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Shaping tomorrow’s
energylandscape
Drax Group plc Annual report and accounts 2024
Welcome
to our 2024
Annual Report
Strategic report
2 Our story
4 At a glance
6 Market context
8 Business model
10 Chair’s Statement
12 CEO’s Review
18 Financial review
22 Safeguarding responsible
biomass sourcing
28 Key Performance Indicators
Sustainable Development
30 Introduction
38 Climate Positive
44 Nature Positive
50 People Positive
56 Task Force on Climate-Related
Financial Disclosures (TCFD)
69 Non-Financial Sustainability
Information Statement
70 Principal risks and uncertainties
84 Viability Statement
Governance
86 Governance at Drax
90 Corporate Governance Report
93 Board of Directors
96 Section 172 Statement
96 Stakeholder engagement
107 Nomination Committee report
112 Audit Committee report
126 Remuneration Committee report
145 Directors’ report
149 Directors’ responsibilities
statement
Financial statements
150 Financial statements contents
152 Independent Auditor’s report to
the members of Drax Group plc
Shareholder information
274 Shareholder information
277 Alternative performance measures
glossary
279 Glossary
281 Company information
Contents
02
Our story
12
CEO’s
Review
22
Responsible
sourcing
Financial & ESG highlights
Total revenue Adjusted EBITDA
(1)
Total basic earnings per share
£6 ,163m
(2 02 3: £ 7,7 33m)
£1,064m
(2023: £1,009m)
137.5 pence
(2023: 142.8 pence)
Cash generated from operations Total operating profit Dividend per share
£1,135m
(2023: £1,111m)
£850m
(2023: £908m)
26.0 pence
(2023: 23.1 pence)
Percentage of total UK renewable
electricity generated
Net debt
(1) (2) (3)
Group carbon intensity
10%
(2023: 8%)
£992m
(2023: £1,220m)
34 tCO
2
e/GWh
(2023: 39 tCO
2
e/GWh)
Group carbon emissions Scope 1 and 2
(location-based)
Total recordable incident rate Group carbon emissions Scope 3
546 ktCO
2
e
(2023: 486 ktCO
2
e)
0.24
(2023: 0.38)
2,867 ktCO
2
e
(2023: 3,534 ktCO
2
e)
Wood pellets produced Employee engagement score
(4)
4.0Mt
(2023: 3.8Mt)
7.4
(2023: 79%)
(1) Adjusted financial performance measures aredescribed on page 191.
(2) Net debt is described in Alternative performancemeasures on page 195.
(3) Net debt was historically defined excluding lease liabilities. We now calculate Net debt including lease liabilities.
The 2023 comparative number has been updated accordingly.
(4) Score changed to out of 10 in 2024.
Pictured: Galloway Hydroelectric
powerscheme
Strategic report
Drax Group plc Annual report and accounts 2024
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Contents
Our story
Our purpose is to enable a zero
carbon, lower cost energy future.
Our strategy is to be a UK leader
in flexible renewable generation, and
a global leader in both sustainable
biomasspellets and carbon removals.
Our people are valued members of a
winningteam with a worthwhile mission.
By delivering our strategy and
achieving our purpose, we can
continue to play a key role in helping
to tackle the challenges of global
climatechange.
10%
Drax Group generates
10% of UK renewable power
Strategic report
Drax Group plc Annual report and accounts 2024
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Contents
Flexible generation –
supporting the system and
providing energy security
The energy transition, and the move away
from fossil fuels, will require a significant
increase in the amount of renewable
electricity we use, including for transport
andheating, on top of our current uses.
This increase indemand may largely be
met by intermittent renewables like wind
and solar. However, when the wind
doesn’tblow or the sun doesn’t shine,
theUK needs flexible sources of energy
generation such as renewable biomass,
pumped storage hydro, and fast response
open-cycle gas turbines (OCGTs), as well
as demand-side response.
These all feature within our portfolio of
flexible, low-carbon power assets, which
can dispatch and turn up or down to
support the system, in response to
changes in demand. In addition to helping
to keep the lights on, our assets support
energy security by providing essential
generation and system support services
tothe UK electricity grid, enabling the UK
energy system to meet demand regardless
of weather conditions.
Sustainable biomass –
to power the journey to net zero
Biomass is organic matter like wood,
forestresidues, or plant material. When
sourced sustainably and used to generate
renewable, low-carbon electricity, it is a
key element in the road to net zero.
Thisisat the heart of our purpose.
The material we use to make our biomass
pellets includes residues from sawmills
and other forestry activities. This helps
tosupport forest health and local
communities, creating positive outcomes
for nature and people.
This is helping to accelerate
decarbonisation worldwide, by replacing
fossil fuels with renewable energy, and
achieving our aim of being a global leader
in sustainable biomass pellets.
Carbon removals –
to achieveglobal climate goals
Renewables are a key part of the global
fight against climate change but, in order
to limit global warming to 1.5°C, the world
needs to go further andremove carbon
emissions from those hard to abate
sectors of the economy likeagriculture
and aviation.
Bioenergy with carbon capture and
storage (BECCS) is a carbon removal
technology. It has the potential to
generate around-the-clock renewable
power and remove large quantities of
carbon from the atmosphere and store
itpermanently underground. Currently,
BECCS is the only technology capable
ofgenerating 24/7 renewable power
whilesimultaneously removing carbon.
To be a UK leader
indispatchable,
renewablegeneration
To achieve our purpose and align to net zero targets,
we are working hard to deliver our strategic pillars:
To be a global leader
in carbon removals
To be a global
leaderinsustainable
biomasspellets
Seepage 13 for more Seepage 14 for more Seepage 15 for more
Strategic report
Drax Group plc Annual report and accounts 2024
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Contents
At a glance
We are committed to
enabling a zero carbon,
lower cost energy future
Our strategic aims are to be a UK leader in flexible,
renewable generation, and a global leader in both
sustainable biomass pellets and carbon removals.
Our business today and long-term targets
FlexGen & Energy Solutions Pellet Production
c.5Mt p.a. of capacity across 17 plants in the USA
andCanada
Diversified logistics
15Mt of offtake contracts
Own-use contracts
Targeting post-2027 recurring Adjusted EBITDA
>£250m p.a.
c.1.5GW portfolio
– 0.44GW Pumped storage
– 0.13GW Hydro
– 0.88GW OCGTs
*
Energy Solutions
Large Industrial & Commercial customer base
Targeting post-2027 recurring Adjusted EBITDA
>£250m p.a.
* Commissioning from 2025.
c.2.6GW of flexible renewable generation
– Largest single source of renewable power
Strong forward power hedges (2025 – March 2027)
Expect long-term value from bridging mechanism,
BECCS, and other uses
Targeting Adjusted EBITDA of £100–200m p.a.
(April 2027 – March 2031)
Targeting post-2027 recurring Adjusted EBITDA >£500m p.a.
UK BECCS
Global BECCS (Elimini)
Long duration energy storage
(Pumped Storage Hydro)
Biomass Generation Attractive options for long-term growth
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Drax Group plc Annual report and accounts 2024
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Contents
Where we operate
3,250
Employees worldwide
4
Number of countries
in which we operate
UK operations
– FlexGen & Energy Solutions
– Biomass Generation
Pumped storage
Pumped storage
expansion
Hydro
OCGTs
Biomass
BECCS
Pellet supply
to Europe
Japan
Pellet sales
Carbon removals (Elimini)
London
Houston
Pellet supply
to Asia
Canada
– British Columbia
– Alberta
US
South East
North American operations
Pellet Production
Strategic report
Drax Group plc Annual report and accounts 2024
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Contents
The world is continuing to navigate a complex
interplayof technological, geopolitical, environmental,
and social factors, requiring global co-operation and
innovative solutions.
The energy sector continues to underpin
modern society, providing the essential
energy resources that power our homes,
industries, and transportation networks.
There is a growing global consensus
behind the need for action on climate
change, a Just Transition, and greater
focus on sustainability. At the same time,
there isconcern about the cost and
implications of the transition and a
growing recognition that in order for
businesses to be sustainable they must
also be profitable.
Moving beyond reducing emissions from
electricity, industry, and waste, many
developed nations are now turning their
attentions towards delivering net zero
anddetermining how to tackle the more
challenging, harder to abate, elements of
climate change. This is complicated by the
increasing demands on the power system
from the growth in Artificial Intelligence
(AI); quantum computing; and large-scale,
energy-intensive computing
infrastructure, such as data centres.
The system will need to manage the
supply to meet these growing demands,
while also securing energy security and
helping to reduce emissions. As such, the
energy trilemma – energy security, energy
equity, and environmental sustainability
– remains a central theme for society.
At Drax, through our strategic focus on
flexible power generation, sustainable
biomass, and carbon removals in the UK
and globally, we believe that we are well
placed to support the energy transition
and in doing so develop our business with
benefits to our investors and stakeholders.
Political change
Our principal geographies
experienced a change in political
leadership in 2024.
In the UK, having campaigned in the July
2024 election with a manifesto pledging
to“accelerate to net zero”, the Labour
Government recognised that it has a lot to
do if it wants to keep that promise. It has
renewed Britain’s climate change targets
with an ambitious goal of a clean energy
system by 2030. Inthe US, the election of
a new president has led to concerns about
a potential move away from renewables
but also a focus on energy security. Drax
has significant business interests inmany
Republican states in the US South which
have active forest economies and have
benefitted from the investment initiated
by the previous administration.
In November 2024, the National Energy
System Operator (NESO) issued a report
tothe UK Government on the pathways
toa clean power system by 2030, outlining
the need for significantly more renewable
energy and power system flexibility. Both
of NESO’s pathways include large-scale
biomass generation and at least one
BECCS unit by 2030, and the Department
for Energy Security and Net Zero’s Action
10%
In 2024 across its pumped storage,
hydroand biomass assets, Drax
provided10% of the UK’s
renewablepower
Plan recognises that biomass “could play
an important role in Clean Power 2030
byproviding flexible or firm generation”.
FlexGen and Biomass Generation
– energy security and
decarbonisation
In the years since the Ukraine-Russia war
started, energy security has remained a
priority, with countries and organisations
facing a tough balancing act between
energy security and cutting emissions.
Drax has continued to play an important
role in preserving the UK’s energy security.
In 2024 across its pumped storage, hydro,
and biomass assets, Drax provided 10%
ofthe UK’s renewable power, and Drax
Power Station in North Yorkshire was the
largest single source of renewable power
in the UK.
With the growth in electrification likely
tolead to a significant increase in the
demand for electricity, in addition to
theemerging demand from AI and data
centres, there is a clear need for the
development of new capacity. This will
likely come from wind and solar and will
drive a need for a more flexible power
system. This is atthe heart of our FlexGen
and Biomass Generation models.
Drax helps to keep the lights on when
thewind doesn’t blow and the sun doesn’t
shine, and supports the build-out of
intermittent renewables. Unlike wind or
solar, our sites provide secure, dispatchable,
low carbon power whatever the weather
– supporting grid stability.
Market context
Drax Group plc Annual report and accounts 2024
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Strategic report
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Pellet Production
The forest products industry is
amajor global industry providing
products which we all consume
across a global supply chain.
Within that, the pellet production industry
is a small part of this much larger system,
utilising lower value residuals from the
forest products industry. The global pellet
market totals over 40Mt of demand each
year, which we believe will grow. As well
asthe current market of generation and
heating, we see growth opportunities
including Sustainable Aviation Fuel (SAF),
where Drax is developing a pipeline of
biomass sales opportunities in North
America and Europe.
Sustainability remains at the heart of the
debate on biomass and while the science
in favour is clear and strong, biomass is not
without challenge and we need to do more
to demonstrate the positive benefits of its
wider use.
CDRs, via BECCS, could be required
annually by 2050 to reach global net zero
targets. The UN-backed Principles for
Responsible Investment estimate that
theCDR market could be worth up to
1.2trillion dollars by 2050. More supply is
required to meet the scale of the challenge,
and the IPCC has assessed that globally up
to 9.5 billion tonnes of CDRs from BECCS
could be required per year by 2050.
The growing global role
of BECCS and Carbon
Dioxide Removal (CDR)
Without immediate action to cut
emissions, protect ecosystems, and deploy
scalable carbon removal technologies,
climate change – with more frequent
extreme weather and rising sea levels –
could reduce global GDP by up to 14% and
displace up to 1.2 billion people as climate
refugees by 2050.
Alongside urgent emission reductions,
addressing historical and residual
emissions through CDR is crucial. UN
scientists estimate that billions of tonnes
of carbon must be removed from the
atmosphere annually, using nature or
technology, to meet global climate goals.
The Intergovernmental Panel on Climate
Change (IPCC), the world’s leading
authority on climate science, states that
CDR methods, including BECCS, are
needed to mitigate residual emissions
andkeep the world on a pathway to
limitwarming to 1.5°C. The illustrative
mitigation pathways assessed by the IPCC
use significant volumes of CDRs, including
BECCS, as a tool for mitigating climate
change. IPCC modelling shows that
between 0.5 and 9.5 billion tonnes of
Pellets produced
4Mt
It is estimated that the UK possesses 25%
of Europe’s geological storage opportunities
for carbon and also holds an advantage in
infrastructure, skills, and engineering due
tothe legacy associated with the oil and
gas industry. In2024, the UK made further
strides towards becoming a global centre
for carbon capture and storage (CCS) by
progressing with its “cluster” process –
providing financial support to companies
delivering CCS technology in heavily
polluting industrial regions.
Strategic reportStrategic report Contents
Drax Group plc Annual report and accounts 2024
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Contents
Business model
A leading UK-based renewable
energy company with global
growthopportunities aligned
to net zero targets
Our assets
Sites
– c.2.6GW biomass
– c.0.9GW OCGTs
*
– c.0.6GW pumped storage
andhydro
– c.5Mt pellet production
People
Supportive, diverse, and
inclusive culture where
colleagues feel they belong
Resilient supply chain
Geographically diversified
biomass supply chain
Innovation
Developing options for
large-scale carbon removal
technologies
Financial strength
Clear capital allocation policy
to support the strategy
Energy solutions
Decarbonisation services to
high-quality business customers
* Commissioning from 2025.
Driven by our purpose
Our purpose is to enable a zero
carbon, lower cost energy future
Sustainability underpins what we do
Helping to ensure we have a positive impact
on the climate, nature, and people
Our purpose
Sustainability
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Drax Group plc Annual report and accounts 2024
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Strategic report
Contents
How we add value
Supporting the UK’s
energysecurity – stable,
resilient energy supply,
andreduced reliance
onfossil fuels
Supporting the energy
transition – secure,
renewable, dispatchable
UKpower generation
No.1
UK’s largest single source
of renewable power (9.8%)
No.2
Second largest
producer of sustainable
biomass globally
Workforce
Seepage 97
Shareholders
and investors
Seepage 99
Communities
Seepage 102
Government, political
bodies and regulators
Seepage 100
Customers and suppliers
Seepage 101
Our stakeholders
Drax Group plc Annual report and accounts 2024
9
Strategic report
Contents
Chair’s statement
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
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. For more information please
see page 17.
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.
2024 was a successful year for
theGroup in which we delivered
astrong operational andfinancial
performance.
Andrea Bertone
Chair
Our purpose is well aligned with the competing
prioritiesofenergy security, affordability,
and the need todecarbonise economies.
Drax Group plc Annual report and accounts 2024
10
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Contents
Board composition (women)
44%
Dividend per share increase
12.6%
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
Delivering positive outcomes
forclimate, nature, and people
iscentral to our plans.
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11
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CEO’s review
Our strategy is designed to realise
ourpurpose of enabling a zero
carbon, lower cost energy future.
Energy security, affordability, and
the need to decarbonise economies
– the energy trilemma – have
remained important global themes
in 2024.
Will Gardiner
CEO
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
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.
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12
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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
p.a. 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 p.a.
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.
We continue to develop a culture
with thecapabilities to support
thedelivery of our strategy and
create long-term value.
Safety remains a primary
focus, and in 2024 weachieved
a significant improvement
inperformance.
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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 p.a.), 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
CEO’s review continued
Alongside supplying renewable
energy, we are increasingly active
in the provision of valueadding
services, including asset
optimisation and EV services.
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For more information on our strategic pillars, please see “Our Story” on page 3.
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
To be a global leader
in carbon removals
To be a global leader
insustainable
biomasspellets
Our strategic pillars
To be a UK leader
in dispatchable,
renewable generation
Drax Group plc Annual report and accounts 2024
15
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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.
CEO’s review continued
+5%
Adjusted EBITDA of £1,064 million
represents a 5% increase on 2023
(£1,009 million).
37%
improvement in safety performance,
witha TRIR of 0.24 (2023: 0.38).
To support the development of
our Global BECCS business we’ve
established a global HQ for carbon
removals in Houston.
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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 Forest
Stewardship Council® (FSC®) (FSC-
123692), 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.
Will Gardiner
CEO
26 February 2025
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.
Drax is continuing to play an
important role in supporting
energy security in the UK.
* SFI marks are registered marks owned by
theSustainable Forestry Initiative Inc.
Drax Group plc Annual report and accounts 2024
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CFO’s financial review
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.
Strong financial performance and
cash generation in 2024 supported
increased returns to shareholders,
with a 12.6% increase in dividend
per share and a new share buyback
programme initiated.
Andy Skelton
Chief Financial Officer
The Group continued to deliver strong
financial performance, which has enabled
increased returns to shareholders in2024.
Drax Group plc Annual report and accounts 2024
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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 2.7. 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).
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)
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CFO’s financial review continued
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 2.7
(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%).
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.
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.
Details of the new debt and facilities,
andrepayments are provided in note 4.2
‘Borrowings’. 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.
Drax Group plc Annual report and accounts 2024
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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
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
Financing activities related to principal
drawdowns and repayments of borrowings
showed a net outflow of £217 million in line
with the narrative in note 4.2 ‘Borrowings’.
Liquidity
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
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 2.7
(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, as
documented in the Viability statement.
Andy Skelton
CFO
26 February 2025
Drax Group plc Annual report and accounts 2024
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Types of feedstock (global)
Sawmill and other wood industry
residues
Woody material produced during the
processing of wood at the sawmill, such
assawdust, shavings, chips, and offcuts.
Low-grade roundwood
Low-grade roundwood is material which
does not satisfy the quality standards set
by the timber industryand is unsuitable
foruse ina sawmill.
Thinnings
Wood from a silvicultural operation where
the main objective is to reduce the density
of trees in a stand, improve the quality and
growth of the remaining trees and produce
a saleable product.
Agricultural residues
Non-woody processing residues, that
arenot the end product that a production
process directly seeks to produce.
Branches and tops
Tops, bark and limbs of trees that have
been left behind post harvest.
End-of-life trees
Trees that are felled because they have
defective stems, are ill or damaged or
treesthat are removed from a plantation
because they have reached the end of
their productive lifetime or trees that must
be removed for the permitted construction
of infrastructures.
Sawmill and
other wood industry
residues (46%)
Low-grade
roundwood (31%)
Agricultural
residues (3%)
Branches
and tops (3%)
Thinnings (16%)
•
Fuel for Drax Power
Station: 85%
•
Third-party pellet sales: 15%
End-of-life
trees (1%)
9m
tonnes of
fibre sourced
13
regions
Proportions of feedstock
sourced in 2024
How we use our
sourced fibre
Drax Group sourced a total of 9 million tonnes
of fibre in 2024 from 13 sourcing regions
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.
Bydoing this, we can work towards our
commitment to deliver positive outcomes
for climate, nature and people.
The Climate Change Committee (CCC),
International Energy Agency (IEA), and
UN Intergovernmental Panelon Climate
Change (UNIPCC) all identify an
important ongoing role for sustainable
biomass power in delivering
adecarbonised energy system.
It is important Drax only sources biomass
which is sustainable, otherwise the
benefits to climate, nature, and people
may be lost.
Drax uses a series of controls and
mitigations, including our policies,
processes and procedures, post-harvest
monitoring andindependent third-party
certification.
Safeguarding responsible
biomass sourcing
The backbone of a net zero economy will be a
zero-carbon power system. Biomass, in the form
of compressed wood pellets, is a low-carbon
replacement for coal that can be used at power
stations to generate renewable energy.
Drax Group plc Annual report and accounts 2024
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66.7%
US
1.5%
Brazil
23.4%
Canada
0.7%
Portugal
0.6%
UK
0.3%
Bulgaria
Drax does not own forests or sawmills.
While we do not own or manage forests,
we do safeguard our wood sourcing by
abiding by the certifications and
accreditations applicable to each of
theterritories and applying our biomass
sourcing policy toallbiomass we source.
Third-party certification is a critical part
ofour due diligence process. Our key
certification scheme is SBP a scheme
specificto the biomass industry. Under
thescheme, independent certification
bodies audit biomass suppliers against
thestandards developed by SBP. The
standards look holistically across the
supply chain including the management
offorests to ensure the health and
vitalityof ecosystems are maintained.
Also, in many cases the forests we
sourcefrom are certified to the SFI
ForestManagement Standard, which
isendorsed under the PEFC.
In the US, where there is abundant
privately owned forest land, our SFI Fiber
Sourcing, FSC® Controlled Wood, and SBP
Certifications provide a robust framework
for assuring, and verifying, sustainability.
