDA and amounted to £161 million in 2024
(2023: £205 million).
(4) Net debt is calculated by taking the Group's borrowings, adjusting for
the impact of associated hedging instruments, lease liabilities and
subtracting cash and cash equivalents. Net debt excludes the share of
borrowings, lease liabilities and cash and cash equivalents attributable to
non-controlling interests. Borrowings includes external financial debt, such
as loan notes, term-loans and amounts drawn in cash under revolving credit
facilities. Net debt does not include financial liabilities such as pension
obligations, trade and other payables, working capital facilities linked
directly to specific payables that provide short extension of payment terms of
less than 12 months and balances related to supply chain finance. Net debt
includes the impact of any cash collateral receipts from counterparties or
cash collateral posted to counterparties. Net debt excluding lease liabilities
was £876 million (2023: £1,084 million).
(5) On 7 August 2024 Drax commenced a £300 million share buyback programme.
The maximum number of shares that may be repurchased by the Company under the
programme is 38,468,257, being the number of shares the Company is authorised
to purchase pursuant to the authority granted by shareholders at the Annual
General Meeting (AGM) held on 25 April 2024, which authority is expected to
be renewed at the AGM to be held in 2025. As at 26 February 2025, 23,245,965
shares had been purchased, leaving a residual allowance of 15,222,292 shares
which can be purchased under the programme ahead of the next AGM being held on
1 May 2025.
(6) As of 20 February 2025, analyst consensus for 2025 Adj. EBITDA was £865
million, with a range of £839 - 893 million. The details of this consensus
are displayed on the Group's website.
Consensus - Drax Global (https://www.drax.com/investors/consensus/)
(7) Excludes Investment Opportunities including development expenditure in
Elimini, Innovation, Capital Projects and Other.
(8) Includes 1.8TWh of structured power sales in 2025, 2026 and 2027
(forward gas sales as a proxy for forward power), transacted for the purpose
of accessing additional liquidity for forward sales from RO units and highly
correlated to forward power prices.
(9) Presented net of cost of closing out gas positions at maturity and
replacing with forward power sales.
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 position, strategy,
projected costs, plans, beliefs, and objectives for the management of future
operations of Drax Group plc ("Drax") and its subsidiaries (the "Group"), are
not warranted or guaranteed. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and depend on
circumstances that may occur in the future. Although Drax believes that the
statements, expectations, statistics and projections and other information
reflected in such statements are reasonable, they reflect Drax's current view
and no assurance can be given that they will prove to be correct. Such events
and statements involve risks and uncertainties. Actual results and outcomes
may differ materially from those expressed or implied by those forward-looking
statements. There are a number of factors, many of which are beyond the
control of the Group, which could cause actual results and developments to
differ materially from those expressed or implied by such forward-looking
statements. These include, but are not limited to, factors such as: delays in
the process for finalising the proposed Low-carbon, Dispatchable CfD agreement
with the UK Government; future revenues being lower than expected; increasing
competitive pressures in the industry; uncertainty as to future investment and
support achieved in enabling the realisation of strategic aims and objectives;
and/or general economic conditions or conditions affecting the relevant
industry, both domestically and internationally, being less favourable than
expected, including the impact of prevailing economic and political
uncertainty, the impact of conflict including those in the Middle East and
Ukraine, the impact of cyber attacks on IT and systems infrastructure (whether
operated directly by Drax or through third parties), the impact of strikes,
the impact of adverse weather conditions or events such as wildfires, changes
to the regulatory and compliance environment within which the Group operates.
We do not intend to publicly update or revise these projections or other
forward-looking statements to reflect events or circumstances after the date
hereof, and we do not assume any responsibility for doing so.
Webcast Arrangements
Management will host a webcast presentation for analysts and investors at
9:00am (GMT) on Thursday 27 February 2025.
The presentation can be accessed remotely via a live webcast link, as detailed
below. After the meeting, the webcast recording will be made available and
access details of this recording are also set out below.
A copy of the presentation will be made available from 7:00am (GMT) on
Thursday 27 February 2025 for download at:
https://www.drax.com/investors/announcements-events-reports/presentations/
(https://www.drax.com/investors/announcements-events-reports/presentations/)
Event Title: Drax Group plc - Full Year Results 2024
Event Date: Thursday 27 February 2025
Event Time: 9:00am (GMT)
Webcast Live Event Link: https://secure.emincote.com/client/drax/drax030
(https://secure.emincote.com/client/drax/drax030)
Conference call and pre-register Link: https://secure.emincote.com/client/drax/drax030/vip_connect
(https://secure.emincote.com/client/drax/drax030/vip_connect)
Start Date: Thursday 27 February 2025
Delete Date: Saturday 28 February 2026
Archive Link: https://secure.emincote.com/client/drax/drax030
(https://secure.emincote.com/client/drax/drax030)
For further information, please contact: Christopher.Laing@fticonsutling.com
Website: www.drax.com
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Chair's statement
Introduction
2024 was a successful year for the Group in which we delivered a strong
operational and financial performance. We also made good progress with our
medium-term strategy to deliver over £500 million of recurring Adjusted
EBITDA from our FlexGen & Energy Solutions and Pellet Production
portfolios, as well as our long-term strategy for growth.
Our purpose, to enable a zero carbon, lower cost energy future, is well
aligned with the competing priorities of energy security, affordability, and
the need to decarbonise economies - what is known as the energy trilemma.
Low-carbon dispatchable CfD agreement
Together with my fellow Board members, I welcomed the announcement on 10
February 2025, of the non-binding heads of terms agreed with the UK Government
for the operation of Drax Power Station beyond 2027.
People and values
Throughout the year I continued to engage with stakeholders, including
shareholders, colleagues, regulators, and suppliers.
From site visits in the UK, US, and Canada, I have been impressed with the
commitment and enthusiasm of colleagues, and the strong sense of pride in what
we are doing. This extends to making sure we do what is right in how we work
and that we provide a safe and supportive working culture.
The Board remains committed to building a supportive and inclusive working
environment where all colleagues feel enabled to contribute to achieve the
best results for themselves and the Group. In our latest colleague engagement
survey we received positive outcomes on measures such as wellbeing and
inclusion, with an overall engagement score of 7.4 out of 10.
I am also pleased to report that, as at 31 December 2024, 44% of the Board
were women. We have more to do to strengthen diversity across the
organisation, and through the updates we receive from Will Gardiner, and my
own engagement with the Group's employee forums, the Board continues to be
informed about colleague opinions and ways in which appropriate changes can be
made.
Governance, compliance, and sustainability
Good governance, compliance, and sustainability are prerequisites for a
well-run company and long-term success.
We recognise the importance of these matters and over the last five years we
have continued to invest in our governance and compliance functions as the
footprint of the business has grown. We are making progress and believe we
have good processes in place, however we are not complacent and recognise that
there are always opportunities to further enhance our capabilities in these
important areas.
Delivering positive outcomes for climate, nature, and people is central to our
plans. Ensuring that we only use biomass that is sourced sustainably is key to
this ambition. Biomass, when sustainably sourced, supports good forestry, is a
renewable source of energy, and an important part of both UK and international
renewable energy policy. As such, I was pleased to see the closure of Ofgem's
investigation into the Group's biomass profiling data. Ofgem confirmed that it
found no evidence that the Group's biomass is not sustainable or that Drax was
incorrectly issued with renewable certificates but in recognition of Ofgem's
findings, Drax made a payment of £25 million into Ofgem's voluntary redress
fund.
Board changes
In February 2024, Vanessa Simms, Non-Executive Director and Chair of the Audit
Committee, announced her intention to stand down from the Board, leaving in
June 2024 after serving the Company for six years. Following a comprehensive
selection process, Rob Shuter was appointed to the Board in June 2024 as a
Non-Executive Director and Rob was also appointed Chair of the Audit
Committee.
In December 2024, Andy Skelton, Chief Financial Officer (CFO), announced his
intention to retire from the Board and his role as CFO. Andy will remain as a
Director of the Company and CFO until a successor is in place, and we have
started a recruitment process.
I would like to welcome Rob, who has been a great addition to the Board, and
thank Vanessa and Andy for their service to the Company. I am particularly
grateful to Andy for his ongoing commitment through 2025 until a successor is
established.
Results
Adjusted EBITDA in 2024 was £1,064 million (2023: £1,009 million), which
reflects strong operational and financial performance. This includes a high
level of renewable power generation and system support services in response to
system need, and an improvement by Pellet Production. The balance sheet is
strong, with Net debt of £992 million (2023: £1,220 million), which means
that Net debt to Adjusted EBITDA was a multiple of 0.9 times at 31 December
2024 - significantly below our target ratio of around 2 times Net debt to
Adjusted EBITDA.
At the 2024 Half Year Results, we confirmed an interim dividend of £40
million (10.4 pence per share). The Board proposes to pay a final dividend in
respect of 2024 of £57 million, equivalent to 15.6 pence per share. This will
make the full-year 2024 dividend £97 million (26.0 pence per share) (2023:
£89 million, 23.1 pence per share). This represents a 12.6% increase on the
dividend per share paid in respect of 2023. It is also consistent with our
policy to pay a dividend that is sustainable and expected to grow, as the
strategy delivers stable earnings and cash flows as well as opportunities for
growth.
The Group has a clear capital allocation policy. In determining the rate of
growth in dividends from one year to the next, the Board will take account of
several factors, including cash flows from contracted income, the less
predictable cash flows from the Group's commodity-linked revenue streams, and
future investment opportunities. If there is a build-up of capital, the Board
will consider the most appropriate mechanism to return this to shareholders.
In line with this policy, in August 2024 the Group commenced a share buyback
programme for up to £300 million of Drax shares to be carried out over a
two-year period. As at 31 December 2024, the programme had spent £115 million
on the purchase of Drax shares.
Summary
In 2024, we generated a record level of renewable generation across our
portfolio of flexible and renewable generation assets as we continue to play
an important role in the UK energy system, supporting energy security. This
has contributed to a strong financial performance, dividend growth, and
capital returns to shareholders.
At the same time, we have made good progress with our medium and long-term
objectives, which are well aligned with our purpose and the energy trilemma.
Through these complementary opportunities, we believe we can deliver
sustainable long-term value to all of our stakeholders while realising our
purpose of enabling a zero carbon, lower cost energy future.
I would like to thank all colleagues for their hard work, dedication, and
expertise in helping us deliver a strong result in 2024 and their continued
commitment to our purpose and the delivery of our strategy.
Andrea Bertone
Chair
26 February 2025
CEO's review
Introduction
Energy security, affordability, and the need to decarbonise economies - the
energy trilemma - have remained important global themes in 2024. Our purpose -
to enable a zero carbon, lower cost energy future - is well aligned with these
competing priorities and we are committed to playing our part in delivering a
Just Transition.
Drax plays an important part in the UK energy system and in 2024 we delivered
a strong operational and financial performance, providing the services our
markets and stakeholders demand - reliable renewable electricity, flexibility
and system support services, all of which contribute to energy security. Our
dispatchable 24/7 generation portfolio, backed up by our resilient North
American supply chain, enables us to operate the UK's largest single source
of renewable power, and through our flexibility we are an enabler of more
renewables on the system.
The UK has led the way in decarbonising power generation but there is much
more to do. At Drax, we are playing our part by developing options for carbon
removals, flexible generation, and energy storage. In its recent "Clean Power
2030" report, the UK's National Energy System Operator (NESO) noted that all
of its pathways to a clean power system in 2030 required more renewable energy
and more power system flexibility. Both of NESO's pathways included
large-scale biomass and BECCS.
We believe that investment in new generation capacity, technology, and
infrastructure to deliver a clean power system, and beyond that net zero,
requires greater policy certainty. Absent this certainty, the pace of
development is likely to be insufficient to deliver what is required and, in
that environment, we believe that the value of proven operational assets
should increase as growing demand for power - for electrification of heating,
transport, and new markets like data centres - moves ahead of supply.
We are excited by the long-term global potential for carbon removals, and
through our new Elimini business we are evaluating options for 24/7 power
generation and carbon removals in North America and beyond. To support the
realisation of these opportunities and the transformation of the Group, we are
continuing to develop a culture and the capabilities to support the delivery
of our strategy and create long-term value for stakeholders.
Our balance sheet is strong, and the business is generating significant free
cash flow. We stand ready to invest in our strategy and opportunities to
create value from our asset base, but will be disciplined on capital
allocation, as we seek to maximise value. Such strategic investment remains
subject to appropriate regulatory structures and investment returns. In the
short term, those structures are not yet sufficiently developed and so, in
line with the Group's capital allocation policy, in August 2024, we commenced
a share buyback programme, for the purchase of shares worth up to £300
million over a two-year period.
Safety
Safety remains a primary focus. In 2024, we achieved a significant
improvement in performance with a Total Recordable Incident Rate (TRIR) of
0.24 (2023: 0.38). This reflects ongoing investment in training and the
strengthening of our safety culture as we continue to work hard to
investigate near misses and hazards so that we can take action to prevent
incidents. We also continue to track leading indicators of near miss and
hazard identification rate as well as our lagging indicators, which are key
targets across the Group.
Summary of 2024
Adjusted EBITDA of £1,064 million represents a 5% increase on 2023 (£1,009
million). This reflects a strong operational and financial performance, with a
high level of renewable power generation and system support activity
in response to system need and an improvement in the Pellet Production
business.
Net debt to Adjusted EBITDA was less than 1 times at 31 December 2024 -
significantly below the Group's target of around 2 times. In aggregate,
through 2024, the Group put in place over £1 billion of new longer-dated
debt and facilities, significantly extending our maturity profile beyond 2027,
whilst reducing Net debt by over £200 million.
In line with our policy to pay a sustainable and growing dividend, the Board
proposes to pay a final dividend in respect of 2024 of £57 million,
equivalent to 15.6 pence per share, giving a full-year dividend of 26.0 pence
per share. This is an increase of 12.6% on 2023 (23.1 pence per share). Since
its inception in 2017, the annual average rate of dividend growth has
been c.11%.
In August 2024, the Group commenced a share buyback programme for up to £300
million of Drax shares over a two-year period. As at 31 December 2024, the
programme had purchased £115 million of Drax shares. When combined with
dividend payments this represents total returns to shareholders of £209
million for 2024.
Progressing towards >£500 million pa of Adjusted EBITDA post-2027 from
FlexGen & Energy Solutions, and Pellet Production
In February 2024 Drax set out a target to deliver more than £500 million pa
of recurring Adjusted EBITDA from our FlexGen & Energy Solutions, and
Pellet Production businesses.
The FlexGen & Energy Solutions portfolio made good progress in 2024, and
we expect to benefit in future years from the full operation of three new Open
Cycle Gas Turbines (OCGTs), as well as the 40MW expansion of Cruachan, all
of which are underpinned by long-term Capacity Market agreements.
We also believe that the restructuring of the Energy Solutions business to
focus on larger customers and renewable products, including electric vehicle
(EV) services, will support the delivery of this ambition.
Pellet Production made strong progress towards its target in 2024 with
improved performance and the development of new markets for biomass sales.
FlexGen & Energy Solutions
The UK's plans to achieve net zero by 2050 will require the electrification of
sectors such as heating and transport systems, resulting in a significant
increase in demand for electricity. We believe that intermittent renewable
and inflexible low-carbon energy sources - wind, solar, and nuclear - could
help meet this demand. However, this will only be possible if other power
sources can provide the dispatchable power and non-generation system support
services required to ensure security of supply.
We believe that the retirement of older thermal generation assets and
increased reliance on intermittent renewables, as well as an increase in power
demand, will drive a growing need for dispatchable power and system support
services, creating long-term, earnings opportunities for, and value from, the
Group's flexible generation assets.
As such, and in line with our ambition to be a UK leader in flexible
renewable generation, the Group continues to assess opportunities for the
development of its portfolio. In addition to the Group's options for
increasing long-duration energy storage at Cruachan, this could also include
medium-term opportunities in other storage solutions like batteries, which
could complement the range of services which the Group's FlexGen business can
provide. Any investment would be subject to the Group's capital allocation
policy and appropriate returns on capital.
Pumped storage and hydro
The Group's pumped storage and hydro business performed well, providing
flexible and renewable power generation and a wide range of system support
services. Adjusted EBITDA of £138 million (2023: £230 million) is in
line with the Group's target for post-2027 Adjusted EBITDA. 2023 included the
benefit of forward selling higher peak power and buying back lower off-peak
power. As forward power prices have reduced, we expected a lower level of
Adjusted EBITDA in 2024.
An £80 million investment to refurbish and upgrade two units at Cruachan
Power Station is progressing. The project, which is underpinned by a 15-year
Capacity Market agreement worth over £220 million (c.£15 million Adjusted
EBITDA pa), will add 40MW of additional capacity by 2027 and improve unit
operations.
