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 Medium-sized Enterprise (SME)
|
(30)
|
(30)
|
|
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
(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/
For further information, please
contact: Christopher.Laing@fticonsutling.com
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
£1,064m
(2023: £1,009m)
|
|
Adjusted operating profit
£800m
(2023: £782m)
|
|
Total operating profit
£850m
(2023: £908m)
|
|
Cash generated from operations
£1,135m
(2023: £1,111m)
|
|
Adjusted basic earnings
per share
128.4 pence
(2023: 119.6 pence)
|
|
Total basic earnings per share
137.5 pence
(2023: 142.8 pence)
|
|
Net debt(1): Adjusted
EBITDA
0.9 times
(2023: 1.2 times)
|
|
Total dividend per share
26.0 pence
(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 from associates
|
264
|
228
|
|
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
£m
|
31
December 2023
£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
£m
|
31
December 2023
£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
results(2)
£m
|
Exceptional
items and
certain
remeasure-ments
£m
|
Total
results
£m
|
|
Restated(1) Adjusted
results(2)
£m
|
Exceptional
items
and
certain
remeasure-ments
£m
|
Restated(1)
Total
results
£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
£m
|
Restated(1)
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 owners of the parent
company
|
6
|
(6.6)
|
(10.3)
|
|
Exchange differences on translation
of foreign operations attributable to non-controlling
interests
|
|
(0.8)
|
(0.4)
|
|
Net fair value losses on financial
assets at fair value through other comprehensive income
|
|
(25.5)
|
(25.0)
|
|
Net fair value losses on financial
assets at fair value through other comprehensive income
reclassified to profit or loss
|
|
25.5
|
25.0
|
|
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
£m
|
2023
£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
equity
£m
|
Share
premium
£m
|
Hedge
reserve
£m
|
Cost
of
hedging
£m
|
Other
reserves
£m
|
Retained
profits
£m
|
Non-
controlling
interests
£m
|
Total
£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
|
|
Notes
|
Year ended
31 December
|
|
2024
£m
|
2023
£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 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(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
Production
£m
|
Biomass
Generation
£m
|
Flexible
Generation
£m
|
Energy
Solutions
£m
|
Innovation,
capital
projects
and
other
£m
|
Intra-group
eliminations
£m
|
Adjusted
results
£m
|
Exceptional
items
and certain
remeasure-ments
£m
|
Total
results
£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
Production
£m
|
Restated(1)(2) Biomass Generation
£m
|
Restated(1) Flexible Generation
£m
|
Energy
Solutions
£m
|
Innovation,
capital
projects
and
other
£m
|
Restated(1) Intra-group
eliminations
£m
|
Restated(2) Adjusted
results
£m
|
Exceptional
items
and
certain
remeasure-ments
£m
|
Restated(2) Total
results
£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
£m
|
Restated(1)
2023
£m
|
2024
£m
|
Restated(1)
2023
£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)
|
|
Year
ended 31 December
|
|
2024
£m
|
Restated(1)
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
December
|
|
2024
£m
|
2023
£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
results
£m
|
Exceptional
items and
certain
remeasurements
£m
|
Total
results
£m
|
|
Adjusted
results
£m
|
Exceptional
items
and
certain
remeasurements
£m
|
Total
results
£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 terms
|
|
Method of recognising revenue, including any
estimation uncertainties
|
|
Pellet sales (Pellet
Production)
|
The Group's Pellet Production
business produces biomass pellets which are sold to external
customers. Customers generally obtain control of the pellets
at the point the pellets are loaded onto the shipping
vessel.
Where freight is also arranged for
the customer, these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is considered a separate
performance obligation.
Invoices are raised in line with
contractual terms and are usually payable within 4-15
days.
|
|
Revenue is recognised at the point
that the pellets are loaded onto the shipping vessel.
The amount of revenue recognised is based on the contracted
price and volume of the pellets.
For CIF sales, revenue for the
freight portion is recognised over the period the vessel
sails.
|
|
Electricity and gas sales (Biomass
Generation and Flexible Generation)
|
The Group's Biomass Generation and
Flexible Generation businesses have contracts for wholesale
electricity sales. Performance obligations, being the supply of
electricity, are met either via generation or through the
procurement of electricity from counterparties. The performance
obligations 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 transferred to the
customer at the point that the electricity has been supplied in
accordance with the contractual terms.
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.
|
|
Revenues from sales contracts
fulfilled through generation are recognised at a point in time
based upon metered output at rates specified under contractual
terms. These are recognised under the output method, whereby
revenue is recognised based on the value transferred to the
customer.
Revenue from sales contracts
fulfilled through procured electricity or gas is recognised at the
point at which this electricity or gas is supplied to the
counterparty in accordance with the contractual terms at rates
specified under the contract.
|
|
Renewable certificate sales (Biomass
Generation, Flexible Generation and Energy Solutions)
|
Renewables Obligation Certificates
(ROCs) and Renewable Energy Guarantees of Origin (REGOs) are sold
to counterparties at a point in time.