All Drax operated pellet plants hold an SBP
Certificate and are subject to an annual
audit by an independent certification body.
Pellet plants holding an active SBP
certification can apply SBP claims to the
pellets they produce. The certification
status of wood pellets produced at
Draxpellet plants varies by customer
requirement, but are sustainably
producedeither way.
Canadian operations
In Canada, where Drax operates 10
pelletmills, around 94% of the forests
arepublicly owned. The Government
ofBritishColumbia, in partnership with
FirstNations, has procedures, policies,
andlawsin place to help ensure
sustainable forest management practices,
protect important forest ecosystems and
support the forest products sector.
Without a market for the low-grade woody
fibre from forests, this material may be
burnt on site at sawmills or may be left
asslash (piles of timber damaged or
otherwise unsuitable for lumber mills and
other woody debris). Removal of debris
isatactic used as part of a wider set of
activities to mitigate wildfire risk and the
spreading of disease and pests in Canadian
forests. But it is not a good climate or
economical outcome to burn forest
residue in forests or at the roadside. We
believe that it is far better to utilise this
fibre according to strict criteria and best
practice, to generate social value and
renewable electricity.
81% of our fibre from Canada comes
fromsawdust and other sawmill residues
created when sawmills produce wood
products used in construction and other
industries. The remaining 19% of our fibre
comes from forest residues, including
low-grade roundwood, tops, branches and
bark. Typically, pellets produced by Drax in
Canada are sold to third-party customers
in Asia to fulfil long-term sales contracts.
5.5%
Latvia
1.0%
Estonia
0.1%
Lithuania
0.2%
Other
European
Regions where we source our wood
Third-party certifications
andaccreditations
SFI®: The Sustainable Forestry Initiative
SBP: Sustainable Biomass Program
PEFC: Programme for the Endorsement
ofForest Certification
FSC
®: Forest Stewardship Council®
Drax Group plc Annual report and accounts 2024
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Contents
Biomass sourcing: Group overview
In 2025, we expect to publish a
revised biomass sourcing policy with
an explicit commitment that this
applies to all biomass that Drax
sources – whether this is for our
pellet production, sold to third parties,
used at Drax Power Station (including
third-party purchased biomass),
orpotential future use in BECCS
atElimini.
The revised policy will be an evolution
of the 2019 publication and more
accurately reflects our global
business today. It is structured
arounda series of core principles and
builds on the wider Sustainability
Framework of delivering positive
outcomes for Climate, Nature, and
People; underpinned by a commitment
to compliance, traceability, and
transparency whilst conducting open
stakeholder engagement.
Drax will use independent third-party
certification schemes as part of the
implementation of the new policy.
US operations
In the US South, where Drax operates
seven pellet plants, over 85% of the forest
is privately owned, with the majority in
family ownership and a smaller percentage
owned by large forestry organisations.
Ourbusiness model supports the broader
forest products sector and provides a
valuable market for forest residues
including low-grade roundwood and
thinnings – material whichis not suitable
for sawtimber. Theestablished sustainable
forest management practice of thinning is
widely used in the US South and serves to
maintain forest health, increase sawtimber
production, and improve the productivity
of the forest ecosystem.
In 2024, 56.3% of biomass Drax sourced
inthe US South was from thinnings and
low-grade roundwood, whilst 39.3% was
sourced from sawmill residues. In addition
to our Biomass Sourcing Policy, processes,
and procedures, Drax utilises independent
third-party certification schemes, which in
the US South includes SFI and FSC® across
all its US pellet plants. This is in addition to
SBP where all Drax operated pellet plants
had a valid SBP Certificate and, in 2024,
over 88.5% of the material supplied came
with a SBP Compliant Claim.
Third-party pellet sourcing
In addition to our own operations, we
source third-party pellets from across
North and South America, as well as
Europe, to be used at Drax Power
Station. Additionally Drax trades pellets
from Asia, North America, and Europe to
fulfil long-term sales commitments to
third-party customers. Sourcing of these
pellets is subject to due diligence and Drax
has processes and procedures in place to
establish that the material is sustainably
produced and compliant with our biomass
sourcing policy and relevant legislation.
In 2024, thevolume of pellets traded
was703,992 tonnes. 84% of the traded
volume held an SBP Compliant claim.
Theremainder was either PEFC/SBP
controlled or without the claim. The
volume without a claim was sourced from
a supplier that is SBP certified and FSC®
certified. Through a combination of on
theground supplier visits, independent
external audit, and assessment of
sustainability risks, we work to ensure
oursuppliers’ meet their markets’
requirements.
Biomass sourcing policy
Drax is proud to acknowledge
itsongoing Memorandum of
Cooperation with The Federation
of Southern Cooperatives.
Drax and the Federation of Southern
Cooperatives share a joint
understanding of the important role
thatsmall forest landowners play in
delivering forest health, environmental
justice, and good economic and social
outcomes in rural communities. We also
share an ambition to increase access
forsmall forest landowners to the fibre
market, where these landowners have
been previously disadvantaged.
This Memorandum of Cooperation sets
out a joint understanding between
Draxand the TFSC, as well as areas
forcooperation.
US – The Federation of Southern
Cooperatives (TFSC)
CASE STUDY
Drax Group plc Annual report and accounts 2024
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Contents
Policy and standard developments
CAAs
As part of the assessment of carbon
stocks, Drax commissions independent
Catchment Area Analysis (CAA) in some
ofthe regions from which we source.
These studies evaluate the carbon stocks
in those forests and how forestry and
other human or natural interventions
haveimpacted or may impact those
carbon stocks. We are committed to
reviewing themethodology of these
studies as the science develops. Our CAAs
are published on our website, with details
of the independent body completing the
work, the methodology used, and their
findings. Where findings are inconclusive
or indicate a negative impact, we aim to
investigate further. Completion of our
CAAs is part of a rolling programme, and
todate we have covered 52.2% of our
sourcing, based on Group sourcing in
2024. During 2024, Drax completed all
four of its CAAs, commissioned in 2023.
Drax will continue to assess the CAA
programme for its pellet plants, for
moreinformation see Drax’s website.
REDIII and EUDR
2025 is a crucial year for the
implementation of new regulation
covering biomass sourced for use in the
EU. The EU’s “Fit for 55” legislative
package brings updates to key pieces
oflegislation including the Renewable
Energy Directive (REDIII).
Meanwhile, the new EU Deforestation-
free products Regulation (EUDR)
introduces new requirements prohibiting
deforestation and forest degradation.
REDIII strengthens biomass sustainability
criteria to reflect good forest management
practices and aligns with the cascading
principle to ensure that wood is utilised to
its highest economic and environmental
added value. The EUDR requires
companies to undertake due diligence to
ensure products do not result from recent
(post 31 December 2020) deforestation,
forest degradation, or breaches of local
environmental and social laws. Both
pieces of legislation impose additional
requirements that will require adjustments
in order to trade wood pellets into and
from the EU. We are working towards
compliance with EUDR and REDIII and
have formed a project to do so. We
therefore continue to closely monitor
theimplementation process, through
ourmembership of trade associations
andengaging with different governments,
including the US, Canada and the EU.
UK Government requirements,
certification and assurance
The biomass used at Drax Power Station
isrequired to comply with the standards
set out in law, regulations, and the
requirements of the renewable support
schemes under which we operate. The
UKGovernment outlines sustainability
requirements for biomass generation
tobeeligible for renewable support.
In order to qualify for subsidies, the
biomass received at Drax Power Station
must comply with the Land Criteria
(whichfor wood pellets, sets out a range
of measures for sustainable forest
management) and the Greenhouse Gas
(GHG) Criteria. The GHG Criteria is a limit
set out by the UK Government, which
ensures that the totality of emissions
involved in our biomass supply chain
represents significant GHG reductions
compared to fossil fuels. The current
criteria for biomass, in the UK, is to ensure
supply chain emissions do not exceed
200kgCO
2
e/MWh electricity generated.
We are required to demonstrate, and
assure to an ISAE 3000 limited assurance
standard, that the biomass we use at Drax
Power Station is consistent with the UK’s
sustainability standards. We therefore
report monthly on the amount of biomass
used, the type of material used, where it
came from, and the GHG emissions from
the supply chain. Under UK regulations,
we must also confirm if the biomass
complied with the Land Criteria. At the
end of every compliance year, the
renewable support schemes require we
have an independent third-party audit
toassess the accuracy of the monthly
reporting submitted through the year.
AtDrax Power Station, to ensure we can
identify and track material through our
supply chain, we are certified against
FSC® (C-119787), SBP and PEFC®
(PEF C/16-37-1769).
In 2021, the Government of British
Columbia introduced Old Growth
Deferral Areas (OGDAs) as an
interim measure before a new
forest management approach
could beagreed with First Nations.
These began to be implemented in 2022
and are separate to Legal Old Growth
Management Areas (OGMAs).
Whilst the work to implement this
interim policy alongside the permanent
new forest management approach is
continuing, Drax has made thedecision
to stop sourcing wood fibre directly from
OGDAs, even if a legal harvest was
subsequently granted.
The implementation of this policy
change is ongoing and is in addition
toour commitment tonot source fibre
from OGMAs which are protected.
Old Growth DeferralAreas
and our approach
CASE STUDY
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Biomass sourcing: Data summary
Drax Group sources of fibre
Sawmill and other
wood industry
residues (t)
Branches
and tops (t) Thinnings (t)
Low-grade
roundwood (t)
End-of-life trees
(t)
Agricultural
residues (t)
Country
total (t)
US 2,351,502 64,931 1,342,820 2,026,266 2 19 4,110 5,979,631
Canada 1,703,775 173,279 – 214,408 6,529 – 2,097,99 0
Latvia 54,380 6,833 16 428,738 – – 489,967
Brazil 6,527 – – 42,13 7 84,399 – 133,062
Estonia 17,07 3 372 12,256 63,488 – – 93,18 9
Portugal 1,13 6 7,412 44,528 10,659 514 – 64,249
UK – – – – – 55,103 55 ,103
Bulgaria – – – – – 23,394 23,394
Other European 2,623 – – 11,561 – – 14,184
Lithuania 6,444 – – 6,334 – – 12,777
Total 4,143,459 252,827 1,399,620 2,803,591 91,443 272,608 8,963,549
Drax Power Station sources of fibre (material consumed at Drax Power Station)
Sawmill and other
wood industry
residues (t)
Branches and
tops (t) Thinnings (t)
Low-grade
roundwood (t)
End-of-life trees
(t)
Agricultural
residues (t)
Country
total (t)
US 2,257,8 41 64,931 1,342,820 2,026,266 2 19 4,110 5,885,970
Canada 683,002 67, 243 – 57,893 6,529 – 814,667
Latvia 54,380 6,833 16 428,738 – – 489,967
Brazil 6,527 – – 4 2 ,13 7 84,399 – 133,062
Estonia 17,07 3 372 12,256 63,488 – – 93,18 9
Portugal 1,13 6 7,412 44,528 10,659 514 – 64,249
UK – – – 0 – 55 ,103 55,103
Bulgaria – – – 0 – 23,394 23,394
Other European 2,623 – – 11,561 – – 14,184
Lithuania 6,444 – – 6,334 – – 12,777
Total 3,029,026 146,792 1,399,620 2,6 47,076 91,443 272,608 7,586,564
Our performance
Unit 2024 2023 2022
Drax Power Station
Total volume of fibre (material consumed at Drax Power Station)
(1)
t 7,586,564* 5,979,554 6,633,722
Proportion of woody biomass consumed at Drax Power Station with
SBPCompliant claim
% 98.6* 96.9 96.6
* Limited external assurance by Bureau Veritas UK Limited using the assurance standard ISAE 3000. For assurance statement see drax.com/sustainability.
(1) Reported figure reflects volume consumed for power generation at Drax Power Station in 2024.
Drax has a long-term
commitment to only utilise
sustainable biomass in its
production processes.
Thecollection and analysis
ofbiomass sourcing data
playsavital role in ensuring
itssustainability and
understanding the origins
andmethods of procurement.
This also allows us to make
informed decisions and
support transparency in
reporting and accuracy
oftheinformation.
In the US South, thinning plays an
important role in managing healthy
andproductive pine forests.
Thinning is an intermediate harvest,
taken by forestry managers, aimed at
reducing tree density to allocate more
resources, like nutrients, sunlight, and
water, to trees which will eventually
become valuable sawtimber. Thinning
improves the forest’s resilience to pest,
disease, and wildfire, as well as
enhancing diversity and wildlife habitat.
It also increases future sawtimber yields.
Results across US forestland show the
volume of annual timber growth is
higher than the volume of annual
timberremovals.
Managing healthy and
productive pine forests
CASE STUDY
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Reducing carbon dioxide emissions
We are committed to ensuring our use
ofbiomass makes a positive contribution
to tackling climate change which we
believe can contribute to fulfilling the
UK’snet zero target by 2050.
Seepage 38
Protecting the natural environment
We recognise our part in supporting a
thriving forestry industry and to respect
the many benefits that forests bring,
including carbon storage, protection
ofsoiland water quality, supporting
biodiversity and provision of habitat.
Seepage 44
Supporting people and communities
From state-owned forests to
smallholdings, and from British Columbia
to the Baltic states, forest owners, forest
workers, and communities in our sourcing
areas are bound by their common reliance
on forests for employment, wellbeing,
andquality of life.
Seepage 50
Investing in research, outreach,
and intervention
The strength of our collaboration with
others will improve the sourcing choices
we make. We are committed to working
with governments, non-governmental
organisations, academia, and other
stakeholders to continually improve
biomass sourcing and develop best
practice that reflects our goals for
Climate, Nature and People positive
outcomes.
Seepage 96
We are committed to
responsible biomass sourcing,
outlined in our biomass
principles, which can generate
broader benefits and create
positive outcomes across the
value chain. Some of these
are listed here.
Utilising low-grade woody fibre from
forests helps prevent the spread of fire,
pests, and disease by reducing forest
density to healthier levels and removing
deadwood which can attract insects and
pathogens. We believe it is far better to
utilise this fibre according to strict criteria
and best practice, in order to generate
social value and renewable electricity.
The carbon cycle: biomass and BECCS
FOSSIL
FUELS
BIOMASS
BECCS
BECCS will take theCO
2
produced from bioenergy and locks it
underground. Thiswill result in low-carbon energy as well as
permanent carbonremovals.
CO
2
CO
2
CO
2
When electricity is generated through fossil fuels, it releases
carbon which has been locked in the ground for millions of years.
* As long as wood pellets are sourced from areas that are managed to maintain or increase productive forest cover,
CO
2
emissions and forest uptake will balance on climate relevant timescales.
Using woody biomass is a more sustainable
energy generation process because forests
naturally absorb CO
2
in their growth cycle.
When biomass is burned for energy
generation, it releases the same CO
2
that
was absorbed during the plant’s lifetime.*
Plants absorb
CO
2
as they grow.
Primary markets for timber drive
forest processes, and residual
forestry material and plants, that
cannot be used can be turned
into wood pellets by suppliers.
Drax Group plc Annual report and accounts 2024
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Measure Definition/why it matters Performance Target Strategic link Link to risks Link to remuneration
Financial
Adjusted EBITDA
(£million)
This is our principal financial performance metric,
combining the earnings of each business to give a
Groupoutcome.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 195.
2
024
2
023
2
022
1,064
1,009
731
To grow the Adjusted
EBITDA of the Group
tosupport investment
inthestrategy.
2
6
3
7
4
8
5
The Adjusted EBITDA performance measure
has a 40% weighting on the Group Scorecard.
Seepage 133
Net debt
(£million)
This is a key aspect of measuring liquidity through
assessing compliance with the Group’s financial
covenants and is used as a basis by debt rating
agenciesto assess credit risk.
The definition and calculation of Net debt is set out
onpage 195.
2
024
2
023
2
022
992
1,220
1,359
Long-term target of Net
debt to EBITDA of around
2.0 times.
3
8
4 5 6
The 2024 bonus Scorecard has a 15%
weightingonnet cash flow, which is directly
linkedto Netdebt.
Seepage 133
Adjusted Pellet
Production EBITDA
(£million)
This is a key measure of the performance of
thisoperating segment and our ability to manage
ourstrategy for the business.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 195 and EBITDA by segment is
included on page 195.
2
024
2
023
2
022
143
89
134
Targeting Adjusted EBITDA
of £250 million pos t 2027.
3
7 8
4 5 6
This is linked to the Group’s Adjusted EBITDA
performance measure that has a 40% weighting
onthe Group Scorecard.
Adjusted Flex Gen &
Energy Solutions
EBITDA
(£million)
This is a key measure of the performance of these
operating segments and our ability to manage our
strategy for the combined business.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 195 and EBITDA by segment is
included on page 195.
2
024
2
023
2
022
189
302
197
Targeting Adjusted EBITDA
of £250 million pos t 2027.
3
8
5 6 7
This is linked to the Group’s Adjusted EBITDA
performance measure that has a 40% weighting
onthe Group Scorecard.
Non-financial
Total Recordable
Incident Rate (TRIR)
Keeping our people safe is a core principle. TRIR is
anindustry standard measure of fatalities, lost time
injuriesand medical treatment injuries per 100,000
hours worked.
You can read more about health, safety, and wellbeing
inPeople Positive on page 50.
2
024
2
023
2
022
0.24
0.38
0.44
TRIR of 0.20 per 100,000
hours worked.
1 9
The safety performance measure has a
5%weighting in Group Scorecard.
Seepage 133
Group carbon
emissions
Scope 1, 2 and3
(ktCO
2
e)
We are focused on reducing carbon emissions – as
measured by reductions in our Scope 1, 2 and 3
footprint – which enables us to track progress towards
achieving our near-term and net zero SBTi targets.
Youcan read more about this in Climate Positive on
page38.
Scope 1 and 2 Scope 3
2
024
2
023
2
022
2,867
3,534
3,123669
486
546
To achieve our externally
disclosed SBTi
decarbonisation targets.
2
6
3
8
4 5
The 2024 Group Scorecard has a 5%
weightingonmeasures focused on reducing
ourcarbon emissions.
Seepage 133
Biomass generation
(TWh)
This is an important measure of the renewable power
generation at Drax Power Station and a key part of our
strategy – to be a UK leader in dispatchable, renewable
generation.
2
024
2
023
2
022
14.63
11.45
12.68
To be a UK leader in
dispatchable, renewable
generation.
1
5 6
2
8
3 4
Biomass generation plays a significant role in
theGroup strategy and links to the financial
performance as well as indirectly linked to other
elements of the Group Scorecard, including UK
BECCS and pellet production.
Pellets produced
(Mt)
This measures a key part of our strategy – to increase
our pellet production capacity and output.
This represents the number of pellets produced
in millions of tonnes.
2
024
2
023
2
022
4.0
3.8
3.9
To be a global
leaderinsustainable
biomasspellets.
3
8
4 5 6
Increasing the pellet production capacity is a key
component in growing reported Adjusted EBITDA
results. Delivery of pellet volume has a 5%
weighting in the Group Scorecard.
Seepage 133
Key performance indicators
To be a global
leader incarbon
removals
Our strategic pillars:
To be a UK leader
indispatchable,
renewable generation
To be a global
leader in sustainable
biomass pellets
Drax Group plc Annual report and accounts 2024
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Contents
Measure Definition/why it matters Performance Target Strategic link Link to risks Link to remuneration
Financial
Adjusted EBITDA
(£million)
This is our principal financial performance metric,
combining the earnings of each business to give a
Groupoutcome.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 195.
2024
2023
2022
1,064
1,009
731
To grow the Adjusted
EBITDA of the Group
tosupport investment
inthestrategy.
2
6
3
7
4
8
5
The Adjusted EBITDA performance measure
has a 40% weighting on the Group Scorecard.
Seepage 133
Net debt
(£million)
This is a key aspect of measuring liquidity through
assessing compliance with the Group’s financial
covenants and is used as a basis by debt rating
agenciesto assess credit risk.
The definition and calculation of Net debt is set out
onpage 195.
2024
2023
2022
992
1,220
1,359
Long-term target of Net
debt to EBITDA of around
2.0 times.
3
8
4 5 6
The 2024 bonus Scorecard has a 15%
weightingonnet cash flow, which is directly
linkedto Netdebt.
Seepage 133
Adjusted Pellet
Production EBITDA
(£million)
This is a key measure of the performance of
thisoperating segment and our ability to manage
ourstrategy for the business.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 195 and EBITDA by segment is
included on page 195.
2024
2023
2022
143
89
134
Targeting Adjusted EBITDA
of £250 million pos t 2027.
3
7 8
4 5 6
This is linked to the Group’s Adjusted EBITDA
performance measure that has a 40% weighting
onthe Group Scorecard.
Adjusted Flex Gen &
Energy Solutions
EBITDA
(£million)
This is a key measure of the performance of these
operating segments and our ability to manage our
strategy for the combined business.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 195 and EBITDA by segment is
included on page 195.
2024
2023
2022
189
302
197
Targeting Adjusted EBITDA
of £250 million pos t 2027.
3
8
5 6 7
This is linked to the Group’s Adjusted EBITDA
performance measure that has a 40% weighting
onthe Group Scorecard.