OCGTs
Commissioning of three new-build OCGTs at two sites in central England and one
in Wales is expected to commence in 2025. This is later than originally
planned, primarily due to delays in grid connection by the relevant
authorities. The OCGTs will provide combined capacity of c.900MW and be
remunerated under 15-year Capacity Market agreements, worth over £240
million, in addition to revenues from peak power generation and system
support services. Drax will continue to assess options for these assets,
including their potential sale.
Energy Solutions (Customers)
Adjusted EBITDA of £51 million was down 29% on 2023 (£72 million), comprised
of profitable Industrial & Commercial (I&C) and renewables services
businesses, and a loss-making Small & Medium-sized Enterprise (SME)
business.
I&C and renewables services Adjusted EBITDA of £81 million was a strong
performance. Alongside supplying renewable energy, this business is
increasingly active in the provision of value adding services, including
asset optimisation and EV services.
Opus Energy (Opus), the Group's SME business, was loss making at the Adjusted
EBITDA level, reflecting an exit from gas supply as part of the Group's
decarbonisation strategy and lower customer numbers. Opus was acquired
by Drax in 2017 and over the past seven years, elements of the acquired
business have been transferred to our core I&C business. Those transfers
included renewables services, which incorporates Power Purchase Agreements
with renewable generators, and certain other customers. These businesses have
contributed to the strong underlying performance in the I&C business.
In September 2024, Drax completed the sale of the majority of its non-core
Opus SME customer meter points. An employee consultation process has also been
completed resulting in a reduction in headcount to reflect a focus on core
I&C and renewables services. The sale is expected to be supportive of the
Group's post-2027 Adjusted EBITDA target, with a leaner, more focused I&C
business model, which can better support customers with their energy needs and
decarbonisation objectives.
Pellet Production
Adjusted EBITDA of £143 million (2023: £89 million) was an increase of 61%.
This is a strong performance which reflects higher production and improved
margin versus 2023.
Output benefitted from the commissioning of a 130kt expansion of the
Aliceville pellet plant. Deliveries were incrementally weighted towards
own-use contracts, which are more reflective of the current market value of
long-term large-scale supply than some legacy third-party supply contracts.
These contracts will fall due for renewal in the coming years.
As a vertically integrated producer, user, buyer, and seller of biomass, we
operate a differentiated biomass model from our peers and see the current
global biomass market as having a favourable balance of risks and
opportunities.
Drax continues to target post-2027 recurring Adjusted EBITDA over £250
million from Pellet Production. This could comprise a combination of own-use
and third-party sales, from existing and new markets, including Sustainable
Aviation Fuel (SAF), where Drax is developing a pipeline of biomass sales
opportunities in North America, Asia, and Europe.
We believe that SAF could be a major market opportunity for biomass pellets.
During 2024 Drax agreed heads of terms with Pathway Energy LLC (Pathway) on a
multi-year agreement that could see Drax supply 1Mt of sustainable biomass
each year for the production of SAF at their proposed plant in Port Arthur,
Texas. The project could provide an attractive home market for the Group's US
pellet production, with pricing expected to be consistent with the Group's
target for post-2027 recurring Adjusted EBITDA.
In the future, Drax could also potentially supply biomass to two additional
Pathway projects, delivering a further 2Mt of sustainable pellets per year to
Pathway's sites through the 2030s.
Separately, as a part of its plans to reduce carbon emissions in its supply
chain, Drax announced a partnership with Smart Green Shipping to trial,
develop, and use an innovative wind-assisted "FastRig" sail with a view to
demonstrating how the technology can reduce fuel consumption and resulting
emissions, which Smart Green Shipping believes could be up to 30% per year.
This is in addition to efforts to reduce emissions in UK rail logistics
by substituting diesel for biofuel.
Biomass Generation
Drax Power Station is the largest power station in the UK and the country's
largest single source of renewable power. The site has four fully flexible
and independent biomass units providing 2.6GW of capacity for secure 24/7
renewable power, supporting UK energy security with a wide range of system
support services. We believe that the size, flexibility, and location of the
site make it an important long-term part of the UK energy system.
In 2024, the site generated over 5% of the UK's electricity and around 10%
of its renewable power. During this period, it produced on average 19% of the
UK's renewable power at times of peak demand and on certain days over 50%.
During October and November 2024, anticyclonic weather systems led to a
prolonged period of low wind speed (dunkelflaute) leading to lower levels of
wind generation and higher demand for power from our assets. This demonstrates
the important role that Drax plays in security of supply in the UK.
Biomass generation is underpinned by a robust and diversified supply chain,
using sustainable biomass material from the Group's own production capacity
and third-party suppliers across the US, Canada, and Europe. This
diversification also provides operational redundancy designed to mitigate
potential disruptions at the supplier level.
In the UK, Drax utilises dedicated port facilities at Hull, Immingham, Tyne
and Liverpool, with annual throughput capacity significantly in excess of the
Group's typical annual biomass usage. Drax Power Station has around 300,000
tonnes of on-site biomass storage capacity. Taken together with volumes
throughout the supply chain, the Group currently has visibility of around 1Mt
of biomass in inventories. This adds to the resilience of the UK power market
in periods of high demand.
The strategically important role which Drax Power Station plays highlights the
importance of continued investment to ensure good operational performance
and availability of our generation assets. As part of this investment, a
major planned outage on one unit was completed in August 2024 and the unit
returned to service ahead of schedule.
Adjusted EBITDA of £814 million was an increase of 16% on 2023 (£703
million). This reflects a higher level of renewable power generation and
system support services in response to greater system need.
With demand for power expected to grow - through the electrification of
heating, transport and other sources like data centres - and more intermittent
renewables, we believe that there remains a need for assets like Drax Power
Station to continue providing large-scale dispatchable 24/7 renewable energy.
Opportunities for investment aligned with long-term strategy
Our strategy is designed to realise our purpose of enabling a zero carbon,
lower cost energy future. It includes three complementary strategic pillars,
closely aligned with global energy policies: (1) to be a UK leader in
dispatchable, renewable generation; (2) to be a global leader in sustainable
biomass pellets; and (3) to be a global leader in carbon removals.
These strategic pillars inform the development of our short, medium and
long-term investment opportunities in energy security and renewable power,
flexible generation, and carbon removals.
Biomass generation - BECCS
We continue to evaluate an option for BECCS at Drax Power Station, with plans
to add post-combustion carbon capture technology to two of the existing
biomass units that use sustainable biomass. In total the project could capture
up to 8Mt of carbon per year, making a major contribution to the UK's legally
binding net zero targets, in addition to providing 24/7 renewable power and
energy security.
Consistent with the position set out by Drax in 2023, clear Government policy
support and milestones (including details of the subsequent allocation rounds
for carbon capture and storage (CCS) projects and transportation and storage
processes) are required to unlock further investment in the development of
BECCS at Drax Power Station.
Biomass generation - data centres
The growing demand for 24/7 power to meet the needs of data centres represents
a potential opportunity for generators like Drax. NESO's Future Energy
Scenarios indicate a potential doubling of demand for power consumption from
data centres by 2030.
The Group's asset base of large-scale dispatchable power generation and
cooling solutions from secure sites backed up by a resilient North American
supply chain, and a route to large-scale high-integrity carbon removals via
BECCS, is well aligned with the needs of this growing industry.
We have received positive engagement with data centre providers in relation to
the potential to co-locate a data centre with biomass generation and Drax
continues to explore such opportunities.
New pumped storage hydro - Cruachan
In October 2024, the UK Government confirmed its intention to introduce a
"cap and floor" scheme to underpin investment in long duration energy storage
schemes like Cruachan.
The location, flexibility and range of services Cruachan can provide makes it
strategically important to the UK power system and a source of long-term
earnings and cash flows linked to the UK's energy transition.
Initial design and engineering work is now complete on the option for a 600MW
expansion of Cruachan. No investment decision has been taken at this stage.
Taken together with current developments, we could create a FlexGen portfolio
of scale comprising c.1.2GW of pumped storage and hydro capacity and c.0.9GW
of OCGT capacity, in addition to 2.6GW of biomass generation capacity (and a
further 1.3GW of additional grid access rights) at Drax Power Station.
Elimini (Global BECCS)
In September 2024, Drax launched Elimini, our international carbon removals
business, which is operationally separate from the Group and is developing
opportunities globally for 24/7 renewable power and high-integrity carbon
removals.
To support the development of this business, in 2023 Drax established a global
HQ for carbon removals in Houston, Texas, and the launch of Elimini represents
the continued evolution of the carbon removals business.
Governance, regulation and compliance
Good governance and compliance are prerequisites for a well-run company and
long-term success.
We recognise the importance of these issues and have invested to develop our
governance and compliance functions as the footprint of the business has
grown. We have made progress and believe that we have good processes in place,
but we are not complacent and recognise that we can enhance our capabilities
in these important areas.
In August 2024, Ofgem closed its investigation into Drax Power Limited's
biomass profiling data relating to the Renewables Obligation scheme. Ofgem
confirmed that it did not find any evidence that the biomass used at Drax
Power Station was not sustainable or that Drax had been issued with Renewables
Obligation Certificates (ROCs) incorrectly. No harm had been caused to the
consumer, but in recognition of Ofgem's findings, Drax made a payment of £25
million into Ofgem's voluntary redress fund. Drax has resubmitted its CP20
profiling data for Canada and committed to undertake an independent audit of
its biomass profiling data for CP22 (April 2023 to March 2024).
Sustainability
As a purpose-led organisation, as we grow, positive outcomes for climate,
nature, and people should grow too. Our operations can help sustain more
working forests and provide more jobs and opportunities in communities where
we operate.
Working in partnership with industry, communities, scientists, regulators,
government and civil society organisations will be vital to achieving our
ambitions. We will look to work constructively with them to help deliver
improvements and perpetuate positive outcomes for the climate, nature, and
people.
We have been developing a new Sustainability Framework which sets out specific
KPIs for our Climate, Nature, and People Positive pillars. These have been
developed in conjunction with internal and external stakeholders, including
shareholders, as we recognise the importance of a wide range of views in
the development of our broader targets and which support the long-term
success of the business.
We expect to publish our Climate Transition Plan in 2025 and are in the
validation process for a new set of long-term (2040) Science Based Targets
initiative (SBTi) targets, which will complement our existing, validated
near-term (2030) targets which are in line with the actions required to
follow a 1.5°C pathway.
We are fully aligned with the Task Force on Climate-related Financial
Disclosures (TCFD). We are also an early adopter to the Taskforce on
Nature-related Financial Disclosures (TNFD) and expect to produce our first
TNFD report by the end of 2026. We are also a signatory to the UN Global
Compact (UNGC) and we are committed to promoting the UNGC principles
concerning respect for human rights, labour rights, the environment, and
anti-corruption.
Biomass sustainability
Biomass, when sustainably sourced, supports good forestry, is a renewable
source of energy, and we believe represents an important part of both UK and
international renewable energy policy. As one of the world's largest users of
sustainable biomass for energy generation, Drax is committed to ensuring the
woody biomass we source comes from forests that are managed in accordance with
standards designed to support their health and growth over the long term.
Drax sources its biomass from well-established forestry markets mainly in
the US and Canada, as well as Europe. The main output from these markets is
sawlogs, which are processed for use in construction and manufacturing. When
used in this way, these materials represent a source of long-term carbon
storage and, when the forest regenerates or is replanted, the growing trees
absorb carbon from the atmosphere.
Drax supports these forest economies by providing incremental secondary
revenues to forest landowners, particularly in the US South, through the
purchase of material which is not otherwise merchantable to a sawmill. These
materials include bark, branches, low-grade wood and woody matter from forest
management activities (thinning), in addition to purchasing sawmill residues.
Our part of the supply chain is purchasing these materials. This helps to
reduce the risk of wildfire and the spread of disease and allows for
replanting of the forest. Where there would otherwise be no demand for these
materials, they are sometimes burned at the roadside, as happens in British
Columbia, or potentially even landfilled.
In the US South, the periodic thinning of a forest helps improve the size and
quality of sawlogs when the trees reach maturity, the economic value of the
timber produced and the carbon absorbed and stored, as well as helping forest
health and biodiversity.
If forests were not thinned, the revenue from sawlogs would be reduced and
landowners may consider other uses for their land, such as agricultural crops
and livestock farming. The management of forestland to produce sawlogs ensures
forests are growing and absorbing carbon, which means forests remain a carbon
sink.
Forests in the areas where Drax sources material are subject to national and
regional regulation and typically supported, and independently monitored for
compliance, by forest certification schemes. These include the Forestry
Stewardship Council® (FSC®) (FSC C123692), the Sustainable Forestry
Initiative® (SFI) (SFI 01578), and the Programme for the Endorsement of
Forest Certification (PEFC) (PEFC/29-31-286).
We supplement this regulation through our own biomass sourcing policy and
supply chain checks, with third-party verification under the Sustainable
Biomass Program (SBP) in respect of woody biomass used at Drax Power Station.
Outlook
The UK and the world need more renewable energy, more flexible energy systems
and energy security. Drax is continuing to play an important role in
supporting energy security in the UK with its dispatchable 24/7 generation
portfolio, and the UK's largest single source of renewable power.
We are continuing to develop a culture with the capabilities to support the
delivery of our strategy and create long-term value and benefits for
stakeholders.
We are continuing to target >£500 million of recurring post-2027 Adjusted
EBITDA from our FlexGen & Energy Solutions and Pellet Production
businesses. We believe that these, together with Drax Power Station, are an
integral part of enabling a clean power system in the UK by 2030.
In the long term we remain focused on our strategic investment opportunities
in 24/7 renewable power and carbon removals via BECCS, data centres, and
energy storage. As we seek to maximise value we will exercise prudence in how
we commit development investment to our larger projects. Until we receive
greater certainty on appropriate regulatory structures and investments
returns, we expect to commit less development investment.
We will continue to apply our capital allocation policy with a focus on
balance sheet strength, investment in the core business, a sustainable and
growing dividend, and to the extent there are residual cash flows beyond the
current needs of the Group, additional returns to shareholders. Through these
strategic objectives and a disciplined approach to capital allocation and
development costs, we expect to create opportunities for value and growth in
the UK and beyond, underpinned by strong cash generation and attractive
returns for shareholders.
Post balance sheet event
Low-carbon dispatchable CfD agreement for Drax Power Station
In February 2025, Drax agreed a non-binding heads of terms with the UK
Government for a low-carbon dispatchable CfD agreement for Drax Power Station,
which would operate between April 2027 and March 2031.
The agreement is intended to support UK energy security, represent value for
money for consumers, and support long-term options for growth and carbon
removals, including BECCS.
The proposed agreement remains subject to Parliamentary procedures, agreement
of a final contract, and also anticipates a tightening of biomass
sustainability requirements. Drax supports these developments and will
continue to engage with the UK Government on the implementation of any future
reporting requirements.
Will Gardiner
CEO
26 February 2025
CFO's financial review
Adjusted EBITDA Adjusted operating profit Total operating profit Cash generated from operations
£1,064m £800m £850m £1,135m
(2023: £1,009m) (2023: £782m) (2023: £908m) (2023: £1,111m)
Adjusted basic earnings per share Total basic earnings per share Net debt((1)): Adjusted EBITDA Total dividend per share
128.4 pence 137.5 pence 0.9 times 26.0 pence
(2023: 119.6 pence) (2023: 142.8 pence) (2023: 1.2 times) (2023: 23.1 pence)
Year end 31 December
2024 2023
Financial performance (£m) Total gross profit 1,877 1,954
Operating expenses (721) (712)
Impairment losses on financial assets (40) (33)
Depreciation and amortisation (242) (225)
Impairment of non-current assets and Other (24) (76)
Total operating profit 850 908
Exceptional costs and certain remeasurements (50) (127)
Adjusted operating profit 800 782
Adjusted depreciation, amortisation and similar charges and share of losses 264 228
from associates
Adjusted EBITDA 1,064 1,009
Capital expenditure (£m) Capital expenditure 332 519
Cash and Net debt (£m unless otherwise stated) Cash generated from operations 1,135 1,111
Net debt((1)) 992 1,220
Net debt to Adjusted EBITDA (times) 0.9 1.2
Cash and committed facilities 806 639
Earnings (pence per share) Adjusted basic 128.4 119.6
Total basic 137.5 142.8
Distributions (pence per share) Interim dividend 10.4 9.2
Proposed final dividend 15.6 13.9
Total dividend 26.0 23.1
Throughout this document we distinguish between Adjusted measures and Total
measures, which are calculated in accordance with International Financial
Reporting Standards (IFRS). We calculate Adjusted financial performance
measures, which exclude income statement volatility from derivative financial
instruments and the impact of exceptional items. This allows management and
stakeholders to better compare the performance of the Group between the
current and previous period without the effects of this volatility and one-off
or non-operational items. Adjusted financial performance measures are
described in more detail in the APMs glossary, with a reconciliation to their
closest IFRS equivalents in note 3. Tables in this financial review may not
add down or across due to rounding.