ROCs sold to optimise working
capital are invoiced in line with contractual terms and are usually
payable within two days.
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.
|
|
External ROC and REGO sales are
recognised at the point the relevant renewable certificates
are transferred to the counterparty.
See note 4 for further details on
how the renewable certificate schemes operate.
|
|
CfD income/payment (Biomass
Generation)
|
The Group's Biomass Generation
business is party to a CfD with the Low Carbon Contracts Company
(LCCC), a Government-owned entity responsible for delivering
elements of the Government's Electricity Market Reform programme.
Under the contract, the Group makes or receives payments in respect
of electricity dispatched from a specific biomass-fuelled
generating unit.
Invoices are raised 7-10 days
following the date of supply and are settled within 28
days.
|
|
The Group recognises the income or
cost arising from the CfD in the Consolidated income statement as a
component of revenue at the point the Group meets its performance
obligation under the CfD agreement. This is considered to be the
point at which the relevant generation is delivered and the payment
becomes contractually due.
See CfD income/payment section below
for further details.
|
|
Ancillary services (Biomass
Generation and Flexible Generation)
|
Ancillary services refer to the
provision of a range of system support services to National Grid.
Most contracts are for the delivery of a specific service
either continually or on an ad-hoc basis over a period of
time.
Invoices are raised and subsequently
settled in line with the National Grid company ancillary services
settlement calendar, typically monthly.
|
|
Revenue is recognised by reference
to the stage of completion of the contractual performance
obligations, which are calculated by reference to the amount
of the contract term that has elapsed.
Depending on contract terms, this
approach may require judgement in estimating probable future
outcomes.
|
|
Other income
(All segments)
|
Other income is derived from the
sale of goods. The customer obtains control typically at the point
of delivery to their premises or upon collection.
Invoices are raised in line with
contractual terms.
|
|
Revenue is recognised at the point
the control of the goods is transferred to the customer.
|
|
Electricity and gas sales (Energy
Solutions)
|
The Group's Energy Solutions
business sells electricity and gas directly to non-domestic
customers. Energy supplied is measured based upon metered
consumption and contractual rates.
The Energy Solutions business also
has long-term contracts for the sale of electricity and gas,
which are deemed as being satisfied over time in line with the
progress of the contracts.
Invoices are raised in line with
contractual terms. For small and medium-sized enterprise (SME)
customers, payment is generally due within 10-14 days. For
Industrial and Commercial (I&C) customers, payment is generally
due between 28-90 days.
|
|
Revenue is recognised on the supply
of electricity or gas when a contract exists, supply has taken
place, a quantifiable price has been established or can be
determined, and the amounts receivable are expected to
be recovered.
Where supply has taken place but has
not yet been measured or billed, revenue is estimated based on
consumption statistics and selling price estimates and is
recognised as accrued income. This estimate is not considered
to be a key source of estimation uncertainty because historical
experience has demonstrated that these estimates are materially
accurate based on the subsequent billings
and settlements.
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 2024. Under this scheme,
energy supplied to eligible non-domestic customers will have a
discount applied to each unit of electricity and gas. Certain
customers may be eligible for higher levels of support dependent on
the sector in which they operate. The discount provided can then be
claimed back from the UK Government by the supplier.
The EBDS replaced the EBRS which
supported non-domestic customers between 1 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.
|
|
The discounted price of electricity
and gas supplied under both the EBRS and EBDS is recognised in
revenue as it is supplied. The amount claimed back from the
UK Government is recognised within revenue over the same
period as the underlying discounted revenue it relates to is
recognised.
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 revenue
from the scheme than it would have done had it not been
introduced.