Non-financial
Total Recordable
Incident Rate (TRIR)
Keeping our people safe is a core principle. TRIR is
anindustry standard measure of fatalities, lost time
injuriesand medical treatment injuries per 100,000
hours worked.
You can read more about health, safety, and wellbeing
inPeople Positive on page 50.
2024
2023
2022
0.24
0.38
0.44
TRIR of 0.20 per 100,000
hours worked.
1 9
The safety performance measure has a
5%weighting in Group Scorecard.
Seepage 133
Group carbon
emissions
Scope 1, 2 and3
(ktCO
2
e)
We are focused on reducing carbon emissions – as
measured by reductions in our Scope 1, 2 and 3
footprint – which enables us to track progress towards
achieving our near-term and net zero SBTi targets.
Youcan read more about this in Climate Positive on
page38.
Scope 1 and 2 Scope 3
2024
2023
2022
2,867
3,534
3,123669
486
546
To achieve our externally
disclosed SBTi
decarbonisation targets.
2
6
3
8
4 5
The 2024 Group Scorecard has a 5%
weightingonmeasures focused on reducing
ourcarbon emissions.
Seepage 133
Biomass generation
(TWh)
This is an important measure of the renewable power
generation at Drax Power Station and a key part of our
strategy – to be a UK leader in dispatchable, renewable
generation.
2024
2023
2022
14.63
11.45
12.68
To be a UK leader in
dispatchable, renewable
generation.
1
5 6
2
8
3 4
Biomass generation plays a significant role in
theGroup strategy and links to the financial
performance as well as indirectly linked to other
elements of the Group Scorecard, including UK
BECCS and pellet production.
Pellets produced
(Mt)
This measures a key part of our strategy – to increase
our pellet production capacity and output.
This represents the number of pellets produced
in millions of tonnes.
2024
2023
2022
4.0
3.8
3.9
To be a global
leaderinsustainable
biomasspellets.
3
8
4 5 6
Increasing the pellet production capacity is a key
component in growing reported Adjusted EBITDA
results. Delivery of pellet volume has a 5%
weighting in the Group Scorecard.
Seepage 133
Our Risks:
1
Environment, Health & Safety
2
Political & Regulatory
3
Strategic
4
Biomass Acceptability
5
Plant Operations
6
Trading & Commodity
7
Information Systems & Security
8
Climate Change
9
People
Drax Group plc Annual report and accounts 2024
29
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Sustainable
development
Contents
34 Introduction
38 Climate positive
44 Nature positive
50 People positive
56 Task Force on Climate-related
Financial Disclosures (TCFD)
69 Non-Financial and Sustainability
Information Statement
69 Assurance statements
Sustainability is a core part of ourmission,
aswe seek to address the global challenge
ofclimate change.
Miguel Veiga-Pestana
Chief Sustainability Officer
Drax Group plc Annual report and accounts 2024
30
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CDP Climate Change
A- (2023: A-)
In 2024, Drax Group plc received a score of A- (onascale
of F – A). CDP is a not-for-profit charity thatruns a global disclosure system
for investors, companies, cities, states and regions to manage their
environmental impacts. Please see the CDP website for further details.
CDP Forests
A- (2023: B)
In 2024, Drax Group plc received a score of A- (on a scale of F – A).
MSCI
A (2023: A)
In 2024, Drax Group plc had a rating of A (on ascale of AAA-CCC) in
theMSCI ESG Ratings assessment
(1)
.
Morningstar Sustainalytics
22 (2023: 23.5)
As of February 2025, Drax Group plc’s Sustainalytics ESG Risk Rating was
22 – medium risk
(2)
.
ISS ESG
B- prime (2023: B- prime)
As at 18/02/2025, Drax Group plc had an ISS ESG Corporate Rating of B-
Prime (on a scale ofD-toA+). Corporate Rating prime status is awarded
tocompanies with an ESG performance above the sector-specific
Primethreshold.
Moody’s Analytics
60 (2023: 62)
In 2024, Drax Group plc had an overall ESG score of62 from Moody’s
Analytics (on a scale of 0 to 100, with 100 being the highest score).
ESG Ratings Summary
(1) The use by Drax Group plc of any MSCI ESG Research LLC or its affiliates (“MSCI”) data,
and the use of MSCI logos, trademarks, service marks or index names herein, do not
constitute a sponsorship, endorsement, recommendation, or promotion ofDrax Group plc
by MSCI. MSCI services and data are the property of MSCI or its information providers
andare provided “as-is” and without warranty. MSCI names and logos are trademarks or
service marks of MSCI.
(2) Copyright ©2024 Morningstar Sustainalytics. All rights reserved. The information, data,
analyses and opinions contained herein: (1) includes theproprietary information of
Sustainalytics and/or its content providers; (2) may not be copied or redistributed except
as specifically authorised; (3)do not constitute investment advice nor an endorsement
ofany product, project, investment strategy or consideration of any particular
environmental, social or governance related issues as part of any investment strategy;
(4)are provided solely for informational purposes; and (5) are not warranted tobe complete,
accurate or timely. The ESG-related information, methodologies, tool, ratings, data,
andopinions contained orreflected herein are not directed to or intended for use or
distribution toIndia-based clients or users and their distribution to Indian resident
individuals or entities is not permitted. Neither Morningstar Inc., Sustainalytics, nor their
content providers accept any liability for the use ofthe information, for actions of third
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subject to conditions available at www.sustainalytics.com/legal-disclaimers.
Drax Group plc Annual report and accounts 2024
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We recognise the significant role we can
play in shaping a sustainable future. The
challenges society faces environmentally,
socially, and economically are vast, but
soare the opportunities. Businesses must
step up and participate in driving positive
change, and Drax is fully committed to
playing ourpart. Our responsibilities go
beyond short-term business goals. We
appreciate that the impacts of our actions
resonate across industries, communities,
and ecosystems, and we must be part of
the wider efforts to safeguard the future
ofour planet.
Drax generates 10% of the UK’s renewable
power, and as such we have an important
part to play inthe UK’s role in tackling
climate change. We have a heritage in
contributing to thatchange, through our
successful transition from fossil fuels,
andwe remain committed to further
reducing carbon emissions subject to
theright investment environment.
During 2024 we made positive strides
inseveral key areas for delivering our
sustainability objectives, particularly in
enhancing our governance structures
andincreasing thetransparency of our
disclosures.
We have largely concluded the
development of our 2030 Sustainability
Framework – our guiding principles and
commitments – setting out the vision for
our 2030 Sustainability Plan, which will
shape our commitments and targets. The
Framework retains our existing purpose
toenable a zero carbon, lower cost energy
future and its existing pillars of Climate,
Nature, and People positive with focused
and time-bound commitments against
each of the pillars.
Sustainability is core to
ourpurpose of enabling
azero carbon, lower cost
energy future.
This Framework will guide us as we
address the interconnected challenges
ofenvironmental protection, social equity,
and economic resilience andIlook forward
to sharing this with youin 2025.
We have continued to progress towards
our SBTi targets, and remain ahead of our
Generation Scope 1 and 2 intensity target
for 2030. These targets are considered
and approved by the Board and
supplemented by a programme that
embeds the delivery of decarbonisation
across the Group. In 2024 we also began
the process of seeking validation from
SBTi for additional 2040 targets.
We have made progress developing
disclosures, on a voluntary basis, based
onthe recommendations of the Taskforce
for Nature-related Financial Disclosures
(TNFD). We worked with business
colleagues to develop programmes at
aunit level intended to realise specific
community level targets. In 2024, we also
strengthened our reporting through the
publication of our first EU Taxonomy
report and a Double Materiality
assessment, both of which are intended
tofurther enable and support the delivery
of future key climate-related actions and
were completed on a voluntary basis.
Therest of this report provides further
details on all of these areas.
These steps reflect our core values and
our commitment to operating with
integrity and accountability.
Notwithstanding this progress, regrettably
there were aspects of our 2024 ambitions
that were not fully realised in the year.
Sustainability is the
cornerstone of long-term
success and fundamental
tothe transformation of our
business. By ensuring that we
source sustainable biomass,
and that we embed sustainable
practices into every facet of our
operations, we can build lasting
value for our business and the
communities we serve.
Miguel Veiga-Pestana
Chief Sustainability Officer
Sustainable development continued
Drax Group plc Annual report and accounts 2024
32
Strategic report
Contents
In2023 we committed to the delivery
ofour Climate Transition Plan by the
endof 2024, but proactively elected not to
do this in the fourth quarter. This was done
in order to co-ordinate its release with the
closely related Sustainability Framework.
Additionally, this allows for a more
up-to-date assessment of our current
progress utilising 2024 emissions data
(versus previous 2023 data set).
We did not achieve a full roll-out of a
Group Nature Policy in 2024, but we
diddevelop our understanding of the
Group’s nature-related risks, impacts,
dependencies and opportunities. Until a
new policy becomes effective, the Group
Environment Policy outlines our
commitment to minimise adverse impacts
of our operations on the environment,
andour management and monitoring
commitments to support this.
The myriad of regulatory regimes and
theirvaried reporting obligations that
apply across our Group can be challenging,
but we continue to make progress in
verifying compliance across the breadth
ofour activities. We recognise that this
requires continuous attentiveness,
attention to detail, and close collaboration
across all levels of the organisation. We
have sought to align our practices with
theexpectations of a broad range of
stakeholders, ensuring that their
perspectives are integrated into our
approach. Regulatory compliance is
nolonger about simply meeting minimum
standards – it is about actively engaging
with emerging frameworks and advancing
beyond compliance to lead by example in
the industry.
Acting responsibly is core to Drax’s future
success, and I am excited about the
journey ahead. With the building blocks
wehave put in place – including
conducting our first Double Materiality
assessment, the launch of our new five
year Sustainability Framework, our
alignment with EU Taxonomy, and the
work we have done to revise our Biomass
Sourcing Policy – we will be better
positioned to meet the sustainability
challenges of the future whilst creating
long term value for our stakeholders.
From these strong foundations, I believe
we will continue to build on 2024’s
momentum in the years to come.
Ourcommitment to sustainability is not
aone-time effort but an ongoing journey,
one that we approach with passion,
dedication, and a sense of responsibility
tofuture generations. I look forward to
sharing more about our work and our vision
as we continue to evolve and grow as a
sustainable, forward-thinking business.
Miguel Veiga-Pestana
Chief Sustainability Officer
26 February 2025
What’s inside
Climate positive
Reaching net zero by 2040 across
our value chain.
Seepage 38
Nature positive
Supporting biodiversity across our sites and
in our value chain by the end of 2030.
Seepage 44
People positive
Making a positive contribution to the
livesand livelihoods of our colleagues,
communities, and workers in our supply
chain by 2030.
Seepage 50
Task Force on Climate-related
Financial Disclosures
Seepage 56
Our reports and policies
ESG Performance Report 2024
Our ESG Performance Report
provides additional environment,
social, and governance data.
Visit www.drax.com/sustainability
Policies
For publicly available policies
referenced in this section:
Visit www.drax.com/about-us/
corporate-governance/
compliance-and-policies/
Contents
Environment
2 Generation, Pellet Production,
andCustomers
3 Carbon and energ y
5 Nature and environmental
management
Social
7 Health and safet y
7 Our people
8 Social value
Governance
9 Ethics and integr ity
Assurance statements
1 0 Assurancestatements
Our ESG Performance
Report 2024 provides an
overview of our ESG data
Drax Group plc
Drax ESG Performance
Report 2024
Policies and key document s
areavailable at
www.drax.com/about–us/
corporate–governance/
compliance–and–policies/
Drax Group plc Annual report and accounts 2024
33
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Contents
Sustainable development continued
Introduction
At Drax, sustainability is a core principle
that shapesour day-to-day operations
and our vision forthe future. In 2024,
wecontinued to invest inenhancing
ourstrategy, in the science thatinforms
our business model, and to leadtheway
with our transparent reporting.
BECCS Done Well
In 2024, we published our updated
response to “BECCS Done Well”, the
independent inquiry by Jonathon Porritt
and the High Level Panel he led. Our
response grouped the 30 conditions for
BECCS Done Well into six themes:
1. Biomass – Drax policies and processes
requires it sources all biomass to verified
standards for sustainability.
2. Climate Positive Outcomes – Drax
maximises the “net negativity” of BECCS
bymaximising high CO
2
capture rates and
decarbonising the BECCS operation
andvalue chain.
3. Nature Positive Outcomes – Drax
recognises the growing need for
companies to contribute towards a
naturepositive future.
4. People Positive Outcomes – Drax will
work hard to realise positive impacts on
neighbours, communities and colleagues
while reducing negative impacts.
5. Transparency and Governance – Drax
will engage in reporting and disclosure.
Itwill use frameworks such as the Task
Force on Climate-related Financial
Disclosures (TCFD) and Taskforce on
Nature-Related Financial Disclosures
(TNFD), as well as all applicable regulatory
requirements.
6. Science – Drax is informed by science
and will listen to stakeholder feedback. We
routinely engage with academics, NGOs,
and industry bodies to assess the breadth
and robustness of scientific evidence.
We believe our response shows how
wehave listened to our stakeholders –
including Carbon Removal customers –
and their interests. Some of the issues
presented bythis work will not be solved
quickly or by Drax alone.
However, our response demonstrates
howwe will approach these issues and
play our part in the wider global challenge
of mitigating the adverse affects of
climate change.
Biomass Sourcing Policy
In 2025, Drax will publish its revised
biomass sourcing policy. The revised policy
is an evolution of the 2019 publication
which more accurately reflects the
business today. The policy applies to all
thebiomass that we source – whether for
our pellet production, sold to third parties,
used at Drax Power Station, or used in
thefuture for BECCS by Elimini. For more
information see page 24.
Double Materiality Assessment
Recognising the importance of
understanding both the financial impact
of environmental, social, and governance
(ESG) factors on our Group, and the
impact our activities have on the broader
environment and society, we undertook
a Double Materiality assessment in 2024.
This rigorous process built on the single
ESG materiality assessment performed
in 2023. See page 37 for more detail.
EU Taxonomy
Reporting against the EU Taxonomy
forthe first time in 2024 has been
anotherimportant development for
us,marking anew era of transparency
andaccountability in sustainable
financialreporting.
The EU Taxonomy report shows the
proportion of alignment of our Group
revenue, operating and capital
expenditure, and EBITDA with the
taxonomy criteria. The results show
ourcommitment to increasing the
proportion of our financials aligned
withthe taxonomy criteria, and
reaffirmour commitments to being
aresponsible business.
Key highlights
Drax Group plc Annual report and accounts 2024
34
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Contents
Evidence Hub
The Evidence Hub (formerly
“Evidence Book”) exists to
provide examination of
scientific evidence and
research related to the
BECCSvalue chain.
In compiling this, we are
working with external
organisations, technical experts
and our Independent Advisory
Board (IAB) to ensure accurate
reflection of the science. As
the science evolves, so too will
the Evidence Hub, ensuring the
topics covered reflect findings
and research surrounding the
BECCS value chain.
We expect to publish each
phase of the Evidence Hub
when finalised and it will be
reviewed by the IAB.
Climate Transition Plan
In 2025, we expect to publish
our first Climate Transition Plan
(CTP) in line with the Transition
Plan Taskforce (TPT) Disclosure
Framework.
Our CTP provides detail to our
stakeholders on how we intend
to meet our near term Science
Based Targets Initiative (SBTi),
and net zero targets across our
operations and value chain.
For more detail see our “at a
glance” summary on page 41.
Sustainability
Framework
We are committed to
advancingour sustainability
efforts through a focused
andforward-looking strategy.
In 2025, we plan to launch our
Sustainability Framework
underthe pillars ofClimate,
Nature and Peoplepositive.
TheFramework will enable
Drax to develop a coherent
narrative around these pillars,
with time-bound commitments,
clear governance and
established implementation
plans. In addition, the
Framework is expected to
support continued gap
identification inour disclosures
ensuring ongoing compliance
with reporting obligations.
TNFD
By the end of 2026, we intend
to publish our first TNFD report.
Though this ambition is
voluntary, it underscores our
commitment to integrating
nature-related risks and
opportunities into our strategic
decision-making processes.
Through work to meet the
requirements of the TNFD
framework, we expect to be
better able to identify, assess,
and manage our dependencies
and impacts on nature, which
isincreasingly recognised as
acritical factor in financial
andoperational resilience.
Our 2025 priorities
Much of the evidence related
to the use of biomass to
generate electricity and to
extract carbon from the
atmosphere by Bioenergy
with Carbon Capture and
Storage (BECCS) is contested.
The IAB’s job is to advise Drax
on the state of the scientific
evidence and to act as a
“criticalfriend” in helping
to ensure that their use
of biomass is as sustainable
as possible.
Lord John Krebs
Independent Advisory Board
The IAB was established in 2019 to
provide independent scientific challenge,
insight and advice on our biomass
sustainability.
The IAB focuses explicitly on thescience
that supports our strategy foreach of the
three pillars of our Sustainability
Framework – Climate, Nature and People
positive – and in particular the biomass
sustainability that underpins these.
The IAB comprises six scientists and
technical specialists (biographies are
available on the Drax website). In 2024,
Lord John Krebs took the position of Chair,
with Professor Sir Ian Boyd assuming
therole of Vice Chair. We thank our
previous chair of five years, Sir John
Beddington.
In 2024, the IAB met four times, with
further ad-hoc engagement between
members on topics pertaining to technical
expertise and background.
Every six months, the IAB produces a
report summarising its activities and
conclusions as well as how Drax is
responding to these. These are published
on drax.com/sustainability/sustainable-
bioenergy/independent-advisory-board-
on-sustainable-biomass.
The IAB Chair updates the CEO after each
meeting. The Chair and Vice Chair met the
Drax Executive Committee in November
2024, discussing the work programme
andkey topics advised on.
Key matters discussed and advised on
during the year included:
1. Developing research questions for
commissioning biodiversity studies
inareas from which Drax sources.
2. Community engagement plans led
byour Head of Community.
3. Our forest carbon strategy and ways
toengage with the research
community.
The IAB has also been included in
discussions pertaining to the development
of the Evidence Hub, the final response
toBECCS Done Well, and the new
Sustainability Framework.
Drax Group plc Annual report and accounts 2024
35
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Independent Advisory Board
Contents
Sustainable development continued
Sustainability governance
The Board has ultimate accountability
forthe Group’s sustainability performance.
Itapproves the Group’s purpose and
strategic aims, which are underpinned
byacommitment to sustainability that
informsbusiness operations and activities.
The CEO has overall responsibility for the
implementation of that strategy in
realising our purpose. Miguel Veiga-
Pestana, CSO, heads the Sustainability and
Corporate Affairs functions, leading Group
implementation of the sustainability
programme and underlying framework.
The Sustainability Council provides
governance and oversight of all
sustainability activity across the Group,
with delegated authority from the
Executive Committee, ensuring alignment
with the Group’s strategy. The Council
reviews and approves sustainability-
related Group policies, reviews and
challenges the management of
sustainability data and sustainability risks
(including the Climate Change Principal
Risk), as well as assessing and approving
Sustainability-driven investments and
improvements, as part of the Group-wide
capital allocation process.
During 2024, the membership of the
Council was updated, with core
membership comprising four Executive
Committee members, and chaired by the
CSO, with delegated decision-making
authority from the Executive Committee
with the aim of improving and accelerating
decision-making processes as well as
enhancing accountability for decision
making and delivery of sustainability issues
with the wider business. The Council is
supported by a panel of technical experts
from across the business.
The Council has accountability for the
administration of the Drax Foundation
andSocial Investment Funds. For more
information see page 55.
Our commitment to long-term
valuecreation
We recognise that a coherent and
well-structured sustainability framework
isessential for driving long-term value,
notonly for our business but also for the
communities and environments in which
we operate.
Our commitment to sustainability goes
beyond compliance – itis integral to our
strategy and is critical to addressing both
the challenges and opportunities of a
rapidly changing global landscape. In 2024,
we made significant strides in refining our
approach to sustainability through the
development ofa framework that focuses
on thematerial topics most relevant to
ouroperations, stakeholders, and
overallimpact.
Designing this framework was not a task
we undertook lightly. It was the result
ofan extensive process that involved
collaboration across various departments,
extensive stakeholder engagement,
andthe input of external experts. We
undertook detailed assessments of
environmental, social, andgovernance
issues relevant to our sector, and mapped
these against the concerns of our
stakeholders, including employees,
customers, investors, suppliers, and the
broader communities inwhich we operate.
This considered analysis enabled us to
prioritise sustainability issues based on
their significance to our business and
theirpotential impact on society and
theenvironment.
Sustainability Governance structure
Supporting Governance Structures
Sustainability Council
Sustainability-owned governance forum Governed outside of Sustainability
Supporting Governance Structures
Nature Expert Hub
PLC Board
Executive Committee
Biomass
Leadership Team
Drax Foundation
Committee
Carbon Reduction
Taskforce
Group HSE Committee
Parallel Committees
DEI Advisory Group
Compliance Steerco
Drax Group plc Annual report and accounts 2024
36
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Contents
Double materiality as the foundation
Central to our Sustainability Framework
isthe principle of double materiality. This
approach considers sustainability issues
relevant in terms of their potential impact
on the financial performance of Drax, but
also in terms of how our business activities
affect the environment and society.
Building on our 2023 work, we conducted
a Double Materiality Assessment. This
assessment evaluates the risks and
opportunities that may arise from
sustainability factors – those that may
influence our operations and those that
may be influenced by them.
The process in 2024 involved reviewing
the external landscape and single
materiality completed in 2023 to
determine a list of 22 material themes.
Thethemes, aligned with the Corporate
Sustainability Reporting Directive (CSRD),
were evaluated in workshops with the
sustainability team, and wider
stakeholders. Using these themes, we
interviewed colleagues to gather diverse
perspectives from across Drax. The
process also included external interviews
across key stakeholder groups. An
employee survey, issued to a sample of
colleagues, asked them to rank the relative
importance of the 22 topics based on their
impact and financial materiality.
The 22 topics presented below (A-Z) all
represent materially relevant topics to
Drax. The relative impact and financial
materiality determined by thestakeholders
who took part is demonstrated by the
score (out of 4), presented in columns
“Impact Materiality” and “Financial
Materiality”. There is generally a strong
correlation between thetopic scores for
impact and financial materiality, indicating
that topics scoring high on impact also
tend to score high onfinancial materiality.
Double Materiality Assessment: Summary of results
Key to SDGs
Material Topic (A-Z)
Link to Sustainable
Development Goal (SDG) Impact Materiality Financial Materiality
Page
Link
Air pollution
3
13
14
15
51
Biodiversity and ecosystems
12
14
15
46
Circular economy and waste
6
12
14
15
46
Climate change mitigation and adaptation
7
9
12
13
15
17
40
Community impact
4
5
7
8
10
13
14
15
57
Corporate culture, ethics and compliance
16
17
53-54
Data privacy and management
16
17
52
Diversity, equity and inclusion
3
4
5
8
10
52
Employee health, safety and wellbeing
2
3
6
8
51-52
Energy management and consumption
7
12
13
38
Fair and equitable compensation
5
8
10
52
Human and labour rights
1
2
4
5
8
10
16
51,53
Political engagement and lobbying activities
10
16
17
53
Responsible procurement and sourcing
3
5
7
8
9
10
12
13
15
16
17
22
Responsible products and customer relations
7
8
10
11
13
16
17
22
Rights of indigenous peoples
1
2
4
5
8
10
11
15
16
55
Soil pollution
13
14
15
44
Substances of concern
6
12
13
14
15
44
Training and skills development
4
5
8
9
10
53
Water
6
7
13
14
15
49
Working conditions in the value chain
3
8
10
12
16
50
Workplace culture
3
4
5
8
10
54
The assessment identified six topics
thatare deemed as our more pressing
sustainability priorities: Climate change
mitigation and adaptation; Air pollution;
Community impact; Corporate culture,
ethics and compliance; Employee health,
safety and wellbeing; and, Responsible
procurement and sourcing. These six
represent areas where Drax has the most
significant impact, and/or where our
associated monitoring, and management
programmes have the greatest financial
sway (both positive/negative).
This assessment was important to the
development of our 2030 Sustainability
Framework and reflects pressing issues
that enable us to identify key focus areas
for action and guiding sustainability efforts
with clarity and purpose for the next years.
Drax Group plc Annual report and accounts 2024
37
Strategic report
Contents
For additional data see ESG Performance Report
www.drax.com/sustainability
Unit 2024 2023 2022 2021
Carbon emissions
Generation CO
2
e emissions
(1)
ktCO
2
e 207 141 310 525
Group total Scope 1
(2)
ktCO
2
e 266
255
336 932
Group total Scope 2 (location-based)
(3)
ktCO
2
e 280
231 333 323
Group total Scope 2 (market-based) ktCO
2
e 367
273
332 323
Group total Scope 1 and 2 (location-based) ktCO
2
e 546 486 669 1,255
Proportion of Group (Scope 1 and 2) emissions within UK % 43
34
51 78
Group total Scope 3 ktCO
2
e 2,867
3,534
3,12 3 3,121
Biogenic CO
2
emissions
(4)
ktCO
2
e 13,276 11,463 12,13 0 13,415
Carbon intensity
Generation emissions per GWh of electricity generation tCO
2
e/GWh 13
11
23 33
Group emissions per GWh of electricity generation
(5)
tCO
2
e/GWh 34
39
49 78
Total energy consumption
Group total energy consumption GWh 41,521
3 4,113
38,341 4 4 ,113
Group total energy consumption within the UK GWh 38,294 3 0 ,12 5 33,789 4 0 ,112
This metric was subject to external independent limited assurance by PricewaterhouseCoopers LLP (‘PwC’) as part of their assurance over metrics in the
ESGPerformance Report 2024. For the results of that assurance, refer to the ESG Performance Report 2024.
(1) Generation emissions cover the total direct emissions from Scope 1 and indirect emissions from Scope 2 activities across our generation sites.
(2) Group total Scope 1 covers all direct emissions from our own business operations, across all sites.
(3) Group total Scope 2 covers all indirect emissions associated with our electricity and heat consumption, across all sites. For 2023 and 2024 we have updated the
location-based methodology, where the Group is able to apply our own generation (currently UK REGOs) and apply a zero-carbon factor for UK grid locations.
(4) The biogenic CO
2
emissions across the Group are zero-rated under the GHG Protocol methodology and our SBTi targets. Biogenic CO
2
emissions are reported separately
as “outside of scope” in ESG reports or under “Memo items” of UK Emissions Trading Scheme (UK ETS).
(5) Group emissions are total Scope 1 and 2 (location-based) emissions as reported.
Climate positive
Reaching net zero by 2040
across our value chain.
Our performance
Carbon and energy use data summary
Drax Group plc Annual report and accounts 2024
38
Strategic report
Contents
Scope 3 Scope 1 Scope 2 Scope 3
Upstream Direct emissions Indirect emissions
from electricity
Downstream
– Natural gas supply chain
– Biomass supply chain
– Supply chain for other fuels
– Supply of sludge to
Daldowie Treatment Plant
– Biomass transport from
Pellet Production sites to
Drax Power Station
– Utilities as part of lease
contracts
– Emissions from operational
and capital purchases
– Business travel
– Hotel stays
– Employee commuting
– Methane and nitrogen
oxides emissions from
biomass generation
– Pellet plant operations
– Pellet port operations
– Large plant vehicles
– Flue gas desulphurisation
systems
– Company vehicles
– Fluorinated gases from
heating, ventilation, and
airconditioning systems
– Hydro electricity
consumption
– Cruachan electricity
imports
– Generation electricity
consumption
– Pellet plant electricity
consumption
– Office sites electricity
consumption
– Recycling, processing
anddisposal of waste
– Reuse and reprocessing
ofash and by-products
– Transmission and
distribution
– Emissions from use of sold
electricity
– Emissions from use of sold
natural gas
– Emissions from transport
and use of sold pellets
Our approach to
climatepositive
Responding to the challenge of climate
change is central to our purpose and our
three strategic aims. Our Group Climate
Policy outlines our approach in line with
the TCFD framework. For more information
on climate-related governance see
pages56 to 68.
Carbon Reduction Taskforce
The Carbon Reduction Taskforce (CRTF)
ismade up of representatives from
different business units to centrally
co-ordinate theprioritisation and delivery
of decarbonisation projects. These
individual business unit forums meet
regularly to evaluate projects and develop
business cases that help Drax to realise
decarbonisation objectives, including
ourcarbon reduction targets. The
business unit forums feedback to the
CRTF of which updates are provided to
theExecutive Committee during the
quarterly business review process, by
theHead of Climate and Nature.
For each of the business units, potential
projects are compiled into a list of
candidate projects, ranked by factors
including cost per tonne of carbon
produced, time to deliver, and feasibility
ofscaling the project.
During the course of2024, some of our
projects were costed using our internal
shadow carbon price. The CRTF evaluates
which projects represent the most
scalable and viable decarbonisation
opportunities and then develops the
business case for funding and
implementation. These project lists form
business units’ carbon reduction plans,
aspects of which form part of the future
Group Scorecard KPIs, and inform
discussions on allocation of funding
through individual business unit budgets.
In 2024, the CRTF’s activities included the
delivery of three decarbonisation projects
that form part of the Group Scorecard
(seepage 40).
Internal shadow carbon price
In our FlexGen and Biomass generation
business units, we have embedded a
shadow carbon price within the capital
expenditure decision-making process.
We use it principally to inform the Net
Present Value and Internal Rate of Return
models, which are the basis for assessing
new business and investment cases and
acorresponding penalty for investments
that increase our carbon footprint.
Theshadow carbon price was set at
c.£95per tonne of CO
2
e in 2024.
Advocacy on climate
In 2024, Drax continued to advocate for
climate action through our engagement in
relevant industry initiatives. See page 67
for more detail on our climate advocacy.
RE100
In 2024, Drax continued to support
ourcustomers in fulfilling their RE100
obligations through the provision of
renewable energy from sustainably
sourced biomass. RE100 is a global
initiative bringing together the world’s
most influential businesses committed
tousing 100% renewable electricity in
their operations.
This is toincentivise the increased
production ofrenewable energy through
both the creation of new sites aswell as
the modernisation of existing renewable
energy sources to increase efficiency.
(1) Our internal shadow price of carbon is used to
incorporate the potential future costs (or benefits)
of the corresponding increase (or decrease) in
carbon emissions on the Group’s total footprint, as
a specific result of the project under consideration.
This is calculated as an amendment to project Net
Present Value, where applicable.
Understanding our carbon emissions
Drax Group plc Annual report and accounts 2024
39
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Sustainable development continued
Climate positive
Our 2024 Scorecard carbon reduction targets
For the 2024 Group Scorecard, a 5% weighting was allocated to the achievement of carbon reduction KPIs.
This was divided between three projects. See results of full Scorecard on page 133.
2024 Group Scorecard target
Delivery
date/year
Project
outcome Result
Baseline
period
Green fuel for trains: Replacement of diesel fuel used in Drax
trains running from the Port of Immingham to Drax Power Station.
Using hydrotreated vegetable oil (HVO) would result in a c.90%
reduction incarbon emissions inthis portion of the supply chain
December
2024
68.6% of the trains
thatdelivered pellets
toDraxPower Station
in2024 ranon HVO
Project outcome
achieved versus a target
of >50% total journeys
Financial
year 2023
Pellet production energy reduction: Implement technological
andoperational changes that will reduce the energy intensity
ofpellet manufacturing within our pellet plants.
December
2024
The team achieved
a4.8%reduction
inenergyintensity
per tonne of pellets
Project outcome
achieved versus a
targetreduction of 4%
Financial
year 2023
Opus gas portfolio rundown: Reducing Scope 3 emissions
associated with the sale of fossil natural gas from Opus Energy
inthe Customers business, viathe offboarding and run-down
ofthe customer book.
December
2024
A 92.5% reduction in gas
volumes (including the
impact of the book sale in
September 2024 to EDF)
Project outcome
achieved versus a target
reduction of 40% from
December 2023 volumes
December
2023
Progress against our SBTi targets is
shown opposite. In summary we remain
ahead of our Generation Scope 1 and 2
intensity targets for 2030.
We have made progress under our
Scope 3 targets, placing us on track to
meet the 2030 SBTi target. Scope 3
emissions decreased by 667ktCO
2
e from
2023 to 2024 mostly as a result of the
635ktCO
2
e footprint included in our
2023 inventory from the sale of coal
aspart of the winter contingency
agreement with UK Government.
Progress against our non-generation
Scope 1 and 2 target remains
challenging in light of increased pellet
production volumes and increased
biomass generation in 2024.
Ambition, targets
and progress
Our climate ambition
Our climate ambition is to achieve our
Science Based Targets while delivering
ourcorporate strategic objectives,
contributing to energy security within
theUK, and carbon removals capacity
globally.
In 2024, we continued to develop options
for BECCS, both in the UK and globally,
including the launch of our US carbon
removals business, Elimini. Read more on
page 15.
SBTi targets
As we pursue options for carbon removals,
we are focused on finding opportunities
toreduce our absolute emissions across
Scope 1, 2 and 3. Our near-term targets,
below, were validated by the SBTi in 2023,
aligned with a 1.5°C pathway. Since our
baseline year of 2020, we have reduced
our total emissions footprint from 5.5Mt
to3.5Mt.
Long-term targets
In 2024 we set our Group net zero target
for 2040, and are awaiting validation
ofthis target from the SBTi.
We recognise there are external
dependencies that could impact our
targetto be net zero by 2040, including
commercialisation and deployment of
low-carbon technologies, and changes
inthe breadth and nature of the Group’s
activities. Our decarbonisation activities
have a particular focus on logistics, pellet
production, andconstruction therefore
any external factors impacting these
sectors could affect our ability to meet our
target. An appropriate fiscal and legislative
framework is required to support the scale
of the UK BECCS programme and our
future investment decisions. Like the rest
of the carbon removals industry, our
targets are subject to appropriate action
from Government.
SBTi targets
Target
year
Base year
2020
2023
% change against
2020 baseline
2024
% change against
2020 baseline
75.7% reduction in
Scope 1 and 2 emissions
from electricity generation
by2030 (kgCO
2
e/MWh)
2030
13
87% reduction89% reduction
11
100
75.7% reduction in
Scope 1, 2, and 3 emissions
from all sold electricity by
2030(kgCO
2
e/MWh)
2030
21
80% reduction78% reduction
103
22
42% reduction in
non-generation Scope 1
and 2 emissions by 2030
2030
337,517
19% increase
22% increase
345,051
282,926
42% reduction in
Scope 3 emissions by 2030
2030
2,866,692
19% reduction
0.1% reduction
3,534,369
3,537,561
Progress against SBTi targets
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Our strategy: carbon
reduction pathway
Climate Transition Plan
In 2025 we expect to publish our first
Climate Transition Plan in line with the
Transition Plan Taskforce (TPT) Disclosure
Framework.
Our plan provides detail to stakeholders
onhow we intend tomeet our near term
SBTi and net zero targets across our
operations and value chain.
The below “at a glance” summarises our
plan to meet the three goals of the TPT.
Business unit carbon reductionplans
Each business unit maintains a portfolio
ofdecarbonisation projects that will
deliver reductions across the supply chain.
“Our carbon reduction pathway” below
summarises our current business unit
reduction plans, and those under
development.
Pellet Production FlexGen & Energy Solutions Biomass Generation
Pellets energy optimisation: Expanded
ourportfolio of energy optimisation
initiativesthattarget a reduction of energy
consumption between 4-8% across our
USandCanadiansites.
Natural gas feedstock dryers in Canada:
Feasibility studies into the impacts of replacing
gas burning dryers withelectric or biomass-
fuelled units.
Source a Renewable PPA deal in Canada:
Exploring types of Renewable Energy
Certificates to apply to high GHG intensive
grids in our operations.
Hydro assets: Drax aim to create and publish
atime-based carbon accounting methodology
to estimate the avoided emissions from grid
balancing technologies.
Solar Hydro Installation Project: Considering
the use of solar panels on our run-of-river
hydro sites to reduce Scope 2 emissions.
Hydrotreated vegetable oil (HVO) fuel train
project: Following the success of HVO to
replace diesel in our rail freight route from
Immingham to Drax Power Station, we are
nowlooking to expand our commercial
supplyto apply to all our UK train routes.
Heavy fuel oil (HFO) alternatives: Exploring
options to use alternative renewable fuel
sources to replace HFO for start-up and boiler
stabilisation operations at Drax Power Station.
SBTi Near
Term 2030 Targets (Consolidated Across Sco
p
e
s
)
MtCO
2
e
5
4
3
2
1
0
2020 2021 2022 2023 2024 2030 20352025 2034203320322031 20362026 2027 2028 2029 2037 2038 2039 2040
4.0
3.5
3.8
4.4
5.5
3.5
0.3
1.7
3.1
0.3
0.9
3.1
0.3
0.4
0.3
3.5
0.2
2.8
0.3 0.3
0.4
2.4
Scope 1
Scope 2
Scope 3
Target
Reduction Targe
t
Our carbon reduction pathway (Absolute Emissions: MtCO
2
e)
Our ambition Our SBTi targets Our Sustainability
Framework
Implementation
strategy (Action)
Governance and
accountability
– To be a UK leader in
dispatchable, renewable
generation; to be a
global leader in
sustainable biomass
pellets; and to be a
global leader in carbon
removals
– Since 2023 we have
fourvalidated near-term
SBTi 2030 targets
– In 2025, we expect to
formally validate a
long-term 2040 net
zero target
Near-term
Four SBTi targets by 2030
(see page 40)
Long-term
Net zero across our value
chain by 2040 (see page 40)
– Climate positive: Achieve
net zero by 2040, deliver
evidence on forest carbon
and deploy BECCS
– Nature positive: Mitigate
harm and promote
circular resource use;
deliver biodiversity
enhancements across
ourvalue chain
– People positive: An
inclusive workplace,
upholding human rights
and partnering with
communities to make a
positive difference
– A project management
model which shares
responsibility for delivery
of costed
decarbonisation goals
– Inclusion of
decarbonisation projects
in the Group Scorecard
– Use of sustainability
linked loans to encourage
progress against
decarbonisation
– The plan is tracked and
governed with oversight
residing with the Drax
Board
– Day-to-day tracking is
monitored by the Carbon
Reduction Task Force
– Updates against
decarbonisation projects
and SBTi targets are
shared with ExCom,
reviewed by the Board,
and will be published in
our Annual Report and
Accounts and ESG
Performance Report
Our Transition Plan “at a glance”
Drax Group plc Annual report and accounts 2024
41
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In 2024, our total Scope 1 and 2 carbon
emissions (location-based) increased by
12%. This can be attributed to the increase
in pellets produced by the Group to 4mt,
as well as an increase in our UK generation
output to 14.9TWh which involves the
useof fossil fuels for boiler start-ups, for
example. The increased generation also
affected Scope 2 emissions atour Pumped
Storage facility at Cruachan as water
ispumped to the reservoir at times
ofexcess grid demand, to generate energy
at times of high grid demand. We seekto
move away from environmental attribution
towards local site-based emission
reduction solutions. Notwithstanding
these increases, our decarbonisation
projects delivered benefits in 2024. For
example, in Canada as a result of energy
efficiency projects, the overall kgCO
2
e/t
ofpellets produced has reduced by 4%.
Value chain (Scope 3)
The most significant contributor to our
Scope 3 emissions profile continues to
befrom fuel and energy-related activities,
primarily driven by the biomass fuel supply
chain. In 2024, Group total Scope 3
emissions decreased by 19% compared
Our carbon emissions and
decarbonisation initiatives
Direct operations (Scope 1 and 2)
Of our total Scope 3 emissions in 2024,
100ktCO
2
e were attributable to the sold
Opus accounts. We believe the
circumstances of this sale require us to
rebaseline our emissions in line with the
GHG protocol – the emissions attributable
to Opus accounts in 2020 was 640ktCO
2
e.
We will conduct this exercise in 2025,
taking advantage of the protocol’s “year
after” disclosure guidance, when full data
is available for us to accurately analyse its
impact on our baseline, and we will restate
reporting as required.
with 2023. This is mostly due to the
contribution the sale of coal made to our
2023 inventory, (acquired as part of the
winter contingency agreement with the
UK Government). In 2024, no coal sales
were recorded in our Scope 3 profile. Drax
also sold a sizable portion of its gas and
electricity customer contracts away from
its Opus accounts. While the associated
emissions still exist, they will now be
accounted for by the purchaser and as
aresult contribute to a decrease in our
overall GHG inventory.
Group total Scope 1 and 2
(location-based) emissions (ktCO
2
e)
2
024
486
669336 333
2
023
2
022
255 231
546266 280
Scope 1
Scope 2
Group emissions intensity (tCO
2
e/GWh)
2
024
49
2
023
2
022
39
34
Generation output by technology type
(% total output), 2024
Biomass 95
Hydro 2
Pumped Storage 3
* Includes pumped storage generation net of imported
and exported power.
Smart Green Shipping
In 2024, Drax partnered with
Smart Green Shipping by injecting
£1 million into a groundbreaking
project to develop and use
innovative wind-assisted “FastRig”
technology, which will be used to
decarbonise the shipping sector.
GHG emissions from shipping contribute
around 3% of all global emissions and
this financial assistance has contributed
to Smart Green Shipping’s wingsail
being installed on a vessel, to
demonstrate how the technology can
reduce fuel consumption and resulting
emissions byup to 30% per year.
Smart Green Shipping has now
completed sea trials of FastRig on the
Pacific Grebe – a purpose-built ship
designed to carry nuclear cargo around
the world safely. Data received from
thesea trials is currently being validated
by athird party and we look forward to
seeing the final report.
Sustainable development continued
Climate positive
CASE STUDY
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42
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Contents
Processing
at origin
Feedstock
transport
Drying Pelleting Transport
to port
Shipping Rail to Drax Combustion
CH
4
& N
2
O
emissions
7%
3%
3%
6%
4%
8%
42%
27%
Biomass supply chain emissions
Biomass is only considered low-carbon,
renewable energy when regulatory
requirements are met. This evidence must
show that the savings of GHG emissions
are delivered on a lifecycle basis, compared
to alternative fossil fuel generation.
Therefore, we collect fuel and energy
datafor each step within the supply chain.
This enables us to calculate lifecycle GHG
emissions for our biomass and check we
are compliant with relevant regulatory
requirements.
The UK Government sets the limit on
biomass supply-chain emissions which
should not exceed 200kgCO
2
e/MWh.
Generators must meet this limit tobe
eligible for support under the Renewables
Obligation and Contract for Difference
schemes – schemes which cover all four
ofour operational units at Drax Power
Station, and which run until 2027. In 2024,
our average biomass supply chain GHG
emissions were 93.7kgCO
2
e/MWh of
electricity. This is a decrease from 2023
due to decarbonisation initiatives such
asthe HVO train project, see page 41.
In 2025, the regulatory threshold will
reduce to 180kgCO
2
e/MWh.
Forest carbon
While the carbon emissions from biomass
is zero rated under IPCC rules, Drax
continues to make decisions informed by
science that underpin this position. We
recognise that biomass is only low carbon
(or better) if it meets certain sustainability
criteria, and we are developing our
Biomass Sourcing Policy on this premise.
We have reviewed multiple approaches
ofmodelling forest carbon, including
commissioning external forestry experts
to perform forest carbon studies on Drax
catchment areas. We have increased our
in-house expertise and are developing a
framework for evaluating and monitoring
forest carbon in our catchment areas,
encompassing future risks.
We are pursuing the use of remote sensing
to provide accurate data on forest carbon
and assess changes in these levels. We are
working with remote sensing data and
service providers to develop a solution
that will support delivery of our
sustainability commitments. To provide
support to the integration of remote
sensing, we have joined the “Nature Tech
Collective” accelerator programme.
We have also continued our investment in
research, including commissioning a study
on the lifecycle carbon impacts of using
different biomass sources, to determine
how well bioenergy and BECCS perform
against other biomass uses and expect
topublish a white paper to share these
findings.
Carbon dioxide removals
The IPCC Sixth Assessment Report states
that CDR methods, including BECCS, are
necessary elements in limiting global
warming to 1.5°C.
We continue to develop options for
BECCS, and we recognise the importance
of standards that define high-integrity
removals that are quantified and verified.
During 2024, we agreed offtake CDR
agreements with Ultrabulk, Holborn
Trading, Karbon-X, ClimateTrade and
NValue.
Note: Includes the biomass supply chain emissions associated with both the Group’s direct operations (PelletProduction business) and third parties. This is an estimate based
on the average carbon footprint ofpelletsreceived at Drax Power Station for each stage in the biomass supply chain.
* Limited external assurance by Bureau Veritas UK Limited using the assurance standard ISAE 3000. For assurance statement see drax.com/sustainability
(1) Equivalent limited external assurance was obtained over this metric in prior year and results of that assurance can be found in the ESG Performance Report 2023.
Drax Power Station average biomass supply chain GHG emissions
Unit 2024 2023 2022
Average biomass supply chain GHG emissions kgCO
2
e/MWh 93.7* 97. 2
(1)
96.2
(1)
Drax Power Station biomass supply chain GHG emissions in 2024 (%)
Drax Group plc Annual report and accounts 2024
43
Strategic report
Contents
Unit 2024 2023 2022
TNFD indicator Other emissions to air
TNFD
Total
non-GHG air
pollutants
bytype
Nitrogen oxides – Generation business unit t 6,853 5,831 5,979
Sulphur dioxide – Generation business unit t 887 849 403
Particulates – Generation business unit t 468 313 376
Sulphur hexafluoride – Generation business unit t 0.01 0.1 –
Nitrogen oxides – Pellet Production business unit t 783 621 836
VOCs – Pellet Production business unit t 919 741 854
Particulates – Pellet Production business unit t 766 1,457 1,354
Carbon monoxide – Pellet Production business unit t 1,485 1,12 8 –
TNFD
Water
withdrawal and
consumption
from areas of
water stress
Water use
Total water abstracted – Drax Power Station m³ 44,491,595 45,058,529
51,899,818
Total water returned – Drax Power Station m³ 37,119,03 6 41,223,516
47,187,916
Total water abstracted and returned – Hydro Generation
(1)
m³ 3,664,202,383 3,515,581,216 3,389,452,345
Total water abstracted from reservoir – Pumped Storage
(2)
m³ 519,698,714 465,042,239 361,145,5 8 2
Total water abstracted from Loch Awe – Pumped Storage
(1)
m³ 509,603,586 451,360,634 325,844,996
Water withdrawn/abstracted from areas of water stress
(3)
m³ 0 0 0
Water consumed from areas of water stress
(3)
m³ 248 347 –
TNFD
Total
amount of
hazardous waste
generated
Waste
Total waste generated
(4)
t 51,888 46,890 –
Total hazardous waste generated
(4)
t 581 877 –
TNFD
Quantity
ofhigh-risk
(5)
natural
commodities,
andproportion
sourced under
acertification
programme
Use of natural commodities
Total volume of woody biomass consumed at Drax Power
Station
(excluding non-woody agricultural residues)
Mt 7.3 5.8 6.4
Total volume of woody biomass produced –
Pellet Production
(6)
Mt 4.0 3.8 3.9
Proportion of woody biomass consumed at Drax Power
Station with an SBP Compliant claim
% 98.6* 96.9 96.6
Proportion of woody biomass pellets produced and sold
with an SBP Compliant claim – Pellet Production
(7)
% 96.5 94.9 –
* Limited external assurance by Bureau Veritas UK Limited using the assurance standard ISAE 3000. For assurance statement see drax.com/sustainability.
(1) Hydro generation covers Galloway and Lanark Hydro scheme.
(2) Pumped storage covers Cruachan Power Station and excludes volume of water collected via the aqueduct system.
(3) Total volume of water from areas of “high” water stress, as classified by the WRI Aqueduct Water Risk Atlas (Aqueduct 4.0), baseline “water stress” indicator. The volume reported
represents water use at our London office, the only location classified as baseline (current) “high” water stress.
(4) Waste data has been collected from our owned sites and the waste has been listed as hazardous/ non-hazardous according to local regulator approach. Where data is unavailable,
assumptions have been made based on European Waste Codes and volumes for comparable sites. The 2023 hazardous waste total (3,281t) has been amended to reflect an update in
hazardous waste classifications in our reporting criteria and to ensure consistency with 2024 reported results.
(5) “High-risk natural commodities” include “timber” as per the TNFD Recommendations, which refer to the Science Based Targets Network (SBTN) High Impact Commodity List (HICL).
(6) Reflects pellets produced at Drax Pellet Production operations in the US and Canada; excludes traded quantity (third party to third party).
(7) Reported figure reflects pellets produced and sold with an SBP Compliant claim. The remaining volume was produced and sold with an SBP Controlled claim.
Our performance
Nature and environment data summary
Nature positive
Supporting biodiversity across our sites
and in our value chain by the end of 2030.
TNFD
Indicates aspects that are aligned with the Taskforce
onNature-related Financial Disclosures (TNFD) core global
metrics, as defined in the Recommendations of the Taskforce
on Nature-related Financial Disclosures, September 2023.
For additional data see ESG Performance Report
www.drax.com/sustainability
Drax Group plc Annual report and accounts 2024
44
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Our approach
to nature positive
The loss of nature and biodiversity
posessignificant risk to the stability
ofeconomies, the wellbeing of society,
andthe globe more generally. PwC
research from 2023 found that up to
55%of the world’s GDP is exposed
tomaterial nature risk.
From the sustainable biomass that Drax
produces in the US and Canada, to the
water used for cooling at Drax Power
Station as well as powering our
hydroelectric and pumped-storage
facilities in Scotland, Drax interacts
with,and depends on, nature. Weare
committed to understanding and
addressing our dependencies and impacts
on nature, our nature-related risks, and
contributing to actions that promote
nature positive outcomes. We are
committed to identifying and seizing
opportunities to reduce these impacts.
Governance for nature
TNFD
The Chief Sustainability Officer is
responsible for the implementation of
theGroup’s sustainable development
framework, including nature positive
commitments. The Executive Committee
and the Board received updates onnature
in 2024, through therespective reporting
mechanisms (seepage 36).
Our Independent Advisory Board provides
external advice on the science and
evidence underpinning practices to protect
nature and support nature recovery.
The Nature Expert Hub serves as the
co-ordination point for nature positive
actions across Drax and oversight of
nature-related projects across the
business. The Hub meets regularly, and the
Senior Scientific Officer provides updates,
as required, to the Sustainability Council.
In 2024, we progressed the development
of a Group-wide set of nature
commitments and targets, which will be
codified into Group policy to promote the
restoration and recovery of nature.
We did not finalise a Group Nature Policy
in 2024, as anticipated, but further
developed our understanding of the
Group’s nature-related risks, impacts,
dependencies and opportunities. Until a
new policy becomes effective, the Group
Environment Policy outlines our
commitment to minimise adverse impacts
of our operations on the environment,
andour management and monitoring
commitments. We aim to finalise a Group
Nature Policy in 2025.
Strategy for nature
TNFD
To understand our baseline and inform
thedevelopment of a Group-wide
naturestrategy, we continued nature
assessments across our assets. Using
theTNFD’s Locate, Evaluate, Assess
andPrepare (LEAP) guidance to further
identify our nature-related risks and
opportunities will help us to identify where
our actions can contribute to nature
positive outcomes. For further information
on our progress in 2024, see page 46.
Risk and impact management
TNFD
Through the conduct of nature
assessments for our assets, we have
identified that many of our nature-related
impacts and risks are already recognised
under our environmental management
programme.
Over the course of 2024, we continued
toreview nature-related risks, and we
intend to retain the connection to our
environmental management systems,
which for our UK Generation business
arecertified to ISO 14001:2015. Our
integration of nature-related risks
withinthe Group’s overall risk approach
isgoverned by the Group’s Risk
Management Policy and builds on the
current approach to operational risk
management.
Nature: at the heart
of sustainable biomass
certification
Third-party certification is a key part
ofour due diligence processes to
demonstrate that fibre is sustainably
sourced. Drax uses a number of
different forest certification
programmes, the three principal ones
being Sustainable Forest Initiative (SFI),
Forest Stewardship Council® (FSC®),
and the Programme for the
Endorsement of Forest Certification
(PEFC). Nature and biodiversity are a
central component in forestry
certification, as these programmes aim
to promote sustainable forest
management that minimise ecological
impact and contribute positively to
forest ecosystems.
SPOTLIGHT
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45
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Sustainable development continued
Nature positive
Ambition, targets
andprogress
TNFD
Our nature ambition is that, by 2030, we
aim to have implemented the systems and
metrics across our operations and value
chains to demonstrate a measurable
contribution to nature positive outcomes
within those regions
(1)
. We also expect to
publish our first TNFD report by the end
of2026.
Identification of our nature-related
dependencies, impacts, risks, and
opportunities supports the creation of
nature-related metrics, several of which
are reported in the Nature and
Environment data summary page 44.
Wewill continue to progress our work to
report against the TNFD’s core metrics.
Taskforce on Nature-related
Financial Disclosures
We began disclosing information aligned
with the TNFD Recommendations in
our2023 Annual Report and Accounts.
In2024, we continued with knowledge
building and progressing our disclosures.
Our focus has initially been on direct
activities at our production assets,
undertaking dedicated assessments at
each site enabling us to understand our
relationship with nature in more depth.
In North America, we made progress to
advance our goal of developing nature
assessments for our Pellet Production
assets. For example, to support the
“Locate” stage of the TNFD LEAP
assessment, we commissioned
NatureServe, North America’s recognised
biodiversity experts, to conduct a detailed
biodiversity baseline assessment across
our US South Pellet Production catchment
areas. In Canada, we used publicly available
data sets to review protected areas,
endangered ecosystems and species.
Our nature assessment work ultimately
supports the creation of site-specific
Nature Positive Action Plans. In 2024,
weprogressed the Drax Power Station
Nature Positive Action Plan. When
complete, it will provide an overview
ofourunderstanding of nature-related
dependencies, risks and impacts related
tothe site, and actions to contribute
tonature positive opportunities.
Mapping our interface with nature
In line with the first step of “Locate” in
theTNFD LEAP approach, we identified
eightDrax-owned sites adjacent or in
proximity to biodiversity sensitive areas
(2)
.
This information is incorporated into
howweassess potential risks, impacts,
andopportunities for nature protection
andrestoration.
Progress of nature assessments for Drax operations
Stage 1
Locate and evaluate
Complete
– Cruachan
– Lanark and Galloway
– Drax Power Station
In progress
– Pellet production in US
– Pellet production in Canada
Stage 3
Prepare, act, disclose
In progress
– Cruachan
– Lanark and Galloway
– Drax Power Station
– Pellet production in US
– Pellet production in Canada
Stage 2
Assess
Complete
– Cruachan
– Lanark and Galloway
– Drax Power Station
In progress
– Pellet production in US
– Pellet production in Canada
(2) This includes areas with legally protected status,
orrecognition such as United Nations World
Heritage Sites or United Nations Man and
Biosphere Reserves, RAMSAR Sites, or Key
Biodiversity Areas.
(1) Our ambition applies to current business
operations and biomass value chain. In the event
of business growth or structural change, the
ambition would be reviewed and adjusted.
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Establishing a
biodiversity
baseline for
Draxbiomass in
theUS South
A significant portion of Drax Power
Station’s biomass supply originates
from sustainably managed forests
in the US South, where we operate
seven pellet mills.
In December 2023, Drax partnered
withNatureServe, North America’s
leading authority on biodiversity data,
toconduct a biodiversity assessment
ofour fibre catchment areas in the
USSouth to support our nature-positive
initiatives and to align with ourvoluntary
TNFD disclosure.
The project, focusing on ouroperations
in Alabama, Arkansas, Louisiana, and
Mississippi, will enable management
tomake more informed decisions and
totake action to enhance biodiversity
inthese areas.
NatureServe’s mission and vision:
“NatureServe leverages the power of
science, data, and technology to guide
biodiversity conservation and stewardship.
NatureServe envisions a world in which
the best available science informs
conservation and stewardship decisions
sothat biodiversity thrives.”
Drax commissioned a team of experts from
NatureServe to analyse at-risk species
diversity and ecosystem extent, condition,
and conservation status (see the image
below) across our US South footprint.
Thisevaluation establishes a biodiversity
baseline, providing crucial information
onthe current state of nature, and serves
as a reference point for identifying
nature-related risks and opportunities.
Additionally, the project evaluated
potential change detection strategies
andexisting monitoring efforts for
at-riskspecies, with a focus onforest
ecosystems.
The biodiversity baseline focused on:
– Species extent and characterisation
viaNatureServe’s species habitat
models, global conservation status,
andspecies extinction risk; and US
Geological Survey’s protected status
– Ecosystem characterisation using
USNational Vegetation Classification
groups; NatureServe’s Landscape
Condition Model; and LANDFIRE’s
Vegetation Departure model
– Methods and opportunities for
detecting and monitoring change
ofvulnerable ecosystems and
at-riskspecies
The results of this assessment will help
toidentify priority areas for nature-
based conservation investments and
habitat enhancement efforts, assess
change-detection strategies and
monitoring approaches aimed at
vulnerable species and habitats, and
help inform local biomass sourcing
strategies while supporting our
commitment to sustainable forestry
andrenewable energy production.
Thanks to the work produced
by NatureServe, we now have
an independently verified
baseline ofthe incredible
biodiversity for this region
ofthe US. Outcomes from
this project will help to lay
the foundation for Drax’s
nature conservation actions
in the nation’s wood basket.
Kyla Cheynet, Director of Sustainability,
US, Drax Biomass Inc.
Figure 1: NatureServe “Global Conservation Status Ranks” of US National Vegetation
Classification Groups in Drax’s US Southeast Fiber Catchment Area
7
1
5
6
2
3
4
Plant locations
1
Aliceville
2
Amite
3
Demopolis
4
LaSalle
5
Leola
6
Morehouse
7
Russellville
Conservation status
Globally imperiled (G2)
Globally vulnerable (G3)
Globally apparently secure (G4)
Globally not ranked (GNR)
CASE STUDY
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Sustainable development continued
Nature positive
Collaborating for nature
positive
We recognise the importance of working
alongside others to achieve our ambitions
and targets. The section below details
some of the organisations we work with,
and the initiatives we are supporting with
local organisations to deliver nature
positive outcomes.
Nature initiatives
US
In 2023, Drax began assisting with
therestoration of established Wetland
Reserve Program (WRP) hardwood
plantings for wildlife enhancements
incollaboration with the Louisiana
Department of Wildlife and Fisheries.
Aspart of this effort, Drax has agreed to
pilot small-diameter, low-value hardwood
thinnings for pellet feedstock as part of
anew conservation fibre stream intended
to benefit Louisiana black bear, swamp
rabbit, waterfowl, and certain fish species.
This has the potential to improve 1,400
acres of WRP hardwood forests plantings
and provide additional funds for regional
conservation efforts.
Drax continues to financially support the
Alabama Wildlife Foundation (AWF) via its
Land Stewardship Assistance Partnership,
which provides technical assistance to
Alabama landowners for the restoration
and management of longleaf pine
ecosystem, other forest types, and
nativewarm season grasslands. AWF
hasassisted 102 landowners with over
9,000 acres of land management.
Canada
We have built a business model on a
strong commitment to sustainable
sourcing from supply partners.
Reforestation is legally mandated on public
land. Sourcing low-grade forest residuals
by Drax supports the Forest Carbon
Initiative, which was established by the
Province of British Columbia in partnership
with Forests For Tomorrow (FFT). The FFT
was established in 2005 with the aim to
reforest areas that have been impacted by
natural disturbance such as wildfire, pests
and diseases. The programme is designed
to enhance the health and resilience of
British Columbia’s forests while also
supporting the province’s forestry sector
and communities that rely on it.
United Kingdom
At Drax Power Station, we undertake
annual ecological surveys using
independent ecologists. These areas
arealso managed for wildlife habitat
conservation.
Scotland
At our Galloway hydro power stations,
wecontinue to work closely with the Loch
Ken Trust to raise awareness about the
avoidance of invasive species across
bodies of water in the area.
Washing stations have been installed at
key locations around the loch to allow
paddleboarders, kayakers, and other
usersto wash their boots andequipment
before moving on to otherwatercourses
inthe area.
At Cruachan Power Station in the
westernhighlands, we have completed
biodiversity surveys to monitor the species
living in thesurrounding habitats. This
data has allowed the team to build a
picture of thevariety of mammals, birds
and insects present in the area, including
several protected status species. This is
important information to help define the
baseline for our nature positive actions
inthe area.
Our ground maintenance team at
Daldowie, near Glasgow, Scotland,
developed a new system of ground
maintenance. Vegetation including
grassed areas are only cut 1-2m from the
operational service roads around the site
allowing the rest of the areas to grow
longer and wilder to enhance biodiversity
and create habitats for existing wildlife.
World Business Council for
Sustainable Development (WBCSD).
Drax participates in multiple working
groups including the Forest Solutions
Group and Nature Action Imperative
to help develop the WBCSD’s Nature
Positive Roadmaps. In 2024, Drax
contributed to the development of
the Forest and Nature Metrics tool,
byproviding feedback on the most
relevant metrics for the forest sector
and testing the tool’s beta version.
This beta version is a prototype for
the forest sector component of
WBCSD’s Nature Metrics Portal,
planned for release in 2025.
National Council for Air and Stream
Improvement (NCASI). Drax is a
member of the NCASI. NCASI serves
the US forest products industry by
providing unbiased, scientific research
and technical information necessary
to achieve the industry’s
environmental and sustainability goals.
UKBBF. In 2024 Drax joined the UK
Business & Biodiversity Forum. We
welcome the UKBBF’s work to raise
awareness and best practice sharing
to achieve nature positive outcomes.
Taskforce on Nature-related
Financial Disclosures (TNFD). TNFD
forms a core component of our nature
positive work, and we continue to
progress our external disclosures on
nature. In 2024, we registered as a
TNFD Early Adopter, and we intend to
publish our first TNFD report by the
end of 2026.
ECHO Program
Drax is proud to support the
ECHOProgram in British Columbia’s
collaborative effort to reduce the
impacts of commercial shipping on
at-risk whales. The voluntary inbound
and outbound ship slowdown led
byVancouver Fraser Port Authority
creates a quieter underwater
environment in a critical habitat for
southern resident killer whales in
HaroStrait, Boundary Pass, and
Swiftsure Bank.
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Environmental
management
Governance
Our Group Environment Policy, refreshed
inJuly 2024, states our commitment
tomanage, monitor, and reduce the
environmental impacts caused by
ourbusiness.
Each month, we report internally on
environmental incidents and near misses.
The Board receives Health, Safety, and
Environment performance updates, as
part of the CEO report. We investigate
environmental incidents in relation to
ouroperations (such as waste spillage
ornear-miss contamination events)
toestablish root causes and learn the
appropriate lessons.
All our operational Generation assets in
the UK are certified to ISO 14001:2015
(Environmental Management Systems)
within an integrated management system.
For more information on our approach to
integrated HSE governance, management
systems, audit, and training see page 51.
Environmental compliance
Since acquiring Daldowie Fuel Plant in
2018 we have responded to feedback
from the Scottish Environment Protection
Agency (SEPA) to address concerns on
odour emissions. Historic issues raised by
SEPA in relation to odour complaints have
now been formally closed.
Other emissions to air
Particulates (tonnes),
Drax Power Station
2
024
2
023 313
468
Drax Power Station is required to comply
with UK laws and regulations to manage
emissions into the atmosphere. For
biomass generation, the main emissions to
air are nitrogen oxides, sulphur dioxide,
and particulates (dust). In 2024, emissions
ofsulphur dioxide and nitrogen oxides
slightly increased compared with 2023
attributed to the operational position
(MWproduced).
Volatile Organic Compounds (VOCs)
(tonnes), Pellet Production
2
024
376
2
023 741
919
Pellet production operations are subject
tolocal State laws for air emissions and
pollutants and set requirements on the
level and frequency of self-monitoring
andreporting. The main emissions to air
are particulates (dust), VOCs, carbon
monoxide, and nitrogen oxides.
Responding to local concerns
In September 2024, Drax and the
Mississippi Department of Environmental
Quality (MDEQ) entered into an Agreed
Order to settle alleged Notices of Violation
(NOV) at our Amite plant in Mississippi in
connection with MDEQ letters dated
14March 2023 (amended on 21 June
2023), and 8 January 2024. The NOVs
were due to an alleged permit exceedance
of hazardous air pollutant limits with
respect to methanol and a failure to timely
conduct an emissions performance test by
a certain deadline. Drax fully co-operated
and took action to investigate the alleged
violations and provide MDEQ accurate
information promptly upon its discovery.
As part of the settlement, Draxagreed to
pay a civil penalty of US$225,000, with
US$150,000 of that amount paid directly
to MDEQ. Drax also agreed to complete
asupplemental environment project,
which includes the installation of a dust
suppression screen, inconnection with
the settlement of thisenforcement action
taken by MDEQ. We are working with
community stakeholders to help guide
future engagement and action.
Water
The use of water is subject to strict criteria
and local laws, with compliance overseen
internally by our Operational and HSE
teams and externally by the local
regulatoryagencies.
Drax Power Station uses water for
operational and cooling processes.
Theprimary use for water is to produce
steamat high pressure, which is used to
power turbines for electricity generation.
A proportion of water used is emitted as
water vapour through cooling towers.
Theremainder is recycled and discharged
under permit to the river Ouse. In line with
requirements, procedures are in place to
manage water system efficiency and
usage, ensuring discharge consent limits
are met. Total water abstracted at Drax
Power Station slightly decreased by
1.3%compared to 2023.
At the Lanark and Galloway hydro
schemes, we diverted 3,664,202,383 m³
of water from river systems to run through
our run-of-river generation plants before
being redirected back into the river. Total
water abstracted and returned increased
by 4.2% compared with 2023 attributed to
the operational position (MW produced).
At Cruachan Power Station we generate
electricity by using water that flows from
Cruachan dam through four turbines
before being directed into Loch Awe. This
generates electricity at times ofincreased
demand. At times when electricity demand
is low, we pump water from Loch Awe into
the upper reservoir atCruachan dam. We
monitor the arrangements for the cycling
of this water and report to SEPA as
required.
At our Pellet Production sites, discharged
water primarily consists of deluge water,
wash water from hoses, and stormwater
from rain events.
By the end of2026 we aim to develop
aGroup water strategy to identify
opportunities for water efficiency
improvements, water reduction and
improved water stewardship.
Water stress assessment
In 2024 we completed a water stress
assessment using the World Resource
Institute (WRI) Aqueduct Water Risk Atlas.
According to this methodology, our London
office 248m
3
, isthe only asset identified
inan area of “high” water stress. Currently,
all our generation and pellet production
assets were identified in areas of “low”
water stress, apart from one pellet facility
identified in an area of “medium” water
stress. We expect our TNFD nature
assessments to build on this analysis.
Supporting Atlantic Salmon
At Tongland Dam in the Galloway
region of South Scotland, we are
working with SEPA and Galloway
Fisheries Trust (GFT) to identify
waysof creating better conditions
formigratory fish. A freshet scheme
isunderway at Tongland Dam to
provide pulses of water designed
tomimic natural conditions and
assistmovement upstream. We
alsocontinue to work closely with
SEPAand GFT to monitor salmon
movement across our network of
hydro-electric stations. A fish
counteris installed on the network,
and we share this data with partner
organisations and relevant agencies.
SPOTLIGHT
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49
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In 2024, we continued to make investments in our people and our communities. We provided opportunities to develop skills,
supported physical and mind safety, and took action to make sure our processes and policies were fair. Through our listening and
engagement strategy for both colleagues and communities, we were able to identify where we need to do better and build greater
trust for our collective success.
Unit 2024 2023 2022
Our colleagues
Total number of Group employees
(1)
n 3,243 3,551 3,229
A fair, safe, and inclusive Drax
Total Recordable Incident Rate (TRIR)
(2)
% 0.24 0.38 0.44
Near Miss and Hazard Identification Rate (NMHIR)
(3)
% 167.56 129.26 –
Wellbeing scores in MyVoice Survey Score 7.8 – –
Women in Senior Leadership
(4)
% 35.7 36.8 –
Men in Senior Leadership
(4)
% 64.3 63.2 –
DEI Scores in MyVoice Survey Score 8.0 81
(5)
80
(5)
An ethical employer of choice
Engagement Score in MyVoice Survey Score 7.4 79
(6)
79
(6)
Employees completing annual compliance training
(7)
% 99.6 – –
Our communities
Total donations (including Drax Foundation) £m 3.6 2.7 –
Total initiatives n 52 41 –
This metric was subject to external independent limited assurance by PricewaterhouseCoopers LLP (‘PwC’) as part of their assurance over metrics in the ESG
Performance Report 2024. For the results of that assurance, refer to the ESG Performance Report 2024.
(1) Total number of Group employees as at 31 December 2024.
(2) TRIR is the total fatalities, lost time injuries, restricted work, and medical treatment injuries per 100,000 hours worked. Total includes both employees and contractors
across our sites and offices. There were no fatalities in any of the years stated above.
(3) NMHIR is the total near misses and hazard incidents per 100,000 hours worked. Total includes both employees and contractors.
(4) Executive Committee, direct reports (excluding Personal Assistants and Executive Assistants) and Subsidiary Directors. 2023 figures does not contain Subsidiary
Directors.
(5) The DEI score measures diversity, equity and inclusion at Drax. Due to a change in provider and scoring methodologies, the 2024 score is presented as a figure out of ten.
The 2023 and 2022 score were previously presented as percentages and have been included here for consistency from previous Annual Reports. Due to the change in
methodologies scores cannot be compared like for like.
(6) In 2023 and 2022 the colleague engagement results were presented as a percentage. Due to a change in provider and scoring methodologies, the 2024 figure represents
a score out of ten.
(7) In line with the new Compliance KPI (see page 53) employees completing annual compliance training considers the average completion rate across four training modules
(Security, Anti-Bribery and Corruption, Code of Conduct, and Data Protection) plus the completion of the Annual Business Ethics Declaration.
Our performance
People performance and data summary
People positive
Making a positive contribution to the
livesand livelihoods of our colleagues,
communities, and workers in our
supplychain by 2030.
For additional data see ESG Performance Report
www.drax.com/sustainability
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People positive –
ourcolleagues
We want all our colleagues to feel like a
valued member, on a winning team, with
aworthwhile mission. To uphold this
commitment to our colleagues, we are
dedicated to being an employer of choice.
In 2024, we set goals within the People
Positive pillar ofour strategy, working to
further align our internal peoplepractices
with the needs of our communities and
supply chains. We are dedicated to
enhancing our fair, safe, and inclusive
environment to achieve this.
Our People approach
We seek to be enablers infostering an
inclusive and high-performance culture
that empowers colleagues to contribute
toour purpose. We focus on establishing
processes that are efficient and equitable;
that allow ourcolleagues to be heard and
valued, equipping colleagues with skills for
the future and nurturing talent that better
represents the communities in which
weoperate.
A fair, safe and inclusive Drax
We prioritise safety
Health and safety is a key part of our
licence to operate. Our Group HSE
Governance Policy, supported by our
OneSafeDrax vision, outlines how all
employees and those working on behalf
ofDrax have a role to play in safety for
themselves and their co-workers. Local
HSE performance is reviewed by each
management team with Group HSE
performance appraised quarterly by
theGroup HSE Committee.
The CEO reports on HSE performance
ateach Board meeting. Drax Leadership
Team meetings often begin with a “safety
standout” where reflections on safety and
areas for potential change are shared. This
includes traditional HSE matters, as well as
Mind Safety, psychological safety, and the
impacts of a positive intervention culture
and how to have the confidence
tointervene if anything looks unsafe.
Our operational UK Generation assets
have an integrated HSE management
system certified to ISO 9001:2015 (Quality
Management Systems), ISO 14001:2015
(Environmental Management Systems),
and ISO 45001:2018 (Occupational Health
and Safety Management Systems).
Our Commercial and Corporate sites in
theUKcontinue to implement Safety
Management Systems to raise awareness
and drive continuous improvement in
ourhealth and safety culture. Our Pellet
Production sites are aligned to one
HSEmanagement system across the
USand Canada.
How we make it happen
We have HSE training for employees
based on the requirements oftheir role.
Focus on HSE Leadership in 2024
resultedin selected UK HSE colleagues
participating in a pilot practical safety
leadership experience.
Group TRIR
(1)
2
024
0.44
2
023
2
022
0.38
0.24
167. 56
Group NMHIR
(2)
(1) TRIR is the total fatalities, lost time injuries,
restricted work, and medical treatment injuries
per100,000 hours worked. Total includes both
employees and contractors across our sites and
offices.
(2) NMHIR is the total number of near miss and hazard
identification reports logged per 100,000 hours
worked. The total includes both employees and
contractors.
This metric was subject to external independent
limited assurance by PricewaterhouseCoopers LLP
(‘PwC’) as part of their assurance over metrics in
the ESG Performance Report 2024. For the results
of that assurance, refer to the ESG Performance
Report 2024.
Cyber security
We have a cyber security team who
manage our assessment of cyber threats
and actions we can take to address them.
Allsecurity framework policies are
reviewed and re-approved annually. Risk
assessments are performed in line with
our policy and regulatory frameworks
andsecurity policies are communicated
tocolleagues, stakeholders, suppliers
andthird parties.
Mind Safety at Drax
Power Station
At Drax Power Station we implemented
a renewed focus on Mind Safety in
2024. We created a Steering Group
andWorking Groups to review
recommendations from a specialist
provider in mental health services.
We opened our “Muckers Hubs” as
on-site safe spaces where colleagues
can seek support on wellbeing. We
refreshed our Mental Health First Aid
provision, implemented line manager
training on mental health, and are
piloting wellbeing check-ins for our
on-site colleagues.
Wealso partnered with Rugby League
Cares and their “Offload” initiative.
This involves engaging with current and
former players to learn the techniques
clubs use to manage players’ mental
andphysical fitness.
Women’s Health &Menopause
In October 2024, we organised events
focusing on women’s health for World
Menopause Day and Breast Cancer
Awareness Month. We delivered
sessions on navigating menopause
andsupporting others, and hosted a
virtual event where colleagues shared
experiences with breast, cervical, and
ovarian cancer. At Drax Power Station,
men volunteered to trial the Menovest,
a“hot flush” simulator from Over The
Bloody Moon (OTBM), to enable them
tobetter understand its effect, to raise
awareness, and build empathy to ensure
change where it’s needed most.
SPOTLIGHT
HSE Governance
Group HSE
Committee
HSE Centre
of Excellence
(HSE leads meet
monthly, forum
for sharing)
Business Unit HSE
Committees
Board receives
HSE performance
updates
Executive
Committee
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51
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We perform phishing tests quarterly,
aimed at increasing awareness of how
hackers try and gain access, using emails
and links that can look like genuine
information.
Through this, the rate of colleagues
successfully reporting the tests and
identifying potential threats has improved.
In the event someone fails the test, further
awareness training is automatically
assigned.
Business unit cyber security awareness
sessions continue to be delivered, which
give colleagues a deeper understanding of
the wider cyber threats to our colleagues
from a personal and professional
perspective. The Board received a cyber
briefing and update in January 2025.
In2024, management provided updates
tothe Executive Committee on the
geopolitical landscape and emergent
cyber threats.
We are externally audited annually for
SECand PCI-DSS compliance (to
applicable Group entities). We also have
avulnerabilities and penetration testing
schedule in place, which runs through
thecourse of the year and is performed
byaccredited test resources with defined
remediation windows in place.
We promote and support holistic
wellbeing
We know for our colleagues to perform
their best, we need to promote their
holistic wellbeing across areas such as
financial, social, mental, and physical
considerations.
How we made it happen in 2024
We do this through our comprehensive
benefits package covering retirement
planning, health and wellbeing, supporting
colleagues andtheir families. In our
engagement survey, colleagues highly
rated our benefits offering (with a score
of8.1, which is 0.2 above the industry
benchmark) and cite it as a key reason they
would recommend Drax as a workplace.
Working with our benefit providers and
external specialists, we deliver a wide-
ranging engagement and communication
programme which covers all four wellbeing
pillars to help raise awareness, connect
and educate colleagues about the support
available to them. We work with our
financial wellbeing partners nudge, Wealth
at Work, and retirement saving providers
to enable colleagues to manage their
finances; with Peppy for specialist advice
on fertility, early parenthood, menopause,
and health support; and with our health
care providers, including Vitality, for
guidance on health aspects including
nutrition, exercise, and sleep.
Our partnership with CorPerformance
hassupported the holistic wellbeing of
48senior leadership colleagues in 2024
through comprehensive health screening,
mood score analysis, and individual
coaching sessions. Outcomes have
included improved self-awareness, health
and mood, mental performance, and
burnout prevention, alongside a
commitment to sharing learnings and role
modelling wellbeing within their teams.
The results of our focus on wellbeing have
seen a steady improvement in the score
inourengagement survey, 7.8 in 2024,
upfrom 7.6 in 2023, against the industry
benchmark of 7.9.
We drive Diversity, Equity and
Inclusion(DEI)
In 2024, we continued to work towards
building a fair, safe, and inclusive Drax,
that better represents the communities
inwhich we operate. During 2024 our
DEIteam worked to develop localised
plans to bring our DEI work to life. These
plans bring together our DEI strategy and
any local challenges for a meaningful and
realistic plan that engages our colleagues.
How we made it happen in 2024
We continued to mark important events
inthe DEI calendar with speakers, panels,
and events. In 2024 we held our first
Group-wide Inclusion Summit with
prominent guest speakers, panels and
workshops. For more information on
events, see pages 92 and 97 in the
Corporate Governance section.
Responding to feedback on Personal
Protective Equipment, we have provided
agreater range of sizes and styles of fit
inthe UK.
Reasonable adjustments improvements
We recognise more needs to be done to
provide a workplace that is inclusive. 2024
saw further work in this important area.
Aspart of our initiative, we need to
encourage colleagues to take positive
steps to make reasonable adjustments and
accommodations for colleagues and
candidates. We provided training and
guidance to managers, hiring managers,
HR, and talent colleagues on managing
these requests.
Additionally, we launched the Recite Me
Accessibility Toolbar on our Careers page
and drax.com. The Toolbar is designed
tobe more inclusive for people with
disabilities, helping people to access
websites and customise content.
Developing our Fair Hiring Project
We strive to better represent our
communities through fair and equitable
processes to build trust and drive
innovation in our processes. In 2024,
weadvanced theFair Hiring Project to
better ensure consistency, equity, and
transparency in hiring, focusing on
objective criteria and bias mitigation. We
are developing the “Hiring the Drax Way”
training and toolkit, a digital assessment
based on our values, so our places of work
better represent the communities in which
we are located.
Introducing new Colleague Resource
Groups (CRGs)
Through listening to our colleagues, we
identified the need for two additional
CRGs in 2024. We launched
Parents&Carers@Drax and Enable@Drax,
responding to the needs of parents,
carers, and colleagues with disabilities.
We also invested in our CRG role-holders
through the Radius Training Programme,
which helped increase our CRG
membership to over 400. In 2024 we
werenamed by Working Families as one
ofthe Top 30 UK employers for those
withfamilies.
Sustainable development continued
People positive
Data based as of 31 December 2024. Senior
management includes the Executive Committee, their
direct reports (excluding executive assistants, personal
assistants and equivalent) and subsidiary directors.
Women on the Board
2
024
2
023 50%
44%
Women in Senior Management
2
024
376
2
023 37%
36%
Workforce gender diversity, 2024
Men
Women
50%
71%
29%
Workforce gender diversity, 2023
Men
Women
50%
68%
32%
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52
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An ethical employer of choice
At Drax, we want to make a positive
impact on our planet. To do this we need
to ensure we have the right people, with
the right skills, at the right time, doing
theright thing.
Acting ethically and with integrity
We are committed to conducting business
ethically, with honesty and integrity, and
incompliance with relevant laws and
regulations. We do not tolerate bribery,
corruption, human rights abuses, or other
unethical conduct. We have a Business
Ethics team who develop and manage
ourBusiness Ethics Programme and
programmes, and a Data Privacy team who
provide guidance and handle personal data
requests. The Ethics and Business Conduct
Committee (EBCC), chaired by the Group
General Counsel, oversee our ethics and
privacy programmes, with each meeting
beginning with an “ethical moment”.
How we made it happen in 2024
Our Business Ethics and Data Privacy
teams monitor compliance and investigate
potential breaches. We have an internal
audit function that challenges the
robustness of our Business Ethics and
Privacy programmes. In 2024, the Fair
Competition programme was subject
toaudit.
We review our suite of Business Ethics
policies annually. In 2024, as part of this
work, the team reviewed and implemented
changes to our Political Engagement and
Lobbying Policy.
The Supplier Code of Conduct is shared
with relevant third-party suppliers, and
incorporated into relevant contracts,
including a termination clause for
materialbreaches. Both our Code
ofConduct and Supplier Code were
reviewedin 2024, withthe associated
drafts presented to the EBCC for
consideration in December 2024. The
review was supplemented, andinformed
by several supplier audits conducted
byathird-party specialist auditor.
A Compliance KPI was created for
theGroup Scorecard which set targets
forcolleagues completing annual training
onthe Code of Conduct, Data Protection
andSecurity, Anti-bribery and Corruption,
and completing the Annual Business
Ethics Declaration.
Skills and development
For Drax to deliver its strategy and to
develop and implement innovative
solutions that provide power to homes
andbusinesses whilst reducing carbon
emissions, we continue to need our
peopleto develop new skills.
How we made it happen in 2024
We implemented our first strategic
workforce plan that identified the
futurecritical skills required to achieve
ourstrategy and carbon removals
ambition. We are working to understand
our existing skills gaps and align our talent
development offerings to our required
skills for growth, both internally and
inpartnership with the communities
weoperate in, such as through our
Environmental Justice work (US South),
and Reconciliation Plan (Canada),
alongside ensuring we have the internal
and external supply chain capability
available at the right time to deliver our
BECCS, carbon removals, andmajor
capital projects growth plans. We
welcomed 37 new apprentices, year-in-
industry students, and graduates to Drax
programmes taking our total up to 91
currently on programmes across Drax.
Business Ethics programmes in more detail
Ethics and
Business
Conduct
Committee
(EBCC)
Business
Ethics team
Audit Committee
Executive
Committee
Anti-bribery and corruption
In 2024, we carried out an annual review
of our Gifts, Hospitality, and Conflicts
ofInterests records. We also updated
our Anti-Bribery and Corruption learning
which was deployed to all colleagues
inQ4, 2024.
Anti-fraud programme (new)
We intend to finalise our anti-fraud
programme in 2025 now that the Home
Office has published its guidance on
thenew Economic Crime andCorporate
Transparency Act: Failure to prevent
fraud offence.
Ethical due diligence programme
This underpins several of our Business
Ethics programmes by helping to
identify initial and ongoing risks
associated with aproposed commercial
relationship. In2024, a project
commenced to strengthen our supplier
data and supplier on-boarding process
and systems.
Speak Up
In 2024, we furthered our efforts to
promote awareness of our Speak Up
channels via Groupwide mandatory
training and internal communication
initiatives. This included the use of
leader’supdates, in person and virtual
presentations, intranet news articles,
physical posters and digital display screens.
There were 49 reports raised through our
Speak Up channels during 2024. Weseek
to investigate all reports where sufficient
information is provided.
Of these 49 reports, 45 were closed
in2024 – 11 could not be progressed
duetoinsufficient information, 29
wereinvestigated and found to be
unsubstantiated, and 5 were investigated
and found to be substantiated. Learnings
and appropriate actions in respect of these
5 matters has been undertaken.
There were4 that remained open as of
31December 2024.
Fair competition
The programme was subject to internal
audit in 2024, with a satisfactory (green)
rating. Revised guidance and policy
updates were published in July 2024.
Financial and Trade Sanctions
This programme of risk assessments
waspresented to the EBCC in Q2 2024.
Regular reporting on sanctions to
EBCCcontinued throughout the year.
Privacy
During 2024, the Data Privacy team
completed the annual review of policies
and notices to confirm they remain in line
with legal and regulatory requirements
for Drax, making updates where required.
Human rights
Our 2024 activity relating to the Supply
Chain Human Rights programme (in
addition to planned activity for 2025)
isset out in our latest Modern Slavery
Statement which can be accessed
onourwebsite.
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53
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Not all our future talent is on our doorstep,
so in 2024 we partnered with Springpod,
an award-winning online careers platform,
to extend our reach to a wider early careers
community to inspire the next generation.
310 students took part in our first free
learning module on Carbon Capture.
Our Management Excellence and
Accelerate Programmes are designed
tosupport managers intheir roles and
toelevate their performance as people
managers and leaders. In 2024, 363
colleagues benefitted from these
programmes.
We launched Inclusive Team Talks tailored
for operational schedules, alongside digital
and in-depth face-to-face workshops on
topics like psychological safety, unmasking
bias, activating allyship to support
colleagues from minority groups through
solidarity, and impacting inclusion.
We reviewed our Talent, Performance,
andSuccession approach, ensuring we
areproviding the right tools and process
todrive a high-performance culture.
We focused on enhancing our talent
pipeline visibility and in 2025 we will be
extending our succession planning
process to over 400 managers and
introducing quarterly succession planning
with the Executive Committee.
We listen and engage
“MyVoice” is our way of acknowledging
colleagues’ sentiment and feedback. It is
avaluable means for understanding the
views of ourpeople and continuously
improving our work environment and
experience.
People positive – our new values and
behaviours
The actions which we have outlined in
thissection will combine with our new
values and behaviours, which were
launched in 2024.
Together the various activities create
opportunity for ourpeople to grow and
develop, whilst fostering an engaging
andhigh-performance environment, that
enables usto attract and retain top talent.
Sustainable development continued
People positive
Every colleague’s journey will be different
and Drax is seeking to establish a culture
whichrespects these differences and
enables each person who works for us
tocontribute their best and be part of
realising our goals for our people, our
communities, our partners and
stakeholders.
A new approach to listening
Our values and behaviours have informed
our listening approach for 2024. This
included beginning the transition to
quarterly colleague engagement surveys
and evolving the colleague MyVoice
forums to work effectively as a strategic
business partner to senior leaders and
theBoard.
Acting on our surveys
Two surveys in July and October 2024
showed steady scores in engagement,
diversity and inclusion, health and
wellbeing, and transformation and change.
These scores reflected good ongoing
engagement. Key focus areas from
colleague feedback included freedom
ofopinions, career paths, management
support, mental wellbeing, and
inclusiveness, which saw steady or slight
improvements. Actions included
introducing values and behaviours,
focusing on mental wellbeing, in addition
to our DEI strategy.
Survey outcomes indicated a need for
moreclarity on business strategy and role
alignment, which will be a key focus in 2025.
5
Number of My Voice Forums (MVFs)
across Drax in 2024
Read more in Stakeholder Engagement,
page 92, and Corporate Governance
Report, see page 90.
Together,
we make it happen
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OUR DRAX VALUES
Drax Group plc Annual report and accounts 2024
54
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A profile of our Grantees
National Audubon Society,
US:£38,200
National Audubon protects birds and
their natural habitat using science,
advocacy, education, and on-the-ground
conservation. In 2024 we provided
funding for Audubon Delta, which is
improving access to nature-based
education for their local chapters in
Louisiana, Mississippi, and Arkansas,
andhelping to protect five hectares
ofpriority bird habitat in Mississippi.
University of British Columbia
(UBC), Canada: c.£54,000
UBC’s Wild and Immersive programme
cultivates lifelong environmental
enthusiasm in children through a range
of outdoor activities and programmes.
Our planned funding will help to expand
and improve trails and support bursaries
for children from underserved
communities to remove barriers to
participation. 15% of the funding was
ring-fenced for indigenous communities
or underprivileged groups.
Argyll Countryside Trust (ACT),
Scotland: £25,300
ACT is a community-led organisation that
works to restore nature, address climate
change and provide outdoors nature-
based learning.
In 2024 we provided funds for their
Rainforest Hub, enabling them to
maximise opportunities at their native
tree nursery, and deliver nature-based
education for local children.
SPOTLIGHT
Our communities
We
seek to make a positive contribution
tothe communities in which we operate
through engagement and corporate
community investment.
We deliver community investment through
the Drax Foundation and Community
Fund which are overseen by our
Community and Charity Policy. In 2024,
we published our first Drax Community
Impact Report which has more detail on
the Foundation and our corporate giving.
£3.6m
donated in 2024 in grant funding
for non-profit organisations
In 2024 the Drax Foundation provided
£3.6 million in grant funding for non-profit
organisations. This has improved access to
STEM education and “green skills” training
for 21,087 young people. In addition, the
Foundation has helped 27 schools receive
energy-efficient LED lighting and solar
panels estimated to save them almost
£0.5m per year on energy bills and save an
average of 512 tCO
2
e per annum.
We have also supported organisations
providing practical and financial support for
people living in fuel poverty across the UK.
The Community Fund provides direct-
giving to grassroots non-profits and
community-led initiatives within our
communities. In 2024, we established our
first Community Advisory Panel (CAP) in
Gloster, Mississippi in the US South to
provide input into local priority issues for
funding. During 2025 and 2026, we intend
to rollout CAPs in all our communities.
For more information about community
engagement undertaken during 2024,
seethe Stakeholder Engagement section
of this report on 96.
Indigenous peoples
Drax recognises the profound relationship
indigenous people have with some of
theland we operate on and from which
wesource.
Weare committed to listen, learn, and
understand concerns related to our
operations and those of our suppliers.
OurIndigenous Peoples Policy is the
foundation for our interaction with
FirstNations and includes our
commitment to building positive and
sustainable relationships with indigenous
peoples following Free, Prior, and
InformedConsent (FPIC).
In 2024 we established a new First Nations
Advisory Committee which provides
recommendations on four performance
areas: employment; business
development; community investment and
community engagement. We also provided
funding for a range of First Nations
initiatives during 2024.
Through the Drax Foundation, we have
provided funding for Scientists in School,
and to MindFuel, which provides STEM
education and skills development
workshops for indigenous and rural
students in British Columbia.
Our funding for the Exploration Place in
Prince George, has expanded educational
outreach to indigenous communities with
a goal to reach 4,000 rural, remote, and
indigenous students during 2024.
Drax Group plc Annual report and accounts 2024
55
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Compliance statement
This disclosure has been prepared in line with the Financial Conduct Authority (FCA) Listing Rule (UKLR 6.6.6(8) consistent with the
recommendations of the TCFD and the updated 2021 TCFDAnnex guidance. The climate-related financial disclosures outlined comply
with the requirements of the Companies Act 2006, asamended by the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022.
TCFD pillar TCFD recommended disclosure
Consistency with
recommended
disclosure Reference
Governance 1. Describe the Board’s oversight of climate-related risks andopportunities Page 57
2. Describe management’s role in assessing and managing climate-related
risks and opportunities
Page 57
Strategy 3. Describe the climate-related risks and opportunities the organisation
hasidentified over the short, medium, and long term
Page 64 to 66
Principal risks and
uncertainties 70
4. Describe the impact of climate-related risks and opportunities on the
organisation’s business, strategy, andfinancial planning
Page 60
Viability Statement 84
5. Describe the resilience of the organisation’s strategy, takinginto
consideration different climate-related scenarios, including a 2°C or
lowerscenario
Page 63
Risk
management
6. Describe the organisation’s processes for identifying andassessing
climate-related risks
Page 59
Principal risks and
uncertainties 70
7. Describe the organisation’s processes for managing climate-related risks
Page 59
Principal risks and
uncertainties 70
8. Describe how processes for identifying, assessing, andmanaging climate-
related risks are integrated into theorganisation’s overall risk management
Page 59
Principal risks and
uncertainties 70
Metrics and
targets
9. Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management
process
Page 67
Climate positive 38
10. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions and the related risks
Page 67
Climate positive 38
11. Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets
Climate positive 38
Fully consistent
Partially
Task Force
onClimate-related
Financial Disclosures
Climate-related financial disclosures
The Task Force on Climate-related Financial Disclosures (TCFD)
provides a common framework for the provision of clear,
comprehensive, high-quality information on the impacts of climate
change. Drax has been a TCFD Supporter since 2020, recognising that
identification and disclosure of climate-related risks and opportunities
supports Drax and our stakeholders to make long-term decisions.
Drax Group plc Annual report and accounts 2024
56
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2024 Actions and progress
TCFD Pillar
Actions for 2024
(as per Annual Report 2023) Progress in 2024
Governance Embed the governance structure and evaluate
effectiveness. Implement decarbonisation projects
as agreed for the 2024 Group annual bonus
Scorecard.
We developed our Sustainability Framework.
TheFramework will enable Drax to develop a
coherent narrative around Climate, Nature and
People positive pillars.
Strategy Undertake an initial quantitative transition risk
scenario analysis exercise.
In 2024 we completed a Double Materiality
Assessment. The results enable us to identify key
focus areas for action and guiding sustainability
efforts with clarity and purpose (see report 37).
Risk
management
Utilise quantitative scenario analysis insights,
relating to potential future development of physical
climate parameters across Pellet Production and
FlexGen and Biomass assets.
Please refer to transition risk analysis on page 62.
Metrics and targets Publish a Climate Transition Plan in line with the
Transition Plan Taskforce (TPT) Disclosure
Framework, during 2024. This will outline the plans
underpinning our carbon reduction targets.
Publication of transition plan expected 2025, (see
page 41). Each business unit has a list of potential
decarbonisation projects, which form the business
unit carbon reduction plans (see page 41).
Governance
Responding to climate change is a core
component of the Group’s purpose, to
enable a zero carbon, lower cost energy
future. This is reflected in our governance
– from our Board through our Executive
Committee and their leadership, to our
business units and their functions (see
Sustainability Governance structure,
page36). Our Group Climate Policy is
available on the Drax website.
Board oversight
The Board has ultimate accountability
forclimate-related risks and opportunities.
The CEO oversees and ensures that the
Group effectively implements the business
strategy, which is aligned to our
decarbonisation objectives.
Every quarter, the Sustainability
Leadershipteam, led by the Chief
Sustainability Officer (CSO), provide
asustainability update to the CEO. During
2024, this included updates on the Climate
positive pillar of our Sustainability
Framework. TheCEO provides regular
updates on sustainability within the CEO
Report to the Board.
Management’s role
The CSO and the Senior Sustainability
Leadership team areresponsible for the
day-to-day implementation of the Group’s
sustainability strategy, and report progress
to the Board on aquarterly basis. The
Sustainability Council (see page 36),
activethroughout 2024, acts as a Risk
Management Committee for the climate
change Principal Risk. Governance of the
climate change Principal Risk is described
on page 59.
In addition to the quarterly sustainability
update provided to the CEO, the Group
conducts Quarterly Business Reviews
withthe Executive Committee. For this,
the Sustainability Leadership team provide
key updates on progress and challenges
across our Sustainability Framework,
including the Climate positive pillar.
Management are responsible for
communicating the priorities for their
business area, that can positively
influence the delivery of objectives linked
to the TCFD pillars. Our colleagues play an
important part in enabling that work about
which more can be found under the
“ourresponse” sections, pages 64 to 66.
Strengthening climate
governance
As part of our commitment to
advancing sustainability efforts
through a focused and forward-
looking strategy, in February
2025, we launched our 2030
Sustainability Framework.
This Framework covers our Climate
positive pillar and enables us to
developa coherent narrative on
climate, with time-bound
commitments and targets, clear
governance and implementation plans.
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57
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Sustainable development continued
Task Force on Climate-related Financial Disclosures
Audit Committee
The Audit Committee has responsibility for overseeing effectiveness
of risk management processes and controls, including the climate
change Principal Risk.
In 2024, the Audit Committee:
– Reviewed and challenged the climate change Principal Risks
disclosure at Half and Full Year
– Received a paper with a matrix detailing assurance in place over
each key ARA disclosure, including those which are climate-related
Executive Committee
The Executive Committee holds regular formal meetings. The Committee
focuses on the delivery of our strategy, operational and financial
performance.
In 2024, the Committee:
– Undertook an in-depth review of the climate change risk register
– Considered and approved a three-year ESG strategy, which highlighted
our existing and future external reporting obligations and
commitments, both legal and voluntary and the areas of highest
priority for focus and investment
– Reviewed and approved the Group’s new biomass sourcing policy
– The CSO reviewed and signed off our CDP Climate Change
questionnaire in September and our UNGC annual commitment in July
– Received updates on TCFD reporting
– In early 2025, formally approved the Group’s new Sustainability
Framework, which will launch in February
Sustainability Council
The council was established in 2023, and meets at least quarterly. In
September 2024, its Terms of Reference were reviewed, enhancing
attendance from the Executive Committee members and increasing
decision-making rights.
In 2024, the council:
– Reviewed and endorsed plans to sign up to a SBTi net zero 2040
decarbonisation target
– Reviewed and endorsed climate-related targets and commitments
inour draft Sustainability Framework
– Received an update on the development and plans to publish our
Climate Transition Plan
Climate Expert Hub – Carbon
Reduction Taskforce (CRTF)
The CRTF is made up of representatives from different business units
to centrally co-ordinate the respective decarbonisation workstreams.
These individual business unit forums meet regularly to evaluate
projects and develop business cases that help Drax to realise
decarbonisation objectives, including our carbon reduction targets.
In 2024, the CRTF:
– Co-ordinated efforts to progress delivery of the three 2024
decarbonisation Group Scorecard target projects, as well as
non-Scorecard projects
Business units and functions
Sustainability: Responsible for our sustainability programme, including
decarbonisation projects, co-ordination of climate change Principal
Risk, ESG disclosure, data, and assurance.
HSE: Responsible for environmental compliance and performance.
Independent Advisory Board (IAB)
The IAB, which met four times in 2024, provides external advice and
challenge on our responsible sourcing of biomass, and wider aspects
ofour sustainability strategy. See page 35 for a summary of the 2024
activity.
The IAB comprises six scientists and technical specialists (biographies
available on the Drax website). In 2024, Lord John Krebs assumed the
role of Chair, with Professor Sir Ian Boyd assuming the role of Vice Chair
in 2024.
Remuneration Committee
The Remuneration Committee oversees the approach to remuneration,
including the safety and ESG element of the Group bonus scorecard.
In 2024, the Remuneration Committee:
– Considered and approved the 2024 Group Scorecard targets and
KPIs, including three carbon reduction projects with an aggregate
5% weighting
– Received an update on the progress tracking the performance
against the 2024 targets
– Considered potential carbon reduction projects for 2025
Drax Group plc Board
The Board meets regularly and has ultimate
accountability for climate-related risks and
opportunities.
In 2024, the Board:
– Received an update on 2024 decarbonisation
progress at the Group’s October Board
Strategy meeting
– Received a briefing on decarbonisation,
focusing on absolute emission reductions,
including progress against our targets,
current project options and future
decarbonisation pathways
– Received and considered a paper that
highlighted our existing and future reporting
obligations and commitments, both legal and
voluntary and the underlying governance
system that exists to manage these
evolutions
– Considered the evolution of TCFD and
TNFD,and how that is being addressed
bymanagement as part of the growing
importance of disclosing climate and
environmental risks in line with international
standards
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Risk management
Integration of climate-related
riskmanagement into Group-wide
approach
The identification assessment and
management of climate-related risks is
integrated into our Group-wide approach
to risk management, as defined by the
Group Risk Management Policy. The
Policy, reviewed and approved annually
bythe Group Financial Risk Management
Committee, is supported by the Group Risk
Management Framework, which defines
our approach to risk management and the
responsibilities of management and our
colleagues.
Climate change is a Principal Risk category
governed within the Group-wide approach
to risk management (see page 70, Principal
Risks and Uncertainties).
Senior leadership and risk owners, who
arelocated across various business units,
are collectively responsible for the
identification of risks with the potential
tothreaten the achievement of strategic
objectives. The Audit Committee and the
Board review the effectiveness of risk
management processes and controls.
TheAudit Committee reviews and
challenges the Principal Risk disclosures
twice per year, including those relating
toclimate change, as part of their review
andapproval of the Half-Year Report
andAnnual Report.
Process for identifying, assessing
and managing climate risk
The climate change Principal Risk register
is administered by the sustainability
function. Each risk has an assigned
business unit management owner,
responsible and accountable for monitoring
the risk, providing updates, and ensuring
mitigations and controls are fit for purpose.
Risk owners provide updates to the risk
register at Half and Full Year. Since its
establishment, the Sustainability Council
acts as the Risk Management Committee,
responsible for review and challenge of
the climate change Principal Risk.
Additionally, we identify, assess, and
manage our climate-related risks through
scenario analysis (see approach to
scenario analysis, below), climate
vulnerability assessments, and our
internalcarbon reduction workstreams.
To assess the materiality of climate-related
risks, identified risks are prioritised based
on the Group risk scoring matrix, which
considers likelihood and impact. The
assessment of impact is separated into
different categories, including financial,
regulatory, strategic, reputational,
technological and environmental
considerations. The level of impact,
fromminor to critical, is defined for each
category of impact. For further detail,
seePrincipal Risks and Uncertainties,
page70.
During 2024, we completed a Double
Materiality Assessment with a third-party,
engaging with our workforce; and key
internal and external stakeholders.
The work built on our 2023 materiality
assessment to understand the
sustainability topics that our stakeholders
view as priorities for Drax. This analysis will
feed oursustainability metrics and targets,
toensure they remain relevant to our
strategy and operations. “Climate change
mitigation and adaption” was one of the
material topics considered. For further
information on our Double Materiality
Assessment, see page 37.
Scenario analysis forms part of
ourapproach to identifying and
assessing climate-related risks.
Using third-party sources, scenario
analysis provides a method for climate
risks identification and assessment
thatis guided by climate science.
In 2021 and 2022, we undertook
twoscenario analyses that informed
updates to our climate change Principal
Risk register (top-down identification).
In2023, we evolved this approach and
focused on the application of scenario
analysis on themost significant physical
climate-related risks that we have
identified (bottom-up assessment).
In2024, weundertook an initial
quantitative transition risks scenario
analysis exercise.
Summarised results of our 2024
transition risk analysis, exploring the
potential quantitative impact of
transition risk parameters across our
operations, are presented on page 62,
and for specified physical climate risks
onpages 63 to 65.
Our approach to scenario analysis
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Strategy
A strategy to enable a zero carbon
lower cost energy future
The identified climate-related risks and
opportunities that could have a material
financial impact on the Group are set out
on pages 64 to 66 and in the Principal
Risks and Uncertainties section (page 70).
Carbon reduction pathway
An overview of our carbon reduction
targets and our plans (current projects
andother projects in development) can
befound in the Climate positive section
(page 40). In March 2025, we will launch
our first Climate Transition Plan in line
withthe Transition Plan Taskforce
Disclosure Framework.
Impacts of climate-related risks and
opportunities on financial planning
The conclusions from the scenario analysis
detailed on pages 62 to 63 informed the
approach to the viability assessment.
The table below summarises how
climate-related matters influence and
arefactored into the respective areas
ofour financial planning.
Financial planning element Our approach
Revenues The UK Government is legally committed to its target to achieve net zero in the UK by 2050. The Labour
Government has also made a commitment to clean energy by 2030. For our UK-based Generation business,
the impact of a transition to net zero is incorporated into the forecasts for future power prices, modelled over
a 15-year basis. The Climate Change Committee has included BECCS in its pathway for the UK to reach net
zero, and the NESO Clean Power 2030 report assumes conversion of at least one biomass unit to BECCS by
2030, and we include BECCS conversions in our long-term plans and capital expenditure, and main strategic
investments. Further to our BECCS opportunity, in the US, the Inflation Reduction Act (IRA) creates
government backed incentives for carbon removal technology such as BECCS which creates a diversified
revenue stream alongside power and CDR sales. Our long-term business plan includes developments in the US
for new-build BECCS plants, and in 2024 we launched our US-based carbon removals business, Elimini.
The primary risk to revenue from climate change is the potential disruption from extreme weather events.
Ourassessments show this will more significantly impact our Pellet Production business but could have
material adverse knock-on impacts to biomass generation if the supply chain is disrupted. Current risks are
largely from extremes of weather in Canada, including cold and sub-zero freezing in winter, as well as wildfires,
storms, and temperature extremes in the summer. We also expect the risk of storms and temperature
extremes to affect our operations in the US. Wemodel the impact of sensitivities to our business plans caused
by this category of disruptions.
The transition away from fossil fuels to renewable forms of energy has created an opportunity for the Group,
with increase in demand for our products and services. Our pumped storage hydro assets provide support
tothe UK energy network, balancing supply and demand caused by the variability in times when intermittent
renewable generators, such as wind and solar, are unable to operate or when generating more than the
system requires. As reliance on intermittent generation increases, the system is likely to require more
balancing services, increasing the value available for assets such as pumped storage. Consumer demand for
renewable electricity is growing, and the value of Renewable Energy Guarantee of Origin (REGO) certificates
have risen since 2021. Our biomass and hydro run-of-river generation assets are eligible to claim REGOs on
theelectricity they produce, and our Customers business provides REGOs to its customers.
We expect global demand for biomass to increase, including into new markets such as Sustainable Aviation
Fuel (SAF), and our business plans include an increase in third-party sales into Asia and North America
through our operations in Canada and the US. Drax also sees opportunity in the carbon removal market
andbelieves Elimini will be well positioned to benefit from developments in this market.
Costs (direct and
indirect)
The demand for renewable electricity and the transition away from fossil fuels also creates risk for our costs,
as the cost of biomass and fibre (the primary raw material for pellet production) will likely increase with
demand. We seek to mitigate this risk through contracting significant volumes of fibre under long-term
(fiveyears plus) offtake agreements.
Operating costs include carbon taxes which are paid in the jurisdictions in which we operate. This includes
fuelduties in the UK and the British Columbia Carbon Tax. Since ceasing coal generation, the impact of carbon
taxes has been significantly reduced on the Group. However, there remains carbon tax to pay on oil used in
biomass generation and gas used at the Daldowie Fuel Plant in the UK, and fuels used in Pellet Production in
Canada. Introduction of an EU Carbon Border Adjustment Mechanism (CBAM) may impose taxes on all trade
of electricity between the UK and the EU via relevant interconnectors in the future. We do not currently
expect the introduction of an EU CBAM to be material.
Meeting the requirements of operating a sustainable business brings additional operating costs. For example
we have a dedicated sustainability function which comes with its own cost base and has increased in size.
Such costs are likely to increase in response to the growth in our business and as we continue to follow
important laws, regulations, and standards.
Sustainable development continued
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Financial planning element Our approach
Capital
expenditures and
capital allocation
Our Capital Allocation Policy outlines our focus on: (1) maintaining the Group’s credit rating, (2) investing the
core business, (3) paying a sustainable and growing dividend, and (4) returning surplus capital beyond
investment requirements.
We have introduced a shadow carbon price within the capital expenditure decision-making process. This internal
shadow carbon price is used principally to modify the Net Present Value and Internal Rate of Return models used
to assess new business and investment cases. This provides a value for decarbonisation and a corresponding
penalty for investments which increase our carbon footprint (see page 67 associated metric).
From a tax perspective, Drax currently makes use of the UK Patent Box tax relief regime and will ensure that
further opportunities arising from UK BECCS patented activities are explored. Biomass is currently excluded
from the UK Emissions Trading Scheme, which has provided us with a working capital inflow, through
substituting coal (which had incurred taxes) to biomass (which does not). We expect that UK BECCS revenue
expenditure may qualify for R&D relief under the UK Research and Development Expenditure Credit (RDEC)
regime. For tax effect of RDEC credit to date, see page 67.
R&D investment: In the shorter term, we continue to investigate next generation carbon capture technologies
with the aim of identifying future options with lower energy requirements than the current technologies.
Wehave used some R&D spend to expand and improve our carbon capture incubation area, to accommodate
more and larger pilots to advance our understanding of future alternative methods of carbon capture to the
current amine-based systems. The innovation team supports the CRTF and are dedicating more R&D budget
toinvestigate technology options todisplace or reduce the use of fossil fuels in the Group’s operations.
Over the longer term, management also considers the impact of potential changes to the UK grid on the need
for dispatchable renewable power and energy storage solutions. Globally, we recognise the increasing role
biomass will have toplay in decarbonising other industries. We are conducting research into areas that may
fitour future strategy, including biofuels and Sustainable Aviation Fuel (SAF).
Acquisitions and
divestments
Our strategic aims are closely aligned with climate solutions, enabling net zero and energy security. Acquisitions
and divestments are therefore guided by, and intended to enable, the achievement of our strategic and
decarbonisation aims. For example, the acquisitions of Pinnacle Renewable Energy Inc in 2021 and Princeton
Pellets in 2022 support our aim to be a global leader in sustainable biomass pellets.
Access to capital Banks and investors are concerned not only with their own ESG performance, but also the ESG risks and
opportunities they are subject to as a lender. Drax maintains a strong investor base and portfolio ofworking
capital facilities through financial and banking institutions.
We have sought to embed aspects of our climate targets and commitments into our debt and credit facilities.
In2024 Drax agreed a £450m sustainability-linked revolving credit facility (RCF), which matures in 2027,
withoptions to extend by two years. The facility has adjustments linked to certain Scope 1, 2, and 3 carbon
emissions based on the Group’s 2030 SBTi targets. This is consistent with our continued strategic focus on
reducing our carbon emissions.
Government support will be required for Drax to fully realise its ambitions and will be critical in attracting
cost-effective investment and capital to the business.
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Quantitative transition
riskscenario analysis:
Summary of results
In 2024, we developed our Scenario
Analysis modelling to include a transition
risk assessment, as committed in our 2023
TCFD report. We utilised the S&P Global
Climanomics tool to undertake
quantitative analysis of the potential
financial implications of transition risks to
our business. We explored how different
transition risks could evolve under two
climate warming scenarios across our
existing Generation and Pellet Production
activities. We applied our analysis across
four time horizons: the 2020s, 2030s,
2040s and 2050s. The tool enables
analysis of five transition risk types and
provides the quantification of exposure
based on asset value.
Scenarios modelled
– Alignment with the International Energy
Agency’s Net Zero Emissions by2050
scenario which is designed tobe
consistent with limiting the global
temperature risk to 1.5°C
– 3°C: Current pathway aligned to current
warming potential as reported by the
IPCC, to ensure we cover the range
ofpossible evolutions
Assessment of resilience
to transition risks
The analysis above details the potential
financial impact that could arise from five
transition risks, under two different
warming scenarios. The 1.5°C scenario
assumes a faster rate of mitigation;
therefore, it is expected organisations will
be at greater risk as they will be expected
to decarbonise more quickly. The opposite
is true for a 3°C scenario.
The scenario assumes greater warming,
but slower mitigation and decarbonisation,
which would result in fewer transition
risks. Our analysis also describes how the
materialisation of these risks could affect
our business, regardless of likelihood. Like
many businesses, the introduction of a
carbon pricing mechanism would
represent the greatest potential financial
risks. The modelling assumes a higher
average price per tonne of CO
2
e in a 1.5°C
scenario than in a 3°C scenario. We are
satisfied that the risk of a mechanism that
affects our operations would be low, and
we are liaising with the appropriate
government and regulatory bodies. As we
develop our carbon removals business, any
carbon pricing mechanism would be seen
as an opportunity for the Group. The
remaining risks considered above present
low material risk and are well mitigated. For
example our current biomass supply chain
emissions of 93.7kgCO
2
e/MWh are below
the regulatory threshold of 180kgCO
2
e/
MWh expected to be introduced in 2025,
due to the steps we have taken to
decarbonise the supply chain.
RCP scenario
Potential financial
impact oftransition
risk (low-high) Example of how risk may materialise (Drax view) Our mitigation strategy
Carbon pricing
3°C High Development of Carbon Border Adjustment
Mechanism (CBAM) policy could prove
concerning for biomass if determined as a
product requiring tax; development of
carbon tax mechanism in sourcing
geography or along the supply chain. We
expect any mechanism unlikely to materially
impact our operations.
Maintain close liaison with UK Government
and EUinstitutions on future polices
(includingfutureof Carbon Pricing,
CBAM);development of carbon removals
capacity at Drax Power Station, and
Globally (see pages 14 to 15).
1.5°C High
Litigation
3°C Low GHG thresholds for supply chain emissions
could result in biomass failing to meet
sustainability criteria; NGO pressure to deem
biomass as non-renewable.
Engagement with policy makers and
stakeholders on carbon accounting of
biomass and explaining steps Drax is
takingto decarbonise the supply chain
andreiterating importance of IPCC
principles on carbon accounting.
1.5°C Low
Reputation
3°C Low Loss of customer, investor, and stakeholder
trust; negative press; lack of understanding
by general public of the benefits from
biomass.
Forest carbon research programme
evidences climate positive impacts
onclimate ofbiomass; global biomass
campaign tocounter eNGO claims and
continue engagement to explain the
positives with interest groups.
1.5°C Low
Technology
3°C Low Failure to adopt new technologies or
investment into unverified or failed
technologies.
Our Innovation team tracks future
technology options; close liaison
withgovernments on future policies.
1.5°C Low
Market
3°C Low Absence of market for negative emissions;
pressure on governments to deem biomass
not low carbon; limited government support
for BECCS.
Liaison with governments on future
polices; engagement on bridging
mechanism and BECCS at Drax
PowerStation.
1.5°C Low
High >10% Medium: 5–10% Low: 0–5%
Magnitude of potential financial impact (absolute risk) as a proportion of asset value (%)
Sustainable development continued
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Quantitative physical
riskscenario analysis:
Summary of results
We utilise the S&P Global Climanomics tool
to undertake quantitative analysis of the
potential financial impacts resulting from
physical risks of climate change. We
explored how eight different physical
climate change hazards could evolve
under three scenarios, for our FlexGen,
Biomass generation and Pellet Production
asset portfolio.
We applied our analysis across four time
horizons: the 2020s, 2030s, 2040s, and
2050s. The tool enables an analysis of
eight physical climate change hazard
types, and provides an estimate of the
climate-related change in the level of
hazard exposure of an asset over time
(relative to a historical baseline).
Preliminary findings
– The top drivers of physical climate-
related risks for the Drax assets
considered are temperature extreme,
wildfire and flooding.
– There is a relatively greater potential
impact on our Canadian and US Pellet
Production Operations due to the
physical risks of climate change, based
respectfully in Canada and the US
South. FlexGen and Biomass generation
operations are the least affected by the
impacts of climatechange.
– None of the risks arising from the
physical climate change hazard types
over the time horizons considered are
modelled to have a material potential
financial impact.
Assessment of resilience
While impacts on our business units and
financial performance of the Group could
materialise under particular climate
scenarios in the long term (such as during
modelling of a High warming scenario), the
geographical diversity of our operational
locations provides some mitigation against
isolated risks, and further mitigations are
described above. Management believe we
have a range of strategic options and we
expect to have the necessary capital to
manage impacts, take opportunities and
remain resilient under the wide range of
scenarios considered.
The following three scenarios were modelled for the analysis:
Scenario Description Rationale for selection
High (RCP 8.5/
SSP5-8.5)
Low mitigation scenario in which global average temperatures rise
by 3.3 to 5.7°C by 2100.
Exploration of a high warming scenario to
“stress test” a high level of physical risks.
Medium (RCP 4.5/
SSP2-4.5)
Strong mitigation scenario in which total GHG emissions stabilise at
current levels until 2050 and then decline to 2100, resulting in global
average temperatures rising by 2.1 to 3.5°C by 2100.
Exploration of an ambitious yet plausible
mid-range scenario.
Low (RCP 2.6/
SSP1-2.6)
Aggressive mitigation scenario in which total GHG emissions reduce
to net zero by 2050, resulting in global average temperatures rising
by 1.3 to 2.4°C by 2100, consistent with the Paris Agreement.
Exploration of an ambitious 2°C or lower
scenario consistent with the Paris
Agreement.
Time frames over which Drax considers climate-related risks Corresponding time horizons explored for scenario analysis (1)
– Short-term (1 year) – aligns to our time periods for assessing going concern
– Medium (2-5 years) – aligns to the period assessed for viability reporting
– 2025
– 2030
(1) Representing sum of potential financial impact
(absolute risk, £m) as a proportion of asset value.
– Long-term (5+ years) – aligns to our BECCS ambitions and beyond – 2040
– 2050
Medium (4.5) scenario
Impact across time horizon
(% of asset value exposed to risk) (£m)
Physical hazard type Examples of how the risk potentially manifests 2025 2030 2040 2050 Our mitigations
Temperature
extremes
Cooling and ventilation costs and increased
servicing costs; employee productivity;
revenue impact
Weather monitoring; plants built
tohigh standards to cope with
weather issues per location;
business continuity plans in place;
winterisation planning
Drought Business interruption; water expenses;
foundation damage
Hydrological modelling; plants
distributed in different fibre baskets;
management of larger inventories
Flooding* Clean-up costs; repair costs; business
interruption
Fibre plants distributed in different
fibre baskets; hydrological
modelling; multiple ports to reduce
reliance on given supply chain route
Wildfire Employee health; business interruption;
physical damage
Smaller fibre plants distributed in
different fibre baskets; fire guard
measures
Water stress Business interruption; revenue impact Water stress assessment completed
for all production assets
Landslide n/a n/a n/a n/a n/a n/a
* Flooding is a combination of coastal, fluvial, andpluvial flooding, and tropical cyclone.
High >15% Medium: 10 to 15% Low3: 6 to <10% Low2: 3 to 6% Low1: 0 to 3%
Magnitude of potential financial impact (absolute risk) as a proportion of asset value (%)
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Climate-related risks
1. Time frame:
– Short term (1 year) – aligns to our time
periods for assessing going concern
– Medium (2-5 years) – aligns to the
period assessed for viability reporting
– Long term (5+ years) – aligns to our
BECCS ambitions and beyond
2. Significant impact:
Significant impact assessment considers
gross potential impact only, and not
likelihood. Risks assessed as net low risk
are not presented. Impacts of climate
change are considered in the Viability
Statement on page 84 and note 3.8
(Climate Change) to the consolidated
financial statements.
3. Link to our strategic aims:
To be a UK leader indispatchable,
renewablegeneration
To be a global leader in
sustainablebiomass pellets
To be a global leader
in carbon removals
Description
Time
frame
(1)
Significant
impact
(2)
Our response (strategic mitigation) Related metrics
Link to our
strategic
aim
(3)
1: Physical risks to our Pellet Production operations and supply chain in the US and Canada
Acute and chronic
climate hazards
impacting:
– Fibre availability for
Canadian pellet
production
– Site operations in US
pellet production
– Site operations at
Canadian pellet
production
ST, MT
and LT
No (direct
impact on
revenue and
cost of sales)
– Proactive weather monitoring with appropriate mitigations taken
to minimise the potential impact of extreme weather events
– Pellet Production business has developed stockpiles to alleviate
incidences of extreme weather-related production interruption
– Diversification into new jurisdictions that reduce seasonal impact
on the business
– New-build pellet mills positioned to minimise risk associated with
potential future weather patterns
– Continue monitoring systemic risks when moving to new
geographies
– Colleague training to respond to adverse climate effects
Metric: Annual total
volume of pellets
produced (see page
44)
Metric: FlexGen,
Biomass, and Pellet
Production: potential
financial impact
(absolute risk, £m) as
a % of asset value
(see page 67)
2: Physical risks to our Drax Power Station operations and supply chain
Physical risks to ports
and shipping to UK,
including:
– Extreme weather
events and flooding
at multiple UK port
locations
– Sea level rise
impacting available
port facilities,
preventing the
receipt of material
into our UK ports
ST, MT
and LT
Yes (direct
impact on
revenue and
cost of sales)
– Business continuity plans in place for owned and leased ports,
including response to weather events
– Conduct detailed climate scenario analysis to model potential
physical risks of climate change at Drax Power Station and our
supply chain
– Engaged with the local authority climate risk plan to cover storm
surges
Metric: FlexGen,
Biomass, and Pellet
Production assets:
potential financial
impact of physical risk
(absolute risk £m) as a
% of asset value (see
page 67)
Metric: water
consumed from areas
of water stress (see
page 67)
River water
temperature at DPS
rises to a level which
could cause permit
breach
ST, MT
and LT
No (direct
impact on
revenue and
cost of sales)
– Permit variation already in place for the summer months
3: Policy risks related to the transition to a low-carbon economy
Future regulatory
framework(s) no longer
consider biomass to be
renewable and/or
require biomass
generators to pay a
carbon price on stack
emissions or on supply
chain emissions
ST, MT
and LT
Yes (direct
impact on
revenue, cost
of sales and
operating
expenses)
– Due to the potential high impact of these unmitigated risks, we
have a strong mitigation plan in place which is functioning well,
lowering the risk to an acceptable level
– BECCS ambitions are an important part of our strategy
– Group decarbonisation plans in place to reduce biomass supply
chain emissions
– Engaging with regulators and industry bodies and wider
stakeholders to understand their priorities, influence the
strategic direction, and undertake scenario planning in
preparedness for ensuring compliance
– Targeted scenario planning and direct engagement with the
REDIII negotiation process and via Trade Associations suggesting
alternative policy and regulatory solutions, to ensure workable
outcomes
Metric: total
non-renewable
generation capacity
(see page 67)
Metric: Generation
business revenue
page (see 67)
Metric: Generation
business Adjusted
EBITDA (see page
67)
Metric: Generation
and Pellet Production
assets: potential
financial impact of
transition risk
(absolute risk £m)
asa % of asset value
(see page 67)
Sustainable development continued
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Description
Time
frame
(1)
Significant
impact
(2)
Our response (strategic mitigation) Related metrics
Link to our
strategic
aim
(3)
Updates to
sustainability criteria on
biomass cannot be met
ST No (direct
impact on
revenue, cost
of sales and
operating
expenses)
– Continued engagement with key stakeholders around our
biomass sourcing and the benefits of using sustainable biomass
from working forests
– Alternative Fuels programme looking at options for alternative
feedstocks
Metric: total
non-renewable
generation capacity
(see page 67)
Changes in UK Carbon
Budget, UK
Government strategy
significantly limits or
does not allow for
unabated gas
generation – risk to
OCGTs projects
ST and
MT
No (direct
impact on
revenue, cost
of sales and
operating
expenses)
– Close liaison with UK Government on future polices. Group
Market Analysis team modelling future generation scenarios and
predicting future generation mix
– Broad range of future options being developed
– Drax’s existing assets will either need to decarbonise or close
– Any new gas assets will need to plan to decarbonise
Metric: total
non-renewable
generation capacity
(see page 67)
Metric: capital
expenditure (see
page 67)
Repeal or significant
amendments to
Inflation Reduction Act
in US which affects
growth opportunities
for Elimini
MT, and
LT
Yes (direct
impact on
revenue)
– Liaison with senior US officials on the development of carbon
capture and removals sector. Engagement with the
Administration and the Department of Energy
– We have a diverse revenue stream, including power sales, CDR
sales, as well as tax relief provided by 45Q
– Bipartisan support for 45Q element of IRA. In August 2024,
Republican members of the House sent a letter to the House
Speaker encouraging the consideration of market opportunities
created by IRA tax credits
Metric: Development
expenditure/ Capital
expenditure (see
page 67
4. Reputation and market risks related to the transition to a low-carbon economy
UK BECCS is delayed or
unable to progress at
scale due to limited
support mechanisms or
absence of sufficient
market for removals
MT and
LT
Yes (direct
impact on
revenue)
– Close liaison with UK Government on future policies. Drax
engages with a variety of MPs and political parties. The majority
of these recognise the positive role of technologies Drax is
pursuing
Metric: capital
expenditure (see
page 67)
Market factors or
reputation leads to a
reduction in profitability
of the Customers
business
MT and
LT
No (direct
impact on
revenue)
– Introduction of value-adding energy services. Offer non-
generation system support and energy management services,
such as the provision of decarbonisation services, including
vehicle fleet electrification
– Strategic Communications work ongoing to provide better data
and transparency on BECCS and biomass
Metric: Customers
business Adjusted
EBITDA (see page
67)
Conflicting
requirements on
reporting of carbon
emissions require us to
report multiple, varying
estimates
ST, MT
and LT
No (direct
impact on
costs)
– Establishment of a carbon alignment expert group to document
all causes of variance for publication
– Evidence Hub to contain a detailed, public explanation of the
different accounting schemes that we are required to report
against
Climate-related opportunities
Each of our climate-related opportunities would impact on revenue, cost of sales and operating expenses
Description
Time
frame
(1)
Significant
impact
(2)
Our response (strategy to realise opportunity) Related metrics
Link to our
strategic
aims
(3)
Opportunity 1: Development of BECCS at Drax Power Station in the UK
At Drax Power Station,
we continue to evaluate
an option for BECCS,
with plans to add
post-combustion carbon
capture to two of the
existing biomass units
that use sustainable
biomass and technology
from our partner,
Mitsubishi Heavy
Industries (MHI).
Achieving this could
offer a model for further
BECCS retrofit for
adoption by other power
generation plants
LT Yes – Development consent was awarded in January 2024 by the
Secretary of State for Energy Security and Net Zero, for two
BECCS units
See CEO’s Review, page 12, for further information
Metric: Generation
business revenue
(see page 67)
Metric: Capital
expenditure (see
page 67)
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Description
Time
frame
(1)
Significant
impact
(2)
Our response (strategy to realise opportunity) Related metrics
Link to our
strategic
aims
(3)
Opportunity 2: Planned upgrade and expansion of Cruachan Pumped Storage Power Station
Pumped storage hydro
assets provide support
to the system, balancing
supply and demand
caused by the variability
of intermittent
generators like wind and
solar. As reliance on
intermittent generators
increases, the system is
likely to require more
balancing services such
as pumped storage
Meeting the full extent
of expected demand will
require the addition to
and expansion of current
power sources.
Additional sources
ensure dispatchable
power and energy
security and stability for
consumers
MT No – A planning application was submitted in May 2022 to expand our
Cruachan facility. This, combined with the current facility, will
increase generation capacity to over 1GW. The location,
flexibility, and range of services it can provide makes Cruachan
strategically important to the UK power system
– In October 2024, the UK Government confirmed its intention to
introduce a cap and floor scheme to underpin investment in long
duration storage schemes like Cruachan
– An £80m investment to refurbish and upgrade two units at
Cