Drax Group Plc (LON:DRX) has announced its full year results for the year 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.
(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.
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.
| Event Title: | Drax Group plc – Full Year Results 2024 |
| Event Date: | Thursday 27 February 2025 |
| Event Time: | 9:00am (GMT) |
| Webcast Live Event Link: | https://secure.emincote.com/client/drax/drax030 |
| Conference call and pre-register Link: | https://secure.emincote.com/client/drax/drax030/vip_connect |
| Start Date: | Thursday 27 February 2025 |
| Delete Date: | Saturday 28 February 2026 |
| Archive Link: | https://secure.emincote.com/client/drax/drax030 |