|
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
£m
|
Inter-segment
£m
|
Total
£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
£m
|
Inter-segment
£m
|
Total
£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
£m
|
2023
£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 revenue
|
77.6
|
228.6
|
|
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 sales
|
45.3
|
(127.0)
|
|
Net remeasurements realised on
maturity of derivative contracts included in cost of
sales
|
(17.1)
|
44.3
|
|
Certain remeasurements included within operating
profit
|
109.5
|
200.2
|
|
Net remeasurements realised on
maturity of derivative contracts included in interest payable and
similar charges
|
(0.6)
|
(0.3)
|
|
Net fair value remeasurements on
derivative contracts included in foreign exchange
(losses)/gains
|
-
|
4.9
|
|
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 losses
|
1.2
|
|
|
|
|
Other losses incurred as a direct result of the transaction
and restructuring
|
|
|
Onerous contracts provision,
impairment of prepaid commissions and final commission settlement
on retained customers - included in cost of sales
|
(23.3)
|
|
Redundancy, transaction and
migration costs - included in operating and administrative
expenses
|
(9.2)
|
|
Fair value losses on receivables
relating to transferred customers - included in operating and
administrative expenses
|
(12.9)
|
|
Additional impairment of receivables
relating to retained customers - included in impairment losses on
financial assets
|
(12.7)
|
|
Impairment of non-current assets -
included in impairment of non-current assets
|
(2.6)
|
|
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
£m
|
Gross
profit
£m
|
Operating
profit
£m
|
Profit
before tax
£m
|
Tax (charge)/
credit
£m
|
Profit/(loss)
for the
period
£m
|
Basic
earnings/
(loss)
per share
Pence
|
Net cash
from
operating
activities
£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
£m
|
Gross
profit
£m
|
Operating
profit
£m
|
Profit
before
tax
£m
|
Tax
(charge)/ credit
£m
|
Profit/(loss)
for
the
period
£m
|
Basic
earnings/
(loss)
per
share
Pence
|
Net cash
from
operating
activities
£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
|
|
Attributable
to
|
|
Owners of
the
parent
company
£m
|
Non-controlling
interests
£m
|
Total
£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
|
|
Attributable to
|
|
Owners of
the
parent
company
£m
|
Non-
controlling interests
£m
|
Total
£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
£m
|
Restated(1)
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
£m
|
2023(1)
£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 owned
subsidiaries
|
(0.8)
|
(0.3)
|
|
Non-controlling interests' share of
lease liabilities in non-wholly owned subsidiaries
|
0.5
|
-
|
|
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
£m
|
2023(1)
£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 equivalents in
non-wholly owned subsidiaries
|
(0.5)
|
0.4
|
|
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 in non-wholly
owned subsidiaries
|
0.5
|
(0.1)
|
|
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
£m
|
2023
£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
£m
|
2023
£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
£m
|
2023
£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
31 December
2024
£m
|
As
at
31
December
2023
£m
|
Inflow/
(outflow)
£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
£m
|
Lease
liabilities
£m
|
Hedging
instruments
£m
|
Total
£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
£m
|
Lease
liabilities
£m
|
Hedging
instruments
£m
|
Total
£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
£m
|
2023
£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
(number)
|
2023
(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
£m
|
2023
£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
redemption
reserve
£m
|
Translation
reserve
£m
|
Merger
reserve
£m
|
Treasury
shares reserve
£m
|
Total
other
reserves
£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
equivalent measure
|
Purpose
|
|
Definition
|
|
Adjusted results
|
Total results
|
The Group's Adjusted results are
consistent
with the way the Board and executive
management assess the performance of the 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.
|
|
Total results measured in accordance
with IFRS excluding the impact of exceptional items and certain
remeasurements. Exceptional items and certain remeasurements are
defined in note 3.
|
|
Adjusted EBITDA
|
Operating
profit(1)
|
Adjusted EBITDA is the primary
measure used by the Board and executive management to assess the
financial performance of the Group as it provides a more comparable
assessment of the Group's year-on-year trading performance. It is
also a key metric used by the investor community to assess the
performance of the Group's operations.
|
|
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 (defined in note 3).
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 post-tax earnings)
attributable to each ordinary share.
|
|
Adjusted basic EPS is calculated by
dividing the Group's Adjusted earnings 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 all outstanding share
options, that are expected to vest on their future maturity dates
and where the shares are considered to be dilutive, were exercised
and treated as ordinary shares as at the reporting date.
|
|
Adjusted diluted EPS is calculated
by dividing the Group's Adjusted earnings attributable to owners of
the parent company (Adjusted profit after tax) by the weighted
average number of ordinary shares outstanding during the period and
dilutive potential ordinary shares outstanding under share plans
during the period.
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Borrowings
|
n/a(2)
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Borrowings provides information
relating to the Group's use of debt. It is a key measure of
leverage and provides information on the sources of liquidity for
the Group.
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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 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).
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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 its financial
obligations.
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.
The impact of hedging instruments
included within Net debt shows the economic substance of the Net
debt position, in terms of actual expected future cash flows to
settle that debt.
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Borrowings (as defined above)
including the impact of hedging instruments, and lease liabilities
calculated in accordance with IFRS 16 less cash and cash
equivalents.
Net debt excludes the proportion of
cash, lease liabilities and borrowings in non-wholly owned entities
that would be attributable to the non-controlling
interests.
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.
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Net debt to Adjusted
EBITDA
|
Borrowings and lease liabilities
less cash and cash equivalents divided by operating
profit(1)
|
The Net debt to Adjusted EBITDA
ratio is a debt ratio that gives an indication 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.
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Net debt divided by Adjusted EBITDA
expressed as a multiple.
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Cash and committed
facilities
|
Cash and cash equivalents
|
This is a key measure of the Group's
available liquidity and the Group's ability to manage its current
obligations.
It shows the value of cash available
to the Group in a short period of time.
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Total cash and cash equivalents plus
the value of the Group's committed but undrawn facilities
(including the Group's RCF, loan facilities and the Energy
Solutions non-recourse trade receivables monetisation
facility).
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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.
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PPE additions plus intangible asset
additions.
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(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
CO2 into the atmosphere through respiration and
decomposition, and plants absorbing CO2 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.