(1) Net debt was historically defined excluding lease liabilities, as this
mirrored the treatment in the Group's covenant calculations. However, recent
facilities have had covenants which incorporate net debt including lease
liabilities. Therefore, we now calculate Net debt including lease liabilities,
and Net debt including lease liabilities to Adjusted EBITDA. Net debt
excluding lease liabilities at 31 December 2024 was £876 million (31 December
2023: £1,084 million).
Introduction
Adjusted EBITDA of £1,064 million was an increase of 5% compared to 2023
(£1,009 million). This contributed to cash from operations of £1,135
million, a slight increase on 2023 (£1,111 million). Our Net debt((1)):
Adjusted EBITDA ratio of 0.9 times (2023: 1.2 times) is significantly below
our long-term target of around 2 times.
While Adjusted operating profit grew from £782 million in 2023 to £800
million in 2024, Total operating profit in 2024 was £850 million (2023: £908
million). Total operating profit includes non-cash mark-to-market reductions
in forward commodity contracts.
Our capital allocation policy remains focused on balance sheet strength,
investment in the core business, a sustainable and growing dividend and, to
the extent there are residual cash flows beyond the current needs of the
Group, additional returns to shareholders.
During 2024 we put in place over £1 billion of new longer dated debt and
credit facilities, significantly extending the Group's average maturity
profile beyond 2027. Net debt reduced by £228 million after increasing
returns to shareholders, reducing gross debt and investing £332 million in
capital expenditure in the core business. We grew the dividend by 12.6% and,
with capital in excess of the Group's current investment requirements, in
August 2024 commenced a share buyback programme for the purchase of up to
£300 million of Drax shares over a two-year period.
Financial performance
Adjusted EBITDA by segment
FlexGen & Energy Solutions
Adjusted EBITDA in our FlexGen business of £138 million reduced compared to
2023 (£230 million). Our Cruachan pumped storage power station, as well as
the run-of-river hydro assets at Lanark and Galloway performed strongly, with
increased generation output compared to 2023. The first quarter of 2023
included significant benefit achieved through forward selling higher peak
power and buying back lower off-peak power.
Adjusted EBITDA in Energy Solutions of £51 million (2023: £72 million)
comprised Adjusted EBITDA of £81 million from our core I&C and renewables
services business (2023: £102 million) and a loss of £30 million from the
non-core SME business (Opus) (2023: a loss of £30 million).
I&C and renewables services earnings reflect a consistent margin on
contracted power prices.
Most of the meter points in the SME business were sold in Q3 2024. Further
information can be found in 'Other information' below. Losses continued in
2024, but have been mitigated by the sale of the meters.
We continue to target greater than £250 million of Adjusted EBITDA from
our FlexGen & Energy Solutions business post-2027. Delivery of this
target is dependent on expected growth from the existing business, combined
with the contribution of OCGT assets under construction, and the Cruachan
units 3 and 4 refurbishment which is ongoing. The 2024 performance of the
existing business was in line with the delivery of this target.
Pellet Production
Adjusted EBITDA of £143 million grew 61% from 2023 (£89 million). The
Pellet Production business produced 4.0Mt (2023: 3.8Mt) and shipped 5.1Mt
(2023: 4.6Mt) at a higher average margin per tonne. Of the 5.1Mt shipped,
3.0Mt was to Drax Power Station (2023: 2.1Mt). The Pellet Production
business purchased 1.1Mt of third party pellets during 2024 (2023: 0.9Mt).
We continue to target greater than £250 million of Adjusted EBITDA from
our Pellet Production business post-2027. We expect delivery of this target
will be supported by renewal of legacy, lower margin contracts and sales into
new markets, such as SAF.
Biomass Generation
Adjusted EBITDA from Biomass Generation was £814 million, a 16% increase on
2023 (£703 million). Drax Power Station produced 14.6TWh (2023: 11.5TWh) of
electricity, providing dispatchable, renewable generation when the grid needed
it most. This result is inclusive of a £25 million cost in relation to the
closure of the Ofgem investigation. Details of both the biomass output and
Ofgem investigation are included in the CEO's review.
Options for growth (Innovation, Capital Projects, and Other)
Development expenditure of £81 million was slightly below 2023 (£85
million). Of this total, £47 million related to Elimini (Global BECCS) (2023:
£57 million). Spending on UK BECCS was minimised as we await clarity from the
UK Government on next steps.
Total operating profit
Total operating profit of £850 million represents a 6% decrease from 2023
(£908 million), predominantly driven by a £91 million change in certain
remeasurements, which are not included in Adjusted EBITDA. This change was
attributable to gas prices and foreign exchange movements. The Exceptional
items value in Operating expenses in 2024 relate to the sale of the SME
customer book, as described in 'Other information' (2023: impairment of Opus
Energy, net credit from legal claim and change in fair value of contingent
consideration). These transactions had an immaterial net cashflow impact.
Further information on Exceptional items and certain remeasurements can be
found in note 3 (Alternative performance measures).
Depreciation and amortisation of £242 million is above 2023 (£225 million),
driven by an increase in the Pellet Production and Biomass Generation
segments.
Profit after tax and Earnings per share
Total net finance costs for 2024 were £97 million (2023: £112 million). The
reduction of £15 million is because of higher interest receivable as more
cash was held at higher rates, a one-off gain on repayment of debt, and lower
absolute levels of facilities through 2024, partially offset by higher
interest rates on the new debt. At 31 December 2024 the weighted average
interest rate payable on the Group's borrowings was 5.4% (31 December 2023:
4.8%).
The effective tax rate of 30% was in line with 2023 (30%). This includes the
impact of the Electricity Generator Levy (EGL) (which is not allowable for
corporation tax purposes) and one-off non-cash revaluations of deferred tax
balances, partially offset by benefits from patent box and research and
development credits. The impact of EGL was an increase to the effective tax
rate of 5% (2023: 6%).
Adjusted basic EPS was 128.4 pence (2023: 119.6 pence) and Total basic EPS was
137.5 pence (2023: 142.8 pence). The average number of shares used in
deriving these calculations was 383.2 million (2023: 393.8 million).
The number of outstanding shares at 31 December 2024 was 369.9 million,
a 4% reduction on 31 December 2023 (384.7 million), reflecting the ongoing
share buyback.
Capital allocation
Maintain credit rating
In 2024 the Group secured over £1 billion of new debt and facilities and
extended the average maturity date post 2027. In 2024, Net debt reduced
by over £200 million.
During the second quarter of 2024, the Group's Issuer Credit Ratings were
reaffirmed as 'BB+' by Fitch and S&P and as 'BBB (low)' by DBRS, with a
Stable Outlook in each case.
Invest in core business - capital expenditure
Capital expenditure of £332 million consists of £212 million of growth
expenditure, £83 million of maintenance, and £37 million of Other (including
HSE and IT). Of the £212 million of growth expenditure, £90 million related
to the OCGTs (2023: £189 million) and £64 million to Pellet Production
capacity expansion (2023: £76 million), mainly on the Longview site. We
capitalised £34 million in relation to the upgrade of Cruachan units 3 and 4
(2023: £nil) and capitalised spend on UK BECCS was £4 million (2023: £18
million).
Further information on the OCGT commissioning dates, and the steps required
before the Group would increase investment in UK BECCS, can be found in the
CEO's review.
Sustainable and growing dividend
The Group is committed to paying a growing and sustainable dividend. On
25 July 2024, the Board resolved to pay an interim dividend for the six
months ended 30 June 2024 of 10.4 pence per share, representing 40% of the
expected full year dividend. The interim dividend was paid on 25 October 2024.
At the Annual General Meeting on 1 May 2025, the Board will seek shareholder
approval to pay a final dividend for the year ended 31 December 2024 of 15.6
pence per share. If approved, the final dividend will be paid on 16 May
2025, with a record date of 25 April 2025.
Taken together with the interim dividend, this would give a total dividend for
2024 of 26.0 pence per share. This is a 12.6% increase on 2023 and represents
sustainable growth in accordance with our capital allocation policy.
Return surplus capital beyond investment requirements
In August 2024, in line with our capital allocation policy and reflecting a
strong balance sheet, current investment requirements, and the dilution
expected from share schemes vesting, we commenced a share buyback programme
for the purchase of up to £300 million of Drax shares over a two-year period.
Up to 26 February 2025 we had purchased over 23 million shares for c.£150
million.
Cash and Net debt
Net cash movements
Operating cash flows before movements in working capital of £1,013 million is
in line with 2023 (£1,013 million). Cash generated from operations, inclusive
of working capital, was £1,135 million (2023: £1,111 million). The net
decrease in cash and cash equivalents during 2024 was £22 million (2023:
£146 million increase).
The net working capital inflow of £122 million was broadly in line with
the prior year (£108 million). The main movements in 2024 were outflows on
renewable certificates of £248 million and payables of £143 million being
offset by an inflow of £392 million on receivables, attributable to lower
power prices at the end of 2024 compared to 2023.
Cash outflows on purchases of property, plant and equipment and intangibles of
£388 million were more than the amount capitalised of £332 million mainly
because of timing of payments in relation to the construction of the three
OCGT developments.
Financing activities related to principal drawdowns and repayments of
borrowings showed a net outflow of £217 million.
Liquidity
31 December 2024 31 December 2023
£m £m
Cash and cash equivalents 356 380
RCF available but not utilised 450 260
Cash and committed facilities 806 639
Cash and committed facilities at 31 December 2024 provided substantial
headroom over our short-term liquidity requirements.
No cash has been drawn under our revolving credit facilities (RCF) since at
least 2020. At 31 December 2024 there were no balances drawn as letters of
credit under the RCF (31 December 2023: £46 million).
At 31 December 2024, the Group held net cash collateral of £5 million (31
December 2023: £79 million posted). This will be returned by the Group as the
associated contracts mature. Depending on market movements, collateral may
need to be posted in future by the Group.
Net debt and Net debt to Adjusted EBITDA
31 December 2024 31 December 2023
£m £m
Cash and cash equivalents 356 380
Current borrowings (119) (264)
Non-current borrowings (1,058) (1,161)
Impact of hedging instruments and NCI (55) (38)
Lease liabilities (117) (136)
Net debt (992) (1,220)
Adjusted EBITDA 1,064 1,009
Net debt to Adjusted EBITDA 0.9 1.2
Net debt to Adjusted EBITDA is significantly below the Group's long-term
target of around 2 times.
Other information
Sale of SME customer book
In September 2024, the Group completed the asset sale of the majority of the
Opus Energy customer meter points. Over the past seven years the renewables
business holding the Group's Power Purchase Agreements with renewable
generators, and certain other customers acquired with the Opus Energy business
in 2017, have been transferred to Drax Energy Solutions.
There is no change to the Group's FlexGen & Energy Solutions Adjusted
EBITDA expectations because of this process.
This transaction resulted in an exceptional item netting to a cost of £60
million.
Further information is set out in note 3 (Alternative Performance Measures).
Going concern and viability
The Group's financial performance in 2024 was strong, delivering improved
profitability and a lower ratio of Net debt to Adjusted EBITDA, which remains
significantly below the Group's long-term target of around 2 times. Following
the refinancing activity during 2024, the Group's debt maturities have been
extended, with a significant proportion now beyond April 2027, and significant
liquidity headroom is available from existing facilities.
The Group refreshes its business plan and forecasts throughout the year,
including scenario modelling designed to test the resilience of the Group's
financial position and performance to several possible downside cases. Based
on its review of the latest forecast, the Board is satisfied that the Group
has sufficient headroom in its cash and committed facilities and covenants
headroom, combined with available mitigating actions, to be able to meet its
liabilities as they fall due across a range of scenarios. Consequently, the
Directors have a reasonable expectation that the Group will continue in
existence for a period of at least twelve months from the date of the approval
of the financial statements and have therefore adopted the going concern basis
of preparation. Further, the Directors have a reasonable expectation that the
Group will be able to continue in operation over the five-year period of the
viability assessment.
Andy Skelton
CFO
26 February 2025
Directors' responsibilities statement
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the group
financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and United Kingdom
adopted International Accounting Standards and have elected to prepare the
Parent Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law), set out in FRS 101 Reduced Disclosure Framework. Under
company law the Directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
In preparing the Parent Company financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard
1 requires that Directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity's
financial position and financial performance; and
· make an assessment of the Company's ability to continue as a going
concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position, and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
· the Strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
· the Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's position, performance, business model,
and strategy.
This responsibility statement was approved by the Board of Directors on 26
February 2025 and is signed on its behalf by:
Will Gardiner
CEO
Consolidated financial statements
Consolidated income statement
Notes Year ended 31 December 2024 Year ended 31 December 2023
Adjusted Exceptional Total Restated((1)) Adjusted Exceptional Restated((1))
Total
results((2)) items and results results((2)) items and
results
£m certain £m £m certain £m
remeasure-ments remeasure-ments
£m £m
Revenue 2 6,081.2 81.3 6,162.5 7,450.3 282.9 7,733.2
Cost of sales (4,130.1) 4.9 (4,125.2) (5,492.3) (82.7) (5,575.0)
Electricity Generator Levy (160.8) - (160.8) (204.6) - (204.6)
Gross profit 1,790.3 86.2 1,876.5 1,753.4 200.2 1,953.6
Operating and administrative expenses (698.5) (22.1) (720.6) (711.7) - (711.7)
Impairment losses on financial assets (27.3) (12.7) (40.0) (32.5) - (32.5)
Depreciation (224.8) - (224.8) (195.6) - (195.6)
Amortisation (17.0) - (17.0) (29.4) - (29.4)
Impairment of non-current assets (11.8) (2.6) (14.4) (1.7) (69.1) (70.8)
Other (losses)/gains (8.5) 1.2 (7.3) 0.7 (4.5) (3.8)
Share of losses from associates (2.2) - (2.2) (1.6) - (1.6)
Operating profit 800.2 50.0 850.2 781.6 126.6 908.2
Foreign exchange (losses)/gains (9.4) - (9.4) (14.3) 4.9 (9.4)
Interest payable and similar charges (106.9) (0.6) (107.5) (115.2) (0.3) (115.5)
Interest receivable and similar gains 20.1 - 20.1 13.1 - 13.1
Profit before tax 704.0 49.4 753.4 665.2 131.2 796.4
Tax:
Before effect of changes in tax rate (213.0) (14.9) (227.9) (195.2) (37.3) (232.5)
Effect of changes in tax rate - - - (0.6) (2.4) (3.0)
Total tax charge (213.0) (14.9) (227.9) (195.8) (39.7) (235.5)
Profit for the period 491.0 34.5 525.5 469.4 91.5 560.9
Attributable to:
Owners of the parent company 492.1 34.5 526.6 470.7 91.5 562.2
Non-controlling interests (1.1) - (1.1) (1.3) - (1.3)
Earnings per share: Pence Pence Pence Pence
For net profit for the period attributable to owners of the parent company
- Basic 128.4 137.5 119.6 142.8
- Diluted 126.0 134.8 116.8 139.5
(1) The year ended 31 December 2023 amounts above have been restated to
reflect the Group's revised application of the agent requirements of IFRS 15
to sleeved electricity trades.
(2) Adjusted results are stated after adjusting for exceptional items and
certain remeasurements. See note 3 for further details.
Consolidated statement of comprehensive income
Notes Year ended 31 December
2024 Restated((1))
£m 2023
£m
Profit for the period 525.5 560.9
Items that will not be subsequently reclassified to profit or loss:
Remeasurement of defined benefit pension scheme 5.5 (28.8)
Deferred tax on remeasurement of defined benefit pension scheme (1.3) 7.2
Gains on equity investments - 0.4
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations attributable to 6 (6.6) (10.3)
owners of the parent company
Exchange differences on translation of foreign operations attributable to (0.8) (0.4)
non-controlling interests
Net fair value losses on financial assets at fair value through other (25.5) (25.0)
comprehensive income
Net fair value losses on financial assets at fair value through other 25.5 25.0
comprehensive income reclassified to profit or loss
Net fair value gains on cost of hedging 6.8 7.5
Deferred tax on cost of hedging (1.7) (1.9)
Net fair value (losses)/gains on cash flow hedges (49.0) 266.5
Net (losses)/gains on cash flow hedges reclassified to profit or loss (242.9) 256.1
Deferred tax on cash flow hedges 73.0 (130.7)
Other comprehensive (expense)/income (217.0) 365.6
Total comprehensive income for the year 308.5 926.5
Attributable to:
Owners of the parent company 310.4 928.2
Non-controlling interests (1.9) (1.7)
(1) The Group has restated comparatives for the year ended 31 December 2023
to reclassify certain amounts from "items that will not subsequently be
reclassified to profit or loss" to "items that may subsequently be
reclassified to profit or loss", and to present gross the fair value losses on
financial assets at fair value through other comprehensive income and their
subsequent reclassification to profit or loss.
Consolidated balance sheet
Notes As at 31 December
2024 2023
£m £m
Assets
Non-current assets
Goodwill 415.1 416.7
Intangible assets 68.1 81.5
Property, plant and equipment 2,802.0 2,698.8
Right-of-use assets 100.9 122.2
Investments 3.6 8.9
Retirement benefit surplus 24.7 18.4
Deferred tax assets 48.6 52.9
Derivative financial instruments 81.7 293.6
3,544.7 3,693.0
Current assets
Inventories 302.0 328.4
Renewable certificate assets 4 540.0 292.2
Trade and other receivables and contract assets 470.3 976.9
Derivative financial instruments 175.6 368.4
Cash and cash equivalents 356.0 379.5
1,843.9 2,345.4
Liabilities
Current liabilities
Trade and other payables and contract liabilities (1,289.1) (1,539.6)
Lease liabilities (26.0) (25.1)
Current tax liabilities (9.6) (20.6)
Borrowings (119.0) (264.2)
Provisions (20.2) (6.6)
Derivative financial instruments (71.1) (231.6)
(1,535.0) (2,087.7)
Net current assets 308.9 257.7
Non-current liabilities
Borrowings (1,057.7) (1,161.1)
Lease liabilities (90.5) (110.7)
Provisions (75.7) (72.2)
Deferred tax liabilities (280.4) (317.1)
Derivative financial instruments (262.2) (306.6)
(1,766.5) (1,967.7)
Net assets 2,087.1 1,983.0
Shareholders' equity
Issued equity 6 49.4 49.1
Share premium 6 443.8 441.2
Hedge reserve (7.9) 207.4
Cost of hedging reserve 6.9 18.7
Other reserves 6 467.0 588.2
Retained profits 1,118.1 666.4
Total equity attributable to owners of the parent company 2,077.3 1,971.0
Non-controlling interests 9.8 12.0
Total shareholders' equity 2,087.1 1,983.0
The Consolidated financial statements of Drax Group plc, registered number
5562053, were approved and authorised for issue by the Board of Directors on
26 February 2025.
Signed on behalf of the Board of Directors:
Andy Skelton
CFO
Consolidated statement of changes in equity
Issued Share Hedge Cost of Other Retained Non- Total
equity premium reserve hedging reserves profits controlling £m
£m £m £m £m £m £m interests
£m
At 1 January 2023 47.9 433.3 (152.0) 40.1 747.7 193.8 13.4 1,324.2
Profit/(loss) for the year - - - - - 562.2 (1.3) 560.9
Other comprehensive income/(expense) - - 391.9 5.6 (10.3) (21.2) (0.4) 365.6
Total comprehensive income/(expense) for the year - - 391.9 5.6 (10.3) 541.0 (1.7) 926.5
Equity dividends paid - - - - - (86.3) - (86.3)
Issue of share capital (note 6) 1.2 7.9 - - - - - 9.1
Distributions from non-controlling interests - - - - - - 0.3 0.3
Repurchase of own shares - - - - (149.2) - - (149.2)
Total transactions with the owners in their capacity as owner 1.2 7.9 - - (149.2) (86.3) 0.3 (226.1)
Movements on cash flow hedges released directly from equity - - (43.4) - - - - (43.4)
Deferred tax on cash flow hedges released directly from equity - - 10.9 - - - - 10.9
Movements on cost of hedging released directly from equity - - - (36.0) - - - (36.0)
Deferred tax on cost of hedging released directly from equity - - - 9.0 - - - 9.0
Movement in equity associated with share‑based payments - - - - - 13.4 - 13.4
Tax on share-based payments released directly from equity - - - - - 4.5 - 4.5
At 1 January 2024 49.1 441.2 207.4 18.7 588.2 666.4 12.0 1,983.0
Profit/(loss) for the year - - - - - 526.6 (1.1) 525.5
Other comprehensive (expense)/income - - (218.9) 5.1 (6.6) 4.2 (0.8) (217.0)
Total comprehensive (expense)/income for the year - - (218.9) 5.1 (6.6) 530.8 (1.9) 308.5
Equity dividends paid - - - - - (93.5) - (93.5)
Issue of share capital (note 6) 0.3 2.6 - - - - - 2.9
Contributions to non-controlling interests - - - - - - (0.3) (0.3)
Repurchase of own shares - - - - (115.4) - - (115.4)
Total transactions with the owners in their capacity as owner 0.3 2.6 - - (115.4) (93.5) (0.3) (206.3)
Movements on cash flow hedges released directly from equity - - 4.8 - - - - 4.8
Deferred tax on cash flow hedges released directly from equity - - (1.2) - - - - (1.2)
Movements on cost of hedging released directly from equity - - - (22.6) - - - (22.6)
Deferred tax on cost of hedging released directly from equity - - - 5.7 - - - 5.7
Movement in equity associated with share‑based payments - - - - 0.8 13.0 - 13.8
Tax on share-based payments released directly from equity - - - - - 1.4 - 1.4
At 31 December 2024 49.4 443.8 (7.9) 6.9 467.0 1,118.1 9.8 2,087.1
Consolidated cash flow statement
Year ended 31 December
Notes
2024 2023
£m £m
Cash generated from operations 5 1,135.1 1,111.0
Income taxes paid (193.6) (180.0)
Interest paid (99.5) (106.1)
Interest received 17.5 10.7
Net cash from operating activities 859.5 835.6
Cash flows from investing activities
Purchases of property, plant and equipment (379.8) (429.8)
Purchases of intangible assets (7.7) (11.3)
Proceeds from the sale of property, plant and equipment 0.5 -
Acquisition of businesses net of cash acquired - (9.0)
Purchases of equity in associates - (1.7)
Contributions to associates (2.9) -
Net cash used in investing activities (389.9) (451.8)
Cash flows from financing activities
Equity dividends paid (93.5) (86.3)
(Contributions to)/distributions from non-controlling interests (0.1) 0.3
Proceeds from issue of share capital 2.7 8.6
Repurchase of own shares (115.4) (149.2)
Drawdown of borrowings 731.8 140.0
Repayment of borrowings (949.2) (125.3)
Gross receipt of financing derivatives 198.3 -
Gross payment of financing derivatives (229.8) -
Payment of principal of lease liabilities (27.4) (25.8)
Other financing costs paid (9.0) (0.2)
Net cash absorbed by financing activities (491.6) (237.9)
Net (decrease)/increase in cash and cash equivalents (22.0) 145.9
Cash and cash equivalents at 1 January 379.5 238.0
Effect of changes in foreign exchange rates (1.5) (4.4)
Cash and cash equivalents at 31 December 356.0 379.5
Non-cash transactions recognised in the Consolidated income statement are
reconciled to operating cash flows as part of the disclosure provided in note
5. Further details of the cash flow impact of exceptional items can be found
in note 3.
This preliminary announcement was approved by the board of directors on 26
February 2025. The financial information contained in this preliminary
announcement does not comprise the statutory accounts of the Group, as defined
in section 434
(https://viewpoint.pwc.com/dt/uk/en/uk_gov/companies_act_2006/companies_act_2006__1_UK/part_15_accounts_and_UK/chapter_7_publicatio_UK/requirements_in_conn_UK/434_requirements_in__UK.html)
of the Companies Act 2006, for the years ended 31 December 2024 or 31
December 2023. Statutory accounts of the Group for the year ended 31 December
2023 have been reported on by the Group's auditor and have been delivered to
the Registrar of Companies. The accounts for the year ended 31 December 2024
will be delivered in due course. The reports of the auditor on both the years
ended 31 December 2024 and 31 December 2023 were unqualified; did not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their reports; and did not contain a statement
under section 498
(https://viewpoint.pwc.com/dt/uk/en/uk_gov/companies_act_2006/companies_act_2006__1_UK/part_16_audit_UK/chapter_3_functions__UK/duties_and_rights_of_UK/498_duties_of_audito_UK.html)
(2) or (3) of the Companies Act 2006.
1 Segmental reporting
Reportable segments are presented in a manner consistent with internal
reporting provided to the chief operating decision maker which is considered
to be the Board. In 2024, the way the Board reviews the performance of the
Group has changed. The Generation segment, that was previously presented as
one segment, was separated into two segments, being Biomass Generation and
Flexible Generation. This was to enable the Board to be able to separately
review the performance of Biomass Generation and Flexible Generation and
monitor their performance against individual strategic targets. Biomass
Generation consists of generation from the four biomass generation units at
Drax Power Station. Flexible Generation includes the pumped storage generation
at Cruachan, the run-of-river hydro generation at Lanark and Galloway,
open-cycle gas turbine (OCGT) generation at the three OCGT sites (Hirwaun,
Millbrook and Progress), and waste-derived pellet production at Daldowie. Also
in 2024, the Customers segment was renamed Energy Solutions.
Following these changes the Group is organised into four businesses. The Board
reviews the performance of each of these businesses separately, and each
represents a reportable segment:
· Pellet Production: production and subsequent sale of biomass pellets
from the Group's processing facilities in North America
· Biomass Generation: generation and sale of electricity from biomass
assets in the UK
· Flexible Generation: generation and sale of electricity from pumped
storage, run-of-river hydro and OCGTs assets, and the processing and sale of
waste-derived pellets, in the UK
· Energy Solutions (previously Customers): supply of electricity to
non-domestic customers in the UK
Operating costs that can be reasonably allocated to the activities of a
reportable segment are included within the results of that reportable segment.
Central corporate and commercial functions provide certain specialist and
shared services, including optimisation of the Group's positions. Central
corporate and commercial function costs that cannot be reasonably allocated to
the activities of a reportable segment are included within Innovation, capital
projects and other. Innovation, capital projects and other is not a reportable
segment as it does not earn revenues, however it is included in the
information presented below to enable reconciliation of the segmental amounts
presented to the consolidated IFRS results recognised in these Consolidated
financial statements.
Given the principal activity of the Group is a generator and seller of
electricity, the Consolidated income statement includes all revenue from sales
of electricity during the period. Where electricity is purchased rather than
generated to fulfil a sale, either due to operational or other requirements,
the cost of this purchase is recorded within cost of sales.
When defining gross profit within the Consolidated financial statements, the
Group follows the principal trading considerations applied by its Pellet
Production, Biomass Generation, Flexible Generation and Energy Solutions
businesses when making a sale. In respect of the Pellet Production business,
this reflects the direct costs of production, being fibre, fuel and drying
costs, direct freight and port costs, or third-party pellet purchases. In
respect of the Biomass Generation and Flexible Generation businesses, this
reflects the direct costs of the commodities required to generate power or the
direct cost of purchasing power, the relevant grid connection costs that
arise, and Electricity Generator Levy (EGL) arising on applicable renewable
and low-carbon generation. In respect of the Energy Solutions business, this
reflects the direct costs of supply, being the costs of the power or gas
supplied, together with costs levied on suppliers such as network costs,
broker costs and renewables incentive mechanisms.
Accordingly, cost of sales excludes indirect overheads and staff costs
(presented within operating and administrative expenses), and depreciation
(presented separately on the face of the Consolidated income statement).
The accounting policies applied for the purpose of measuring the reportable
segments' profits or losses, assets and liabilities are the same as those used
in measuring the corresponding amounts in the Consolidated financial
statements.
EGL applies to the Group's three biomass units operating under the Renewables
Obligation (RO) scheme and its run-of-river hydro operations. It does not
apply to the Group's Contract for Difference (CfD) biomass unit or its pumped
storage hydro operations. The EGL applies at a rate of 45% to receipts from
in-scope forms of wholesale electricity generation that exceed a defined
benchmark level, after the deduction of certain allowable costs, from 1
January 2023 to 31 March 2028.
The Group has determined that it should be treated as a levy under IFRIC 21
'Levies', rather than as a tax under IAS 12 'Income taxes'. Therefore, the
cost is recognised above gross profit. A liability for a levy is recognised
once the obligating event, being the activity that triggers the payment of the
levy, has occurred. EGL is triggered based on average generation receipts for
in-scope revenue schemes over a reporting period being higher than the
threshold set in the legislation. A liability is recognised if the average
actual generation receipts to date in a financial period are above the
threshold. The threshold rises annually in April, in line with the UK Consumer
Price Index (CPI). The threshold at 31 December 2024 was £77.94 (2023:
£75.00). The assessment is based on receipts above this threshold
after adjusting for allowable costs.
Seasonality of trading
The primary activities of the Group are affected by seasonality. Demand in the
UK for electricity is typically higher in the winter period (October to March)
when temperatures are lower, which drives higher prices and higher levels of
generation. Conversely, demand is typically lower in the summer months (April
to September) when temperatures are milder, and therefore prices and levels
of generation are generally lower.
This trend is experienced by all of the Group's UK-based businesses, as they
operate within the UK electricity market. It is most notable within the
Biomass Generation business due to its scale and the flexible operation of its
thermal generation plant.
The Pellet Production business incurs certain costs that are higher in winter
months due to the impact of weather conditions, such as fibre drying costs
and heating costs. Production volumes and margins are typically higher in the
summer months. The business is protected from demand fluctuations due to
seasonality by regular production and dispatch schedules under its contracts
with customers, both intra-group and externally.
Segment revenues and results
The following is an analysis of the Group's performance by reportable segment
and any other information necessary to enable reconciliation to the Group's
total IFRS results recognised for the year ended 31 December 2024. Revenue for
each segment is split between sales to external parties and inter-segment
sales. Inter-segment sales are eliminated in the intra-group eliminations
column along with any adjustments required for unrealised profits (primarily
inventory purchased by the Biomass Generation segment from the Pellet
Production segment that is still held as inventory at the reporting date).
Adjusted EBITDA by reportable segment is presented in note 3.
Year ended 31 December 2024
Pellet Biomass Generation Flexible Generation Energy Solutions Innovation, Intra-group Adjusted Exceptional Total
Production £m £m £m capital eliminations results items results
£m projects and £m £m and certain £m
other remeasure-ments
£m £m
Revenue
External sales 340.1 1,880.7 74.3 3,786.1 - - 6,081.2 81.3 6,162.5
Inter-segment sales 602.0 3,040.0 148.5 - - (3,790.5) - - -
Total revenue 942.1 4,920.7 222.8 3,786.1 - (3,790.5) 6,081.2 81.3 6,162.5
Cost of sales (562.1) (3,685.5) (46.2) (3,625.0) - 3,788.7 (4,130.1) 4.9 (4,125.2)
Electricity Generator Levy - (150.2) (10.6) - - - (160.8) - (160.8)
Gross profit 380.0 1,085.0 166.0 161.1 - (1.8) 1,790.3 86.2 1,876.5
Operating and administrative expenses (236.7) (268.6) (28.4) (85.5) (78.1) (1.2) (698.5) (22.1) (720.6)
Impairment losses on financial assets - (2.9) - (24.4) - - (27.3) (12.7) (40.0)
Depreciation (102.7) (97.7) (17.1) (0.7) (5.8) (0.8) (224.8) - (224.8)
Amortisation (4.5) (2.9) - (7.3) (2.3) - (17.0) - (17.0)
Impairment of non-current assets (3.3) (0.1) - - (8.4) - (11.8) (2.6) (14.4)
Other (losses)/gains (4.1) (4.6) 0.2 - - - (8.5) 1.2 (7.3)
Share of losses from associates (1.3) - - - (0.9) - (2.2) - (2.2)
Operating profit/(loss) 27.4 708.2 120.7 43.2 (95.5) (3.8) 800.2 50.0 850.2
Further information on the main revenue streams of each segment is presented
in note 2.
The following is an analysis of the Group's performance by reportable segment
for the year ended 31 December 2023:
Year ended 31 December 2023
Pellet Restated((1)(2)) Biomass Generation Restated((1)) Flexible Generation Energy Solutions Innovation, Restated((1)) Intra-group Restated((2)) Adjusted Exceptional Restated((2)) Total
Production £m £m £m capital eliminations results items results
£m projects and £m £m and certain £m
other remeasure-ments
£m £m
Revenue
External sales 397.8 2,011.4 82.8 4,958.3 - - 7,450.3 282.9 7,733.2
Inter-segment sales 424.6 4,391.5 298.3 - - (5,114.4) - - -
Total revenue 822.4 6,402.9 381.1 4,958.3 - (5,114.4) 7,450.3 282.9 7,733.2
Cost of sales (511.8) (5,216.9) (100.8) (4,763.3) - 5,100.5 (5,492.3) (82.7) (5,575.0)
Electricity Generator Levy - (181.4) (23.2) - - - (204.6) - (204.6)
Gross profit 310.6 1,004.6 257.1 195.0 - (13.9) 1,753.4 200.2 1,953.6
Operating and administrative expenses (221.7) (301.3) (26.9) (90.7) (78.1) 7.0 (711.7) - (711.7)
Impairment losses on financial assets - - - (32.5) - - (32.5) - (32.5)
Depreciation (89.3) (84.6) (15.9) (0.9) (2.7) (2.2) (195.6) - (195.6)
Amortisation (4.7) (2.5) - (21.6) (0.6) - (29.4) - (29.4)
Impairment of non-current assets (2.8) - 1.1 - - - (1.7) (69.1) (70.8)
Other gains/(losses) 0.5 0.2 - - - - 0.7 (4.5) (3.8)
Share of (losses)/profits from associates (1.7) - - - 0.1 - (1.6) - (1.6)
Operating (loss)/profit (9.1) 616.4 215.4 49.3 (81.3) (9.1) 781.6 126.6 908.2
(1) Comparative amounts have been restated to reflect the updated
presentation of reporting Biomass Generation and Flexible Generation
separately. See above for further details of the change in reportable
segments.
(2) Amounts have been restated to reflect the Group's revised application
of the agent requirements of IFRS 15 to sleeved electricity trades. This
restatement wholly relates to the Biomass Generation segment.
Capital expenditure by reportable segment
Assets and working capital are monitored on a consolidated basis; however,
capital expenditure is monitored by segment.
At 31 December Additions to intangible assets Additions to property, plant and equipment
2024 Restated((1)) 2024 Restated((1))
£m 2023 £m 2023
£m £m
Pellet Production - - 104.8 163.0
Biomass Generation 0.5 1.9 72.5 129.9
Flexible Generation - - 139.4 203.5
Energy Solutions 3.8 2.7 0.3 0.2
Innovation, capital projects and other 2.6 5.3 8.5 12.6
Total 6.9 9.9 325.5 509.2
(1) Comparative amounts have been restated to reflect the updated
presentation of reporting Biomass Generation and Flexible Generation
separately. See above for further details of the change in reportable
segments.
Total cash outflows in relation to capital expenditure during the year were
£387.5 million (2023: £441.1 million). In the current year, the cash outflow
in relation to property, plant and equipment is higher than the cost
capitalised, predominantly as a result of a decrease in creditors relating to
capital expenditure compared to the prior year.
Intra-group trading
Intra-group transactions are carried out at management's best estimate of
arm's-length, commercial terms that, where possible, equate to market prices.
During 2024, the Pellet Production segment sold biomass pellets and provided
associated services with a total value of £602.0 million (2023: £424.6
million) to the Biomass Generation segment and the Biomass Generation segment
sold electricity, gas and renewable certificate assets with a total value of
£2,928.7 million (2023: £4,250.1 million) to the Energy Solutions segment.
The Biomass Generation segment sold electricity to the Flexible Generation
segment with a total value of £36.5 million (2023: £92.7 million). The
Flexible Generation segment sold electricity and renewable certificate assets
with a total value of £145.9 million (2023: £296.4 million) to the Biomass
Generation segment and electricity of £2.6 million (2023: £1.9 million) to
the Energy Solutions segment. During 2024, the Biomass Generation segment sold
biomass pellets to the Pellet Production segment with a total value
of £74.8 million (2023: £48.7 million).
The impact of all intra-group transactions, including any unrealised profit
arising, is eliminated on consolidation.
Major customers
There was no individual customer, in either the current or previous financial
year, that represented 10% or more of total revenue.
Geographical analysis of revenue and non-current assets
The geographic information analyses the Group's revenue and non-current assets
by the entity's country of domicile. In presenting the geographic information,
segment revenue has been based on the geographic location of customers and
segment assets were based on the geographic location of the assets.
The Group's external revenue and non-current assets for the Biomass
Generation, Flexible Generation and Energy Solutions segments are all
UK-based. The Pellet Production segment has third-party pellet sales to both
the UK and other locations around the world. The Pellet Production segment's
non-current assets are located in North America, in both Canada and the US.
Revenue
(based on location of customer)
Ye
ar
en
de
d
31
De
ce
mb
er
2024 Restated((1))
£m 2023
£m
North America (Canada and US) 7.9 8.5
Europe (excluding UK) 25.8 60.3
Asia 242.5 280.1
UK 5,886.3 7,384.3
Total 6,162.5 7,733.2
(1) Comparative amounts have been restated to reflect the Group's revised
application of the agent requirements of IFRS 15 to sleeved electricity
trades. This restatement wholly relates to the Biomass Generation segment.
Non-current assets((1))
(based on asset's location)
As
at
31
De
ce
mb
er
2024 2023
£m £m
Canada 356.5 406.7
US 698.9 666.0
Asia 0.2 0.3
UK 2,334.1 2,255.1
Total 3,389.7 3,328.1
(1) Non-current assets comprise goodwill, intangible assets, property,
plant and equipment, right-of-use assets and investments.
2 Revenue
The majority of the Group's revenue is within the scope of IFRS 15. The other
sources of the Group's revenue outside the scope of IFRS 15 comprise gains
and losses on non-hedge accounted derivatives, the ineffective portion of
hedge accounted derivatives, amounts reclassified to revenue for gains and
losses on hedge accounted UK inflation swaps, Contract for Difference (CfD)
income, and income from the Government's Energy Bill Relief Scheme (EBRS) and
Energy Bills Discount Scheme (EBDS). See note 3 for further details on gains
and losses on derivatives. Gains and losses recognised in the Consolidated
income statement on derivative contracts that are entered to hedge a revenue
item are presented within the same revenue stream line as the revenue item
they are intending to hedge.
Year ended 31 December 2024 Restated((1))
Year ended 31 December 2023
Adjusted Exceptional Total Adjusted Exceptional Total
results items and results results items and results
£m certain £m £m certain £m
remeasurements remeasurements
£m £m
Revenue from contracts with customers 5,918.2 (6.9) 5,911.3 7,148.3 - 7,148.3
Other revenue 163.0 88.2 251.2 302.0 282.9 584.9
Total revenue 6,081.2 81.3 6,162.5 7,450.3 282.9 7,733.2
(1) Comparative amounts have been restated to reflect the Group's revised
application of the agent requirements of IFRS 15 to sleeved electricity
trades. This restatement wholly relates to the Biomass Generation segment.
Revenue stream (Segment) Nature and timing of performance obligations, including significant payment Method of recognising revenue, including any estimation uncertainties
terms
Pellet sales (Pellet Production) The Group's Pellet Production business produces biomass pellets which are sold Revenue is recognised at the point that the pellets are loaded onto the
to external customers. Customers generally obtain control of the pellets at shipping vessel. The amount of revenue recognised is based on the contracted
the point the pellets are loaded onto the shipping vessel. price and volume of the pellets.
Where freight is also arranged for the customer, these sales are known as For CIF sales, revenue for the freight portion is recognised over the period
Cost, insurance and freight (CIF) sales. The freight component is considered a the vessel sails.
separate performance obligation.
Invoices are raised in line with contractual terms and are usually payable
within 4-15 days.
Electricity and gas sales (Biomass Generation and Flexible Generation) The Group's Biomass Generation and Flexible Generation businesses have Revenues from sales contracts fulfilled through generation are recognised at a
contracts for wholesale electricity sales. Performance obligations, being the point in time based upon metered output at rates specified under contractual
supply of electricity, are met either via generation or through the terms. These are recognised under the output method, whereby revenue is
procurement of electricity from counterparties. The performance obligations recognised based on the value transferred to the customer.
for these contracts are deemed to be a series of distinct goods that are
substantially the same and transfer consecutively. Control is deemed to have Revenue from sales contracts fulfilled through procured electricity or gas is
transferred to the customer at the point that the electricity has been recognised at the point at which this electricity or gas is supplied to the
supplied in accordance with the contractual terms. counterparty in accordance with the contractual terms at rates specified under
the contract.
The Group's Biomass Generation segment has gas sales contracts as part of
managing the Group's overall gas requirements.
Invoices for electricity are typically raised on the fifth banking day
following the month of supply, in line with the Grid Trade Master Agreement
(GTMA) contractual terms, and are payable on the fifth banking day following
the date of invoice.
Renewable certificate sales (Biomass Generation, Flexible Generation and Renewables Obligation Certificates (ROCs) and Renewable Energy Guarantees of External ROC and REGO sales are recognised at the point the relevant
Energy Solutions) Origin (REGOs) are sold to counterparties at a point in time. renewable certificates are transferred to the counterparty.
ROCs sold to optimise working capital are invoiced in line with contractual See note 4 for further details on how the renewable certificate schemes
terms and are usually payable within two days. operate.
Invoices for ROC sales to third parties are raised when the ROCs are
transferred, typically four to five months following the end of the compliance
period in which they were generated. Invoices are usually payable within seven
days.
CfD income/payment (Biomass Generation) The Group's Biomass Generation business is party to a CfD with the Low Carbon The Group recognises the income or cost arising from the CfD in the
Contracts Company (LCCC), a Government-owned entity responsible for delivering Consolidated income statement as a component of revenue at the point the Group
elements of the Government's Electricity Market Reform programme. Under the meets its performance obligation under the CfD agreement. This is considered
contract, the Group makes or receives payments in respect of electricity to be the point at which the relevant generation is delivered and the payment
dispatched from a specific biomass-fuelled generating unit. becomes contractually due.
Invoices are raised 7-10 days following the date of supply and are settled See CfD income/payment section below for further details.
within 28 days.
Ancillary services (Biomass Generation and Flexible Generation) Ancillary services refer to the provision of a range of system support Revenue is recognised by reference to the stage of completion of the
services to National Grid. Most contracts are for the delivery of a specific contractual performance obligations, which are calculated by reference to
service either continually or on an ad-hoc basis over a period of time. the amount of the contract term that has elapsed.
Invoices are raised and subsequently settled in line with the National Grid Depending on contract terms, this approach may require judgement in estimating
company ancillary services settlement calendar, typically monthly. probable future outcomes.
Other income (All segments) Other income is derived from the sale of goods. The customer obtains control Revenue is recognised at the point the control of the goods is transferred to
typically at the point of delivery to their premises or upon collection. the customer.
Invoices are raised in line with contractual terms.
Electricity and gas sales (Energy Solutions) The Group's Energy Solutions business sells electricity and gas directly to Revenue is recognised on the supply of electricity or gas when a contract
non-domestic customers. Energy supplied is measured based upon metered exists, supply has taken place, a quantifiable price has been established or
consumption and contractual rates. can be determined, and the amounts receivable are expected to be recovered.
The Energy Solutions business also has long-term contracts for the sale of Where supply has taken place but has not yet been measured or billed, revenue
electricity and gas, which are deemed as being satisfied over time in line is estimated based on consumption statistics and selling price estimates
with the progress of the contracts. and is recognised as accrued income. This estimate is not considered to be a
key source of estimation uncertainty because historical experience has
Invoices are raised in line with contractual terms. For small and medium-sized demonstrated that these estimates are materially accurate based on the
enterprise (SME) customers, payment is generally due within 10-14 days. For subsequent billings and settlements.
Industrial and Commercial (I&C) customers, payment is generally due
between 28-90 days. Where contracts for the sale of electricity and gas are held, revenue is
recognised in line with the progress of the contracts.
The revenue recognised for fixed price contracts is based on the input method.
Revenue is recognised based on the costs incurred and the estimated margin to
be obtained over the life of the contract. For variable price contracts
revenue is recognised based on the output method. Revenue is recognised based
on the volume supplied and the contracted price. Assumptions are applied
consistently but third-party costs can vary, therefore actual outcomes may
vary from initial estimates.
EBRS and EBDS income (Energy Solutions) The UK Government introduced the EBDS running from 1 April 2023 to 31 March The discounted price of electricity and gas supplied under both the EBRS and
2024. Under this scheme, energy supplied to eligible non-domestic customers EBDS is recognised in revenue as it is supplied. The amount claimed back from
will have a discount applied to each unit of electricity and gas. Certain the UK Government is recognised within revenue over the same period as the
customers may be eligible for higher levels of support dependent on the sector underlying discounted revenue it relates to is recognised.
in which they operate. The discount provided can then be claimed back from the
UK Government by the supplier. The revenue received from the UK Government is included in the EBRS and EBDS
income line in the table below. The Group does not recognise any additional
The EBDS replaced the EBRS which supported non-domestic customers between 1 revenue from the scheme than it would have done had it not been introduced.
October 2022 and 31 March 2023. Under the EBRS, energy supplied to
non-domestic customers in this period had a discount applied for the customer
under the scheme to cap their energy tariff. The discount provided can then be
claimed back from the UK Government by the supplier.
Payment is due 10 days post submission of a claim, which typically occurs
monthly.
Accounting policy
Revenue represents amounts receivable for goods or services provided to
customers in the normal course of business, net of trade discounts, VAT and
other sales-related taxes and excludes transactions between Group companies.
Revenue is presented gross in the Consolidated income statement when the Group
controls the specified good or service prior to the transfer to the customer.
When the Group is acting primarily as an agent, revenue is recognised on a
net basis. During the year, the Group reassessed the application of the agent
and principal requirements in IFRS 15 against sleeved electricity trades.
A summary of the Group's principal revenue streams, along with the nature and
timing of performance obligations, payment terms, methods of recognising
revenue, and any estimation uncertainties, is given in the table above.
Renewable certificate sales
The generation and sale of renewable certificates, primarily ROCs and REGOs,
is a key driver of the Group's financial performance.
During the year, the Group made sales and related purchases of ROCs to help
optimise its working capital position. External sales of ROCs in the table
below includes £50.8 million of such sales (2023: £583.3 million), with a
similar value reflected in cost of sales. The renewable certificate sales
revenue in the Biomass Generation business of £739.3 million has decreased
compared to prior year (2023: £1,277.4 million) primarily as a result of the
reduction in these ROC sales.
See note 4 for further details of how the renewable certificate schemes
operate, of the renewable certificates generated and sold by the Biomass
Generation and Flexible Generation businesses, and of those utilised by the
Energy Solutions business during the year.
CfD income/payment
The income/payment is calculated by reference to a strike price per MWh. The
base year for the strike price was 2012 and it increases each year in line
with the UK Consumer Price Index (CPI) and changes in system balancing costs.
The strike price at 31 December 2024 was £138.16 per MWh (2023: £132.47 per
MWh).
When market prices (based on average traded prices in the preceding season)
are above or below the strike price, the Group makes an additional payment to
or receives additional income from LCCC equivalent to the difference between
that market power price and the strike price, for each MWh produced from the
relevant generating unit. Such payments or receipts are in addition to amounts
received from the sale of the associated power in the wholesale market.
Further analysis of revenue for the year ended 31 December 2024 is provided in
the table below:
Year ended 31 December 2024
External Inter-segment Total
£m £m £m
Pellet Production
Pellet sales 329.6 597.5 927.1
Other income 10.5 4.5 15.0
Total Pellet Production 340.1 602.0 942.1
Biomass Generation
Electricity and gas sales 1,426.6 2,510.7 3,937.3
Renewable certificate sales 284.8 454.5 739.3
CfD income 148.6 - 148.6
Ancillary services 18.7 - 18.7
Other income 2.0 74.8 76.8
Total Biomass Generation 1,880.7 3,040.0 4,920.7
Flexible Generation
Electricity sales 22.1 141.2 163.3
Renewable certificate sales - 7.3 7.3
Ancillary services 24.2 - 24.2
Other income 28.0 - 28.0
Total Flexible Generation 74.3 148.5 222.8
Energy Solutions
Electricity and gas sales 3,734.0 - 3,734.0
EBRS and EBDS income 14.4 - 14.4
Renewable certificate sales 37.4 - 37.4
Other income 0.3 - 0.3
Total Energy Solutions 3,786.1 - 3,786.1
Elimination of inter-segment sales - (3,790.5) (3,790.5)
Total consolidated revenue in Adjusted results 6,081.2 - 6,081.2
Certain remeasurements 81.3 - 81.3
Total consolidated revenue in Total results 6,162.5 - 6,162.5
Revenue recognised in Adjusted results of £6,081.2 million (2023: £7,450.3
million) differs from revenue recognised in Total results of £6,162.5 million
(2023: £7,733.2 million) due to certain remeasurement gains of £81.3 million
(2023: £282.9 million), comprised of gains and losses on derivative contracts
that are used to manage risk exposures associated with the Group's revenue,
not designated into hedge accounting relationships under IFRS 9.
Revenue recognised in the period that was included within contract liabilities
at the start of the year was £16.8 million (2023: £28.5 million).
Revenue recognised in the period from performance obligations satisfied or
partly satisfied in the previous period was £nil (2023: £nil).
The following is an analysis of the Group's revenues for the year ended 31
December 2023:
Restated((1)(2))
Year ended 31 December 2023
External Inter-segment Total
£m £m £m
Pellet Production
Pellet sales 391.3 424.6 815.9
Other income 6.5 - 6.5
Total Pellet Production 397.8 424.6 822.4
Biomass Generation
Electricity and gas sales 1,183.4 3,908.0 5,091.4
Renewable certificate sales 842.6 434.8 1,277.4
CfD payment (63.0) - (63.0)
Ancillary services 25.0 - 25.0
Other income 23.4 48.7 72.1
Total Biomass Generation 2,011.4 4,391.5 6,402.9
Flexible Generation
Electricity sales 24.8 289.6 314.4
Renewable certificate sales - 8.7 8.7
Ancillary services 30.4 - 30.4
Other income 27.6 - 27.6
Total Flexible Generation 82.8 298.3 381.1
Energy Solutions
Electricity and gas sales 4,554.4 - 4,554.4
EBRS and EBDS income 365.8 - 365.8
Renewable certificate sales 37.9 - 37.9
Other income 0.2 - 0.2
Total Energy Solutions 4,958.3 - 4,958.3
Elimination of inter-segment sales - (5,114.4) (5,114.4)
Total consolidated revenue in Adjusted results 7,450.3 - 7,450.3
Certain remeasurements 282.9 - 282.9
Total consolidated revenue in Total results 7,733.2 - 7,733.2
(1) Amounts have been restated to reflect the change in reportable
segments. See note 1 for further details of the change in reportable segments.
(2) Amounts have been restated to reflect the Group's revised application
of the agent requirements of IFRS 15 to sleeved electricity trades. This
restatement wholly relates to the Biomass Generation segment.
The Group's Biomass Generation and Flexible Generation segments have contracts
for wholesale electricity sales. Performance obligations, being the supply of
electricity, are met either via electricity generation or through the
procurement of electricity from counterparties. Where electricity is procured
from counterparties to meet this obligation, the electricity sale is presented
on a gross basis with the cost of buying the electricity presented in cost of
sales and the sale of this electricity presented in revenue. If external
purchases of power were presented net within external revenue this would have
reduced external revenue by £1,072.9 million to £5,089.6 million (2023: by
£2,347.0 million to £5,386.2 million) with a corresponding decrease in
external cost of sales.
For most customer contracts the Group is eligible for, and applies, the
practical expedient available under IFRS 15 and has not disclosed information
related to the transaction price allocated to remaining performance
obligations. The right to receive consideration from these customers is at an
amount that corresponds directly with the value to the customer of the Group's
performance completed to date, or the contract's original expected duration is
less than one year. For the Group's fixed price energy supply contracts that
have an original expected duration of more than one year, the aggregate amount
of the transaction price allocated to performance obligations that are
unsatisfied at the end of the reporting period is £146.6 million (2023:
£336.0 million). Of this amount £127.0 million (2023: £284.0 million) is
expected to be recognised as revenue in 2025, £18.4 million (2023: £46.4
million) in 2026 and £1.2 million (2023: £5.6 million) in 2027.
3 Alternative performance measures
The alternative performance measures (APMs) glossary to these Consolidated
financial statements provides details of all APMs used, each APM's closest
IFRS equivalent, the reason why the APM is used by the Group and a definition
of how each APM is calculated.
The Group presents Adjusted results in the Consolidated income statement.
Management believes that this approach is useful as it provides a clear and
consistent view of underlying trading performance. Exceptional items and
certain remeasurements are excluded from Adjusted results and are presented in
a separate column in the Consolidated income statement. The Group believes
that this presentation provides useful information about the financial
performance of the business and is consistent with the way the Board and
executive management assess the performance of the business.
The Group has a policy and framework for the determination of transactions to
be presented as exceptional. Exceptional items are excluded from Adjusted
results as they are transactions that are deemed to be one-off or unlikely to
reoccur in future years due to their nature, size, the expected frequency of
similar events, or the commercial context. By excluding these amounts, this
provides users of the Consolidated financial statements with a more
representative view of the results of the Group and enables comparisons with
other reporting periods as it excludes amounts from activities or transactions
that are not likely to reoccur. All transactions presented as exceptional are
approved by the Audit Committee.
In these Consolidated financial statements, the following transactions have
been designated as exceptional items and presented separately:
· Costs and credits arising as a result of the transaction to sell the
majority of the non-core Opus Energy SME customer meter points and related
strategic restructuring to reflect the reduced size of the Opus Energy SME
business and Energy Solutions' focus on core I&C customers and renewables
services (2024, Energy Solutions)
· Impairment charges related to the Opus Energy CGU (2023, Energy
Solutions)
· Proceeds from a legal settlement relating to a supplier's failure to
perform under their contract (2023, Energy Solutions)
· Change in the fair value of contingent consideration (2023,
Generation)
· Impact of the UK tax rate change on deferred tax balances (2023,
Generation and Energy Solutions)
Certain remeasurements comprise gains and losses on derivative contracts to
the extent that those contracts do not qualify for hedge accounting, or hedge
accounting is not effective, and those gains or losses are either i)
unrealised and relate to derivative contracts with a maturity in future
periods, or ii) are realised in relation to the maturity of derivative
contracts in the current period. Gains and losses on derivative contracts
prior to maturity generally reflect the difference between the contracted
price and the current market price, which management does not believe provides
meaningful information as the Group is not entering contracts with the
intention of creating value from changes in market prices. The Group is
entering forward contracts as economic hedges to secure prices and rates, and
lock in value for its future expected pellet production, generation or energy
supply activities. The effect of excluding certain remeasurements from
Adjusted results is that commodity sales and purchases are recognised in the
period they are intended to hedge at their contracted prices i.e. at the
all-in-hedged amount paid or received in respect of the delivery of the
commodity in question. It also results in the total impact of financial
contracts being recognised in the period they are intended to hedge.
Management believes this better reflects the performance of the business as it
more accurately represents the intention for entering derivative contracts.
Movements on derivative financial instruments which do not qualify for hedge
accounting, or where hedge accounting is ineffective, are shown in the table
below. During 2024 the amounts recognised were predominantly due to fair value
gains recognised on foreign exchange contracts due to the weakening of
sterling against the US dollar and the realisation of losses on maturity of
inflation and commodity hedges.
Year ended 31 December
2024 2023
£m £m
Exceptional items:
Opus Energy sale of meter points and restructuring (59.5) -
2023 Opus Energy impairment - (69.1)
Net credit from legal claim - 13.7
Change in fair value of contingent consideration - (18.2)
Exceptional items included within operating profit and profit before tax (59.5) (73.6)
Tax on exceptional items 14.8 10.8
Impact of tax rate change - 0.7
Exceptional items after tax (44.7) (62.1)
Certain remeasurements:
Net fair value remeasurements on derivative contracts included in revenue 11.9 70.7
Net remeasurements realised on maturity of derivative contracts included in 77.6 228.6
revenue
Net hedge ineffectiveness reclassified to profit or loss included in revenue (8.2) (16.4)
Net fair value remeasurements on derivative contracts included in cost of 45.3 (127.0)
sales
Net remeasurements realised on maturity of derivative contracts included in (17.1) 44.3
cost of sales
Certain remeasurements included within operating profit 109.5 200.2
Net remeasurements realised on maturity of derivative contracts included in (0.6) (0.3)
interest payable and similar charges
Net fair value remeasurements on derivative contracts included in foreign - 4.9
exchange (losses)/gains
Certain remeasurements included in profit before tax 108.9 204.8
Tax on certain remeasurements (29.7) (48.1)
Impact of tax rate change - (3.1)
Certain remeasurements after tax 79.2 153.6
Reconciliation of profit for the period:
Adjusted profit for the period 491.0 469.4
Exceptional items after tax (44.7) (62.1)
Certain remeasurements after tax 79.2 153.6
Total profit for the period 525.5 560.9
Opus Energy sale of meter points and restructuring
On 26 June 2024, the Group agreed the sale ("the transaction") of the majority
of its non-core small and medium-sized enterprise (SME) customer meter points
from Opus Energy to EDF Energy Customers Limited (EDF). The sale also included
the transfer of receivables balances related to these transferred customer
meter points. The transaction was an asset sale under an Asset Purchase
Agreement (APA) and completed on 1 September 2024.
The Group received consideration of £9.6 million from EDF on completion of
the transaction relating to the meter points and related customer contracts
and £4.3 million relating to the provision of REGOs to cover the energy
supplied under the transferred customer contracts. The consideration for the
REGOs will be recognised in line with the transfer of the REGOs to EDF.
The amount the Group will receive for the transferred receivables is
contingent on the amounts collected by EDF. The transfer did not qualify for
derecognition under IFRS 9 as the Group had neither transferred nor retained
substantially all the risks and rewards of ownership and has retained control
of the asset. The receivables are recognised at fair value through profit or
loss as they are no longer solely payment of principal and interest. The fair
value gains and losses recognised on these receivables reflect changes in the
fair value of the consideration expected to be received.
The Group has commenced a restructuring to reflect the reduced size of Opus
Energy post sale and the focus on I&C customers and renewables services
within the Energy Solutions business. The Group incurred costs of redundancies
in order to reduce the headcount in the Opus Energy business and holds a
redundancy provision at 31 December 2024 in respect of in scope colleagues who
had not yet left the Group.
Certain assets, including prepaid commissions and software have been impaired
due to the reduced future economic benefit expected to be obtained from these
assets following the transaction.
With a significantly reduced number of customers to cover the cost base of the
remaining Opus Energy business, a number of sales contracts are judged to be
onerous and an onerous contracts provision has therefore been recognised.
An additional impairment charge has been recognised as a result of lower
expected recoveries on the retained receivables due from loss customers
(customers who are no longer supplied by Opus Energy) due to the transaction
and restructuring.
The gains and losses described above that have been recognised in the period
on the transaction and related restructuring have been classified as
exceptional. Further details of the amounts recognised as exceptional are
detailed below:
Year ended 31 December 2024
£m
Consideration allocated to the customer meter points 9.6
Net assets disposed of directly related to the transferred customers (8.4)
Profit on disposal of customer meter points - included in other gains and 1.2
losses
Other losses incurred as a direct result of the transaction and restructuring
Onerous contracts provision, impairment of prepaid commissions and final (23.3)
commission settlement on retained customers - included in cost of sales
Redundancy, transaction and migration costs - included in operating and (9.2)
administrative expenses
Fair value losses on receivables relating to transferred customers - included (12.9)
in operating and administrative expenses
Additional impairment of receivables relating to retained customers - included (12.7)
in impairment losses on financial assets
Impairment of non-current assets - included in impairment of non-current (2.6)
assets
Net loss recognised as a result of the transaction (59.5)
As part of the transaction, the Opus Energy hedge book, to purchase power and
gas to supply to its customers, was transferred to EDF. Prior to the
transaction these trades were all intercompany between the Biomass Generation
business and Opus Energy and were therefore eliminated on consolidation. As
the hedge book was transferred at the original hedged rate to a party external
to the Group, the trades were off market and had a day one mark-to-market fair
value of £33.7 million. This gain has not been recognised as part of the net
loss as a result of the transaction, as whilst the counterparty has changed,
there is no impact on the Biomass Generation business which will continue to
sell energy. This would have occurred irrespective of the transaction and as
such the gain has been presented within Certain remeasurements in the
Consolidated income statement, consistent with the Group's treatment
of unrealised gains and losses on unhedged derivative contracts.
During the current year the Group had a net cash inflow of £9.6 million in
respect of the Opus Energy transaction. This comprised a cash inflow of £13.9
million of consideration received, a net £2.0 million inflow in respect of
debt and credits transferred to EDF, and a cash outflow of £6.3 million in
respect of redundancy, transaction and migration costs paid out in the year.
The cash flows relating to the transaction have been recognised within
operating cash flows in the Consolidated cash flow statement.
For each item designated as exceptional or as a certain remeasurement, the
table below summarises the impact of the item on Adjusted and Total profit
after tax, Basic EPS and Net cash from operating activities.
Year ended 31 December 2024
Revenue Gross profit Operating Profit Tax (charge)/ credit Profit/(loss) Basic Net cash from
£m £m profit before tax £m for the earnings/ (loss) operating
£m £m period per share activities
£m Pence £m
Total results IFRS measure 6,162.5 1,876.5 850.2 753.4 (227.9) 525.5 137.5 859.5
Certain remeasurements:
Net fair value remeasurement on derivative contracts (81.3) (109.5) (109.5) (108.9) 29.7 (79.2) (20.7) -
Exceptional items:
Opus Energy sale of meter points and restructuring - 23.3 59.5 59.5 (14.8) 44.7 11.6 (9.6)
Total (81.3) (86.2) (50.0) (49.4) 14.9 (34.5) (9.1) (9.6)
Adjusted results totals 6,081.2 1,790.3 800.2 704.0 (213.0) 491.0 128.4 849.9
Year ended 31 December 2023
Restated((1)) Revenue Gross profit Operating Profit Tax (charge)/ credit Profit/(loss) Basic Net cash from
£m £m profit before tax £m for the earnings/ (loss) operating
£m £m period per share activities
£m Pence £m
Total results IFRS measure 7,733.2 1,953.6 908.2 796.4 (235.5) 560.9 142.8 835.6
Certain remeasurements:
Net fair value remeasurement on derivative contracts (282.9) (200.2) (200.2) (204.8) 48.1 (156.7) (39.7) -
Impact of tax rate change - - - - 3.1 3.1 0.8 -
Exceptional items:
2023 Opus Energy impairment - - 69.1 69.1 (13.5) 55.6 14.1 -
Net credit from legal claim - - (13.7) (13.7) 2.7 (11.0) (2.8) (9.3)
Change in fair value of contingent consideration - - 18.2 18.2 - 18.2 4.6 -
Impact of tax rate change - - - - (0.7) (0.7) (0.2) -
Total (282.9) (200.2) (126.6) (131.2) 39.7 (91.5) (23.2) (9.3)
Adjusted results totals 7,450.3 1,753.4 781.6 665.2 (195.8) 469.4 119.6 826.3
(1) The year ended 31 December 2023 amounts above have been restated to
reflect the Group's revised application of the agent requirements of IFRS 15
to sleeved electricity trades.
Adjusted EBITDA is a key measure of financial performance for the Group. A
reconciliation from Adjusted operating profit from the Consolidated income
statement is shown below:
Year ended 31 December 2024
Att
rib
uta
ble
to
Owners of the Non-controlling interests Total
parent company £m £m
£m
Adjusted operating profit/(loss) 801.3 (1.1) 800.2
Depreciation and amortisation 240.4 1.4 241.8
Other losses 8.5 - 8.5
Share of losses from associates 2.2 - 2.2
Impairment of non-current assets 11.8 - 11.8
Adjusted EBITDA 1,064.2 0.3 1,064.5
Year ended 31 December 2023
Att
rib
uta
ble
to
Owners of the Non- Total
parent company controlling interests £m
£m £m
Adjusted operating profit/(loss) 782.9 (1.3) 781.6
Depreciation and amortisation 223.7 1.3 225.0
Other gains (0.7) - (0.7)
Share of losses from associates 1.6 - 1.6
Impairment of non-current assets 1.7 - 1.7
Adjusted EBITDA 1,009.2 - 1,009.2
Year ended 31 December
2024 Restated((1))
£m 2023
£m
Segment Adjusted EBITDA:
Pellet Production 143.0 88.9
Biomass Generation 813.5 703.3
Flexible Generation 137.6 230.2
Energy Solutions 51.2 71.8
Innovation, capital projects and other (78.1) (78.1)
Intra-group eliminations (3.0) (6.9)
Total Adjusted EBITDA 1,064.2 1,009.2
(1) Comparative amounts have been restated to reflect the change in
reportable segments. See note 1 for further details of the change in
reportable segments.
Net debt
Net debt is calculated by taking the Group's borrowings, adjusting for the
impact of associated hedging instruments, adding lease liabilities, and
subtracting cash and cash equivalents. Net debt excludes the share of
borrowings, lease liabilities, and cash and cash equivalents attributable to
non-controlling interests.
Prior to 2024, the Group's definition of Net debt did not include lease
liabilities.
Borrowings includes external financial debt, such as loan notes, term loans
and amounts drawn in cash under revolving credit facilities (RCFs). Borrowings
does not include other financial liabilities such as pension obligations,
trade and other payables, lease liabilities calculated in accordance with IFRS
16, and working capital facilities (such as credit cards and deferred letters
of credit) linked directly to specific payables that provide short extension
of payment terms of less than 12 months (see note 5). The Group does not
include balances related to supply chain financing in Net debt as there
are no changes to the Group's payment terms under this arrangement, nor would
there be if the arrangement was to cease. Net debt includes the impact of any
cash collateral receipts from counterparties or cash collateral posted to
counterparties.
The Group has entered into cross-currency interest rate swaps, fixing the
sterling value of the principal repayments and interest in respect of the
Group's euro (EUR) denominated debt. The Group has also entered fixed rate
foreign exchange forwards to fix the sterling value of the principal repayment
of the Canadian dollar (CAD) denominated debt and certain EUR denominated
debt. For the purpose of calculating Net debt, USD, EUR and CAD balances are
translated at the hedged rate, rather than the rate prevailing at the
reporting date, which impacts the carrying amount of the Group's borrowings.
See the APMs glossary for further details on the calculation of Net debt.
As at 31 December
2024 2023((1))
£m £m
Borrowings (1,176.7) (1,425.3)
Lease liabilities (116.5) (135.8)
Cash and cash equivalents 356.0 379.5
Net cash, borrowings and lease liabilities (937.2) (1,181.6)
Non-controlling interests' share of cash and cash equivalents in non-wholly (0.8) (0.3)
owned subsidiaries
Non-controlling interests' share of lease liabilities in non-wholly owned 0.5 -
subsidiaries
Impact of hedging instruments (54.2) (37.8)
Net debt (991.7) (1,219.7)
(1) The comparative amounts have been re-presented to reflect the change
in definition of Net debt to include lease liabilities.
The table below reconciles Net debt in terms of changes in these balances
across the year:
Year ended 31 December
2024 2023((1))
£m £m
Net debt at 1 January (1,219.7) (1,359.0)
(Decrease)/increase in cash and cash equivalents (23.5) 141.5
(Increase)/decrease in non-controlling interests' share of cash and cash (0.5) 0.4
equivalents in non-wholly owned subsidiaries
Decrease in borrowings 248.6 15.6
Decrease in lease liabilities 19.3 17.3
Increase/(decrease) in non-controlling interests' share of lease liabilities 0.5 (0.1)
in non-wholly owned subsidiaries
Movement in the impact of hedging instruments (16.4) (35.4)
Net debt at 31 December (991.7) (1,219.7)
(1) The comparative amounts have been re-presented to reflect the change
in definition of Net debt to include lease liabilities.
The Group has a long-term target for Net debt to Adjusted EBITDA of around 2.0
times.
As at 31 December
2024 2023((1))
Adjusted EBITDA (£m) 1,064.2 1,009.2
Net debt (£m) (991.7) (1,219.7)
Net debt to Adjusted EBITDA ratio 0.9 1.2
(1) The comparative amounts have been re-presented to reflect the change
in definition of Net debt to include lease liabilities.
Cash and committed facilities
The below table reconciles the Group's available cash and committed
facilities:
As at 31 December
2024 2023
£m £m
Cash and cash equivalents 356.0 379.5
RCF available but not utilised ((1)) 450.0 259.9
Total cash and committed facilities 806.0 639.4
(1) In August 2024, the Group secured a new £450.0 million RCF. The Group
cancelled its previous £300.0 million RCF at this date. The Group's C$10
million RCF also matured during 2024. As at 31 December 2024, the Group had no
cash or non-cash drawings under the RCF (2023: £46.1 million in letters of
credit were drawn).
Further commentary on total cash and committed facilities is contained within
the CFO's financial review.
4 Renewable certificate assets
The Group generates renewable certificate assets, including Renewables
Obligation Certificates (ROCs) and Renewable Energy Guarantees of Origin
(REGOs), which are accredited by the Office for Gas and Electricity Markets
(Ofgem), as a result of generating renewable electricity using biomass at Drax
Power Station and generating renewable electricity at the Group's run-of-river
hydro plants. The Group also purchases renewable certificates from third
parties. The Group's ROCs and REGOs are sold bilaterally to counterparties,
including external suppliers, and also internally for utilisation by the
Energy Solutions business.
This note sets out the value of renewable certificate assets that the Group
held at the reporting date.
Accounting policy
Renewable certificate assets are recognised at cost or deemed cost less any
impairments. Renewable certificates, principally ROCs and REGOs, are first
recognised as current assets in the period they are generated or purchased.
For generated renewable certificates the Group uses their fair value at
initial recognition, based on anticipated sales prices, as deemed cost. For
renewable certificates purchased from third parties the agreed purchase price
is the cost.
Generating renewable power simultaneously creates joint products, being
electricity and the renewable certificates. The cost of generating renewable
electricity is allocated between the cost of the electricity generation, which
is recognised in the Consolidated income statement at the point of generation,
and the cost of generating the renewable certificate, which is initially
recognised as an asset in the Consolidated balance sheet. As such, the value
of generated renewable certificates earned reduces the cost of electricity
generation.
Where the Energy Solutions business incurs an obligation to deliver renewable
certificates, that obligation is accrued in the period incurred and recognised
within cost of sales.
Renewable certificate assets are derecognised when they are submitted to Ofgem
or at the point of sale to a customer. The point of sale is when the customer
takes control of the renewable certificate, which is usually at the point of
transfer of the certificate. At this point any revenue expected to be received
from the customer is recognised (see note 2) and the carrying amount of the
renewable certificate asset sold is recognised within cost of sales.
Generated ROC and REGO valuations are comprised of the expected value to be
obtained in a sales transaction with a third-party supplier at the point of
generation. If the Group has already agreed sales contracts covering the
renewable certificates generated in a period, then they are recognised at the
contracted price. Any renewable certificates generated above this, or to be
utilised by the Energy Solutions business, are recognised at an estimate of
the expected market value, which is generally based on the amount to be
obtained in a sales transaction with a third-party supplier. These estimates
are made using various sources of information including recently achieved
sales prices, ongoing sales negotiations, internal forecasts, and published
third-party market price assessments and data.
The Renewables Obligation (RO) scheme places an obligation on electricity
suppliers to source an increasing proportion of their electricity from
renewable sources. Under the RO scheme, ROCs are issued to generators of
renewable electricity which are then sold bilaterally to counterparties,
including suppliers, to demonstrate that they have fulfilled their obligations
under the RO scheme. ROCs are managed in compliance periods (CPs), running
from April to March annually. CP1 commenced in April 2002. At 31 December
2024, the Group is operating in CP23.
To meet its obligations a supplier can either submit ROCs or pay the buy-out
price at the end of the CP. The buy-out price rises annually in line with the
UK Retail Price Index (RPI). The buy-out price for CP23 is £64.73 (2023: CP22
£59.01). ROCs are typically procured in arm's-length transactions with
renewable generators at a market price slightly lower than the buy-out price
for that CP. At the end of the CP, the amounts collected from suppliers paying
the buy-out price form the recycle fund, which is distributed on a pro-rata
basis to the suppliers who presented ROCs during the CP.
Generated ROC valuations at initial recognition are comprised of two parts:
the buy-out price element and an estimate of the future benefit that may be
obtained from the ROC recycle fund at the end of the CP. The recycle fund
provides a benefit where supplier buy-out charges (incurred by suppliers who
do not procure sufficient ROCs to satisfy their obligations) are redistributed
to the suppliers who presented ROCs in a CP on a pro-rata basis. The estimate
of the recycle value is based on assumptions about likely levels of renewable
generation, which is generally weather dependent, the demand for ROCs over the
CP, and the number of ROCs banked in a CP, and is thus subject to some
uncertainty. The Group utilises external sources of information, such as
energy demand and generation forecasts, average historical weather data, and
published information about ROC banking in previous CPs, in addition to its
own forecasts in making these estimates. Historical experience indicates that
the assumptions used in the valuations are reasonable, but the recycle value
remains subject to possible variation and may subsequently differ from
assumptions at 31 December.
REGOs are certificates that enable suppliers to prove that energy supplied to
their customers came from a renewable source. One REGO is issued to a
generator for every MWh of renewable electricity they generate. The primary
use of REGOs is for the Fuel Mix Disclosure that requires licensed electricity
suppliers to disclose to potential and existing customers the mix of fuels
used to generate the electricity supplied. REGOs are managed in CPs, running
from April to March annually. CP1 commenced in April 2002. At 31 December
2024, the Group is operating in CP23. Generated REGO valuations at initial
recognition are usually based on published third-party market price
assessments.
At each reporting date, the Group reviews the carrying value of renewable
certificate assets held against updated anticipated sales prices or
anticipated obligation requirements, and the estimated recycle value. Where
relevant, this takes account of agreed forward sales contracts, changes in
published third-party market price assessments, the likely utilisation of
renewable certificates generated to settle the Group's own obligations, and
any relevant information about the levels of wider renewable generation in the
market. Any impairment loss on these assets is recognised in the Consolidated
income statement in the period incurred within cost of sales.
Year ended 31 December
Carrying amount: 2024 2023
£m £m
At 1 January 292.2 187.8
Earned from generation 752.6 749.7
Purchased from third parties 464.6 673.8
Utilised by the Energy Solutions business (654.7) (435.7)
Sold to third parties (314.7) (883.4)
At 31 December 540.0 292.2
Of the £540.0 million of renewable certificates recognised at 31 December
2024 (2023: £292.2 million), £486.1 million (2023: £172.9 million) relates
to ROCs and £53.9 million (2023: £119.3 million) relates to REGOs. Of the
£752.6 million (2023: £749.7 million) of renewable certificates earned from
generation, £652.6 million (2023: £601.8 million) was attributable to ROCs
and £100.0 million (2023: £147.9 million) to REGOs.
Recognition of revenue from the sale of renewable certificates is described in
further detail in note 2.
5 Notes to the Consolidated cash flow statement
Accounting policy
In accordance with IAS 7 the Group has elected to classify cash flows from
interest paid and interest received as cash flows from operations, dividends
paid as cash flows from financing activities, and dividends received as cash
flows from investing activities. The interest repayment on lease liabilities
is included within interest paid, and the lease principal repayment is
presented within cash flows from financing activities. Payments for short-term
and low value leases are included within cash flows from operating activities.
Cash generated from operations
Cash generated from operations is the starting point of the Group's
Consolidated cash flow statement. The table below makes adjustments for any
non-cash accounting items to reconcile the Group's net profit for the year to
the amount of cash generated from the Group's operations.
Year ended 31 December
2024 2023
£m £m
Profit for the year 525.5 560.9
Adjustments for:
Interest payable and similar charges 107.5 115.2
Interest receivable and similar gains (20.1) (13.1)
Tax charge 227.9 235.5
Research and development tax credits (2.0) (2.0)
Share of losses from associates 2.2 1.6
Depreciation of property, plant and equipment 196.7 168.7
Amortisation of intangible assets 17.0 29.4
Depreciation of right-of-use assets 28.1 26.9
Impairment of non-current assets 14.4 70.8
Losses on disposal of fixed assets 11.2 2.6
Other losses 1.7 18.2
Certain remeasurements of derivative contracts((1)) (89.3) (222.0)
Non-cash charge for share-based payments 14.0 13.9
Effect of changes in foreign exchange rates (21.9) 6.2
Operating cash flows before movement in working capital 1,012.9 1,012.8
Changes in working capital:
Decrease in inventories 25.2 20.6
Decrease in receivables 392.2 71.4
Decrease in payables (142.7) (30.8)
Net movement in derivative-related collateral 83.7 155.4
Increase/(decrease) in provisions 11.5 (4.4)
Increase in renewable certificate assets (247.8) (104.4)
Total cash released from working capital 122.1 107.8
Net movement in defined benefit pension obligations 0.1 (9.6)
Cash generated from operations 1,135.1 1,111.0
(1) Certain remeasurements of derivative contracts includes the effect of
non-cash unrealised gains and losses recognised in the Consolidated income
statement and their subsequent cash realisation. It also includes the cash and
non-cash impact of deferring and recycling gains and losses on derivative
contracts designated into hedge relationships under IFRS 9, where the gain or
loss is held in the hedge reserve and then released to the Consolidated income
statement in the period the hedged transaction occurs.
The Group has generated cash from operations of £1,135.1 million during the
year (2023: £1,111.0 million). This resulted from a cash inflow from
operating activities before working capital of £1,012.9 million (2023:
£1,012.8 million), a net working capital cash inflowof £122.1 million
(2023: £107.8 million) and a cash inflow of £0.1 million (2023: £9.6
million cash outflow) in respect of defined benefit pension obligations. The
most significant factors making up these cash movements are explained in
further detail below.
The £89.3 million outflow due to the adjustment for certain remeasurements of
derivative contracts in the current year (2023: £222.0 million) mainly
relates to cash payments on maturing trades where the derivative losses had
been recognised in a previous period, as well as unrealised fair value gains
on open derivative contracts.
Cash collateral is sometimes paid or received in relation to the Group's
commodity and treasury trading activities. When derivative positions are out
of the money for the Group, collateral may be required to be paid to the
counterparty. When derivative positions are in the money, collateral may be
received from counterparties. These positions reverse when mark-to-market
positions reduce, or contracts are settled, and the collateral is returned.
The Group actively manages its liquidity requirements. This includes managing
collateral associated with the hedging of power and other commodities, as well
as other contractual arrangements. Under certain arrangements the Group is
able to use non-cash collateral, such as letters of credit and surety bonds,
that may otherwise have required cash collateral.
The Group has had a net cash inflow of £83.7 million from derivative-related
collateral during the year, as trades have matured and mark-to-market
positions have reduced (2023: £155.4 million). As at 31 December 2024, the
Group held £9.8 million in cash collateral receipts (2023: £20.3 million)
recognised in payables, and had posted £4.7 million (2023: £98.9 million) of
cash collateral payments recognised in receivables. The Group had also
utilised £14.5 million (2023: £14.5 million) of letters of credit and £30.0
million (2023: £70.0 million) of surety bonds to cover commodity trading
collateral requirements. Letters of credit and surety bonds utilised at the
reporting date have reduced the requirement for cash collateral payments,
which has increased the amount by which receivables have decreased.
The Group has a strong focus on cash flow discipline and managing liquidity.
The Group enhances its working capital position by managing payables,
receivables, inventories and renewable certificate assets to make sure the
working capital committed is closely aligned with operational requirements.
The impact of these actions on the cash flows of the Group is included within
the further detail explained below.
The table below sets out the key arrangements utilised by the Group to manage
elements of its working capital:
As at As at Inflow/
31 December 31 December (outflow)
2024 2023 £m
£m £m
Receivables monetisation 400.0((1)) 400.0 -
ROC monetisation sales - 298.4 (298.4)
Supply chain finance scheme (38.4) (48.6) (10.2)
Deferred letters of credit (150.3) (224.7) (74.4)
(1) As at 31 December 2024 the Group had sold £386.3 million of
receivables under this facility. At 31 December 2024 the Group had recognised
an amount payable to the facility provider of £13.7 million, being the
movement in the receivables sold compared to the prior month. This amount was
paid to the facility provider in January 2025, so as at 31 December 2024 the
utilisation of the facility was still £400.0 million.
None of the balances in the table above are included within the Group's
definition of Net debt or borrowings (see note 3 for further details on Net
debt). The receivables monetisation facility is non-recourse in nature and
therefore there is no future liability associated with these amounts. Through
standard ROC sales and ROC purchase arrangements the Group is able to manage
the working capital cycle of inflows and outflows of these assets. The supply
chain finance and deferred letters of credit facilities are linked directly to
specific payables. The deferred letters of credit facilities provide a short
extension of payment terms of less than 12 months. The impact of these
facilities on the cash flows of the Group is explained further below.
The overall cash inflow of £392.2 million (2023: £71.4 million) due to lower
receivables in the current year is primarily a result of a reduction in energy
prices compared to the prior year.
The Energy Solutions segment has access to a receivables monetisation facility
which enables it to accelerate cash flows associated with amounts receivable
from energy supply customers on a non-recourse basis. The facility was
previously refinanced to increase the size of the facility to £400.0 million
from £200.0 million for the period to March 2025, and then reducing to
£300.0 million until the facility matures in January 2027. Utilisation of
the facility was £400.0 million at 31 December 2024 (2023: £400.0 million).
As the facility was fully utilised at 31 December 2024 and 31 December 2023
there has been no cash flow impact in the period.
Payables have decreased from the prior year, with a cash outflow of £142.7
million (2023: £30.8 million). This is due to a reduction in other payables
as the deferred letters of credit have reduced in relation to OCGT capital
expenditure now that the assets are nearing completion. The decrease in
payables is also due to the reduction in energy supply accruals compared to
the prior year as the value of REGOs has reduced year-on-year. Certain of the
Group's suppliers are able to access a supply chain finance facility provided
by a bank, for which funds can be accelerated in advance of normal payment
terms. At 31 December 2024, the Group had trade payables of £38.4 million
(2023: £48.6 million) related to this reverse factoring. The facility does
not directly impact the Group's working capital, as payment terms remain
unaltered with the Group and would remain the same should the facility fall
away.
The Group also has access to deferred letters of credit facilities under which
the Group benefits from an extension to payment terms of less than 12 months
for a fee. The amount outstanding under these facilities at 31 December 2024
was £150.3 million (2023: £224.7 million). Of the total deferred letters of
credit, £92.8 million (2023: £155.1 million) were utilised for capital
expenditure and £57.5 million (2023: £69.6 million) were utilised for trade
payables. Utilisation of these payment facilities impacted the purchases
of property, plant and equipment line in the Consolidated cash flow statement
and the movement in payables line above.
The movement in renewable certificate assets during the year includes a
combination of generation, utilisation, purchases and sales, as described in
note 4. The £247.8 million cash outflow (2023: £104.4 million) is
predominantly due to an increase in the value of renewable certificates
generated and still held by the Group compared to the prior year, due to a
reduced level of ROC monetisation sales. Cash from renewable certificates, and
in particular ROCs, is typically realised several months after they are
earned; however, through standard ROC sales and ROC purchase arrangements the
Group is able to manage the working capital cycle of inflows and outflows of
these assets. At 31 December 2024, the Group had cash inflows of £nil from
using these standard renewable certificate sales (2023: £298.4 million).
Changes in liabilities arising from financing cash flows
A reconciliation of the movements in liabilities arising from financing
activities for both cash and non-cash movements is provided below:
Borrowings Lease liabilities Hedging instruments Total
£m £m £m £m
At 1 January 2024 1,425.3 135.8 32.5 1,593.6
Cash flows from financing activities (226.4) (27.4) (31.5) (285.3)
Effect of changes in foreign exchange rates (30.7) 1.1 18.3 (11.3)
Other movements 8.5 7.0 21.7 37.2
At 31 December 2024 1,176.7 116.5 41.0 1,334.2
Borrowings Lease Hedging instruments Total
£m liabilities £m £m
£m
At 1 January 2023 1,440.9 153.1 (2.2) 1,591.8
Cash flows from financing activities 14.5 (25.8) - (11.3)
Effect of changes in foreign exchange rates (35.4) (6.7) 29.8 (12.3)
Other movements 5.3 15.2 4.9 25.4
At 31 December 2023 1,425.3 135.8 32.5 1,593.6
Other movements on borrowings principally relate to interest. Other movements
on lease liabilities principally relate to discounting and additions in the
year. Other movements on hedging instruments include cross-currency interest
rate swaps that are hedging both principal and interest payments on
borrowings. Interest payments are classified as operating cash flows in the
Consolidated cash flow statement, as such fair value movements and cash
settlements relating to the interest payments on these hedges are recognised
within the other movements line above.
6 Equity and reserves
The Group's ordinary share capital reflects the total number of shares in
issue, which are publicly traded on the London Stock Exchange.
Accounting policy
Ordinary shares are classified as equity as evidenced by their residual
interest in the assets of the Company after deducting its liabilities.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Issued equity
As at 31 December
2024 2023
£m £m
Issued and fully paid:
427,770,766 ordinary shares of 11 pence each (2023: 424,923,406) 49.4 49.1
The movement in allotted and fully paid share capital of the Company during
the year was as follows:
Year ended 31 December
2024 2023
(number) (number)
At 1 January 424,923,406 414,872,491
Issued under employee share schemes 2,847,360 10,050,915
At 31 December 427,770,766 424,923,406
The Company has only one class of shares, which are ordinary shares of
11 pence each, carrying no right to fixed income. No shareholders have
waived their rights to dividends. Throughout the year, shares were issued in
satisfaction of options vesting in accordance with the rules of the Group's
employee share schemes.
During the year 794,782 shares were issued at a weighted average exercise
price of 336 pence per share in respect of options vesting on employee share
purchase schemes and 2,052,578 shares were issued in respect of share options
vesting on share awards with no exercise price.
Share buyback programme
On 26 July 2024, the Group announced the commencement of a £300 million share
buyback programme. The buyback programme is ongoing, with £115.4 million of
shares having been repurchased as at 31 December 2024. The shares purchased by
the Group have not been cancelled and so continue to be included in the issued
shares in the above table.
Share premium
The share premium account reflects amounts received in respect of issued share
capital that exceeds the nominal value of the shares issued, net of
incremental transaction costs and tax, that are directly attributable to the
issue of new shares. Movements in the share premium reserve during the year
reflect amounts received above the nominal value on the issue of shares under
employee share schemes.
Year ended 31 December
2024 2023
£m £m
At 1 January 441.2 433.3
Issue of share capital 2.6 7.9
At 31 December 443.8 441.2
Other reserves
Capital Translation Merger Treasury shares reserve Total other
redemption reserve reserve £m reserves
reserve £m £m £m
£m
At 1 January 2023 1.5 85.8 710.8 (50.4) 747.7
Exchange differences on translation of foreign operations - (10.3) - - (10.3)
Repurchase of own shares - - - (149.2) (149.2)
At 1 January 2024 1.5 75.5 710.8 (199.6) 588.2
Exchange differences on translation of foreign operations - (6.6) - - (6.6)
Movement in equity associated with share-based payments - - - 0.8 0.8
Repurchase of own shares - - - (115.4) (115.4)
At 31 December 2024 1.5 68.9 710.8 (314.2) 467.0
The capital redemption and treasury shares reserves arose when the Group
completed previous share buyback programmes. A further share buyback was
ongoing during 2024 and has continued into 2025. The net cost of this share
buyback up to 31 December 2024 was £115.4 million. The 57.8 million (2023:
40.3 million) shares held in the treasury shares reserve have no voting rights
attached to them.
Exchange differences relating to the translation of the net assets of the
Group's US and Canadian subsidiaries from their functional currencies (USD and
CAD) into sterling for presentation in these Consolidated financial statements
are recognised in the translation reserve.
Hedge reserve and Cost of hedging reserve
The hedge reserve and cost of hedging reserve reflect the change in fair value
of derivative financial instruments designated into hedge accounting
relationships in accordance with IFRS 9 and related deferred tax.
Alternative performance measures (APMs) glossary table
The alternative performance measures (APMs) described below are used
throughout the Annual report and accounts and are measures that are not
defined within IFRS but provide additional information about financial
performance and position that is used by the Board to evaluate the Group's
trading performance. These APMs have been defined internally and may therefore
not be comparable to APMs presented by other companies. Additionally, certain
information presented is derived from amounts calculated in accordance with
IFRS but is not itself a measure defined under IFRS. Such measures should not
be viewed in isolation or as an alternative to the equivalent IFRS measure.
APM Closest IFRS Purpose Definition
equivalent measure
Adjusted results Total results The Group's Adjusted results are consistent Total results measured in accordance with IFRS excluding the impact of
exceptional items and certain remeasurements. Exceptional items and certain
with the way the Board and executive management assess the performance of the remeasurements are defined in note 3.
Group. Adjusted results are intended to reflect the underlying trading
performance of the Group's businesses and are presented to assist users of the
Consolidated financial statements in evaluating the Group's trading
performance and performance against strategic objectives on a consistent
basis.
Adjusted results excludes exceptional items and certain remeasurements.
Exceptional items are those transactions that, by their nature, do not reflect
the trading performance of the Group in the period.
Certain remeasurements comprise fair value gains and losses that do not
qualify for hedge accounting (or hedge accounting is not effective). The Group
regards all of its forward contracting activity to represent economic hedges
and therefore by excluding the volatility caused by recognising fair value
gains and losses prior to maturity of the contracts, the Group can reflect
these contracts at the contracted prices on maturity, reflecting the intended
purpose of entering these contracts and the Group's underlying performance.
Adjusted results are the metrics used in the calculation of Adjusted basic EPS
and Adjusted diluted EPS.
Adjusted EBITDA Operating profit((1)) Adjusted EBITDA is the primary measure used by the Board and executive Earnings before interest, tax, depreciation, amortisation, other gains and
management to assess the financial performance of the Group as it provides a losses and impairment of non-current assets, excluding the impact of
more comparable assessment of the Group's year-on-year trading performance. It exceptional items and certain remeasurements (defined in note 3).
is also a key metric used by the investor community to assess the performance
of the Group's operations. Adjusted EBITDA excludes any earnings from associates or attributable to
non-controlling interests.
Adjusted basic EPS Basic EPS Adjusted basic EPS represents the amount of Adjusted earnings (Adjusted Adjusted basic EPS is calculated by dividing the Group's Adjusted earnings
post-tax earnings) attributable to each ordinary share. attributable to owners of the parent company (Adjusted profit after tax) by
the weighted average number of ordinary shares outstanding during the period.
Adjusted diluted EPS Diluted EPS Adjusted diluted EPS demonstrates the impact upon the Adjusted basic EPS if Adjusted diluted EPS is calculated by dividing the Group's Adjusted earnings
all outstanding share options, that are expected to vest on their future attributable to owners of the parent company (Adjusted profit after tax) by
maturity dates and where the shares are considered to be dilutive, were the weighted average number of ordinary shares outstanding during the period
exercised and treated as ordinary shares as at the reporting date. and dilutive potential ordinary shares outstanding under share plans during
the period.
Borrowings n/a((2)) Borrowings provides information relating to the Group's use of debt. It is a Borrowings includes external financial debt, such as loan notes, term loans
key measure of leverage and provides information on the sources of liquidity and amounts drawn in cash under revolving credit facilities (RCFs). Borrowings
for the Group. does not include other financial liabilities such as pension obligations,
trade and other payables and working capital facilities linked directly to
specific payables (such as credit cards and deferred letters of credit) that
provide a short extension of payment terms of less than 12 months (see note
5).
Net debt((3)) Borrowings and lease liabilities less cash and cash equivalents Net debt is a key measure of the Group's liquidity and its ability to manage Borrowings (as defined above) including the impact of hedging instruments, and
its financial obligations. lease liabilities calculated in accordance with IFRS 16 less cash and cash
equivalents.
Net debt is used as a basis by debt rating agencies to assess credit risk, and
in the calculation of the Group's financial covenant requirements. Net debt excludes the proportion of cash, lease liabilities and borrowings in
non-wholly owned entities that would be attributable to the non-controlling
The impact of hedging instruments included within Net debt shows the economic interests.
substance of the Net debt position, in terms of actual expected future cash
flows to settle that debt. Net debt includes the impact of foreign currency hedging instruments, meaning
that any borrowings that have associated hedging instruments in place are
adjusted to reflect those borrowings at the hedged rate.
Net debt includes the impact of any cash collateral receipts from
counterparties or cash collateral posted to counterparties.
Net debt to Adjusted EBITDA Borrowings and lease liabilities less cash and cash equivalents divided by The Net debt to Adjusted EBITDA ratio is a debt ratio that gives an indication Net debt divided by Adjusted EBITDA expressed as a multiple.
operating profit((1)) of how many years it would take the Group to pay back its debt if Net debt and
Adjusted EBITDA are held constant.
The Group has a long-term target for Net debt to Adjusted EBITDA of around 2.0
times.
Cash and committed facilities Cash and cash equivalents This is a key measure of the Group's available liquidity and the Group's Total cash and cash equivalents plus the value of the Group's committed but
ability to manage its current obligations. undrawn facilities (including the Group's RCF, loan facilities and the Energy
Solutions non-recourse trade receivables monetisation facility).
It shows the value of cash available to the Group in a short period of time.
Capital expenditure Property, plant and equipment (PPE) additions and intangible asset additions Used to show the Group's total spend on PPE and intangible assets in a year. PPE additions plus intangible asset additions.
(1) Operating profit is presented in the Group's Consolidated income
statement; however, it is not defined per IFRS. It is a generally accepted
measure of profit.
(2) Borrowings are presented in the Group's Consolidated balance sheet;
they are a commonly used balance sheet line item heading however borrowings
are not defined by IFRS, therefore the Group's borrowings may not be
comparable to borrowings presented by other companies.
(3) During 2024, the Group updated its definition of Net debt to include
lease liabilities, see note 3 for more information.
Glossary
Ancillary services
Services provided to National Grid used for balancing supply and demand or
maintaining secure electricity supplies within acceptable limits. They are
described in Connection Condition 8 of the Grid Code.
Availability
Average percentage of time the units were available for generation.
BECCS
Bioenergy with carbon capture and storage, with carbon resulting from power
generation captured and stored.
Biogenic carbon cycle
Biogenic refers to something that is produced by, or originates from, a living
organism. The biogenic carbon cycle is the natural process of plants and
animals releasing CO(2) into the atmosphere through respiration and
decomposition, and plants absorbing CO(2) via photosynthesis.
Biomass
Organic material of non-fossil origin, including organic waste, that can be
converted into bioenergy through combustion. The Group uses sawmill and other
wood industry residues and forest residuals (which includes low-grade
roundwood, thinnings, branches and tops) in the form of compressed wood
pellets, to generate electricity at Drax Power Station or sell the pellets to
third parties.
Capacity Market
Part of the UK Government's Electricity Market Reform, the Capacity Market is
intended to ensure security of electricity supply by providing a payment for
reliable sources of capacity.
Carbon capture and storage (CCS)
The process of trapping or collecting carbon emissions from a large-scale
source and then permanently storing them.
CCC
The UK's Climate Change Committee.
CDR
Carbon dioxide removal.
Contracts for Difference (CfD)
A mechanism to support investment in low-carbon electricity generation. The
CfD works by stabilising revenues for generators at a fixed price level known
as the "strike price". Generators will receive revenue from selling their
electricity into the market as usual; however, when the market reference price
is below the strike price, they also receive a top-up payment for the
additional amount. Conversely, if the reference price is above the strike
price, the generator must pay back the difference.
Combined Cycle Gas Turbines (CCGT)
A form of highly efficient energy generation technology that combines a
gas-fired turbine with a steam turbine.
Department for Energy Security and Net Zero (DESNZ)
The UK Government Department that provides dedicated leadership focused on
delivering security of energy supply, ensuring properly functioning markets,
greater energy efficiency and seizing the opportunities of net zero to lead
the world in new green industries.
Dispatchable power
An electricity generator produces dispatchable power when the power can be
ramped up and down, or switched on or off, at short notice to provide (or
dispatch) a flexible response to changes in electricity demand. Biomass,
pumped storage, coal, oil, and gas electricity generation can meet these
criteria and hence can be dispatchable power sources. Nuclear can be
dispatched against an agreed schedule but is not flexible. Wind and solar
electricity cannot be scheduled and hence are not dispatchable. An electricity
system requires sufficient dispatchable power to operate and remain safe.
EBDS
The UK Government's Energy Bills Discount Scheme.
EBRS
The UK Government's Energy Bill Relief Scheme.
ENGO
Environmental NGO.
ESG
Environmental, Social and Governance.
First Nations
Any of the groups of indigenous peoples in Canada.
Forced outage/Unplanned outage
Any reduction in plant availability, excluding planned outages.
FSC®
Forest Stewardship Council: an international NGO which promotes responsible
management of the world's forests.
Frequency response
The automatic change in generation output, or in demand, to maintain a system
frequency of 50Hz.
GHG
Greenhouse gas.
Grid charges
Includes transmission network use of system charges (TNUoS), balancing
services use of system charges (BSUoS) and distribution use of system charges
(DUoS).
IAB
Independent Advisory Board, comprising scientists, academics, and forestry
experts who provide independent challenge, insight and advice into the Group's
activities.
IFRS
International Financial Reporting Standards.
Lost Time Incident Rate (LTIR)
The frequency rate is calculated on the following basis: (fatalities and lost
time injuries)/hours worked x 100,000. Lost time injuries are defined as
occurrences where the injured party is absent from work for more than 24
hours.
NGO
Non-governmental organisation.
Near Miss and Hazard Identification Rate (NMHIR)
NMHIR is the total number of near miss and hazard identification reports
logged per 100,000 hours worked.
Open Cycle Gas Turbine (OCGT)
A free-standing gas turbine, using compressed air, to generate electricity.
Planned outage
A period during which scheduled maintenance is executed according to the plan
set at the outset of the year.
PEFC
Programme for the Endorsement of Forest Certification: an independent,
non-profit, non-governmental organisation that promotes sustainable forest
management through independent third-party certification.
Pulp wood
A low value and bulky product, generally produced from the top of trees or
from production thinnings, with the principal use of making wood pulp for
paper production.
REGO
The Renewable Energy Guarantees of Origin (REGO) scheme provides certificates
called REGOs which demonstrate electricity has been generated from renewable
sources.
Reserve
Generation or demand available to be dispatched by the System Operator to
correct a generation/demand imbalance, normally at two or more minutes'
notice.
ROC
A Renewables Obligation Certificate (ROC) is a certificate issued to an
accredited generator for electricity generated from eligible renewable
sources.
Sawlog
A felled tree trunk suitable for being processed at a sawmill for cutting up
into lumber.
SBP
Sustainable Biomass Program: a certification system designed for woody biomass
used in industrial energy production.
Summer
The calendar months April to September.
Sustainable biomass
Biomass which complies with the definition of "sustainable source", Schedule
3, Land Criteria, UK Renewables Obligation Order 2015.
System operator
National Grid Electricity Transmission. Responsible for the co-ordination of
electricity flows onto and over the transmission system, balancing generation
supply and user demand.
TCFD
Task Force on Climate-related Financial Disclosures.
Thinning
Thinning operations correct overcrowding, and improve the health and vigour of
those trees which remain. Thinning targets small, malformed, and diseased
trees for removal, allowing the healthier trees the space, light, and soil to
reach maturity sooner. Thinning also mitigates the risk of pest infestation
and wildfire, while speeding the development of a more mature forest with
increased plant diversity.
TNFD
Taskforce on Nature-related Financial Disclosures.
Total Recordable Incident Rate (TRIR)
The frequency rate is calculated on the following basis: (fatalities, lost
time injuries and worse than first aid injuries)/hours worked x 100,000.
Total results
Financial performance measures prefixed with "Total" are calculated in
accordance with IFRS.
Total shareholder return (TSR)
A measure of the performance of a company's shares over time. It combines the
rise or fall of the share price and dividends paid to shareholders to show the
total return to shareholders over a particular period.
UK ETS
The UK Emissions Trading Scheme is a mechanism introduced across the UK to
reduce carbon emissions; the scheme is capable of being extended to cover all
greenhouse gas emissions.
Winter
The calendar months October to March.
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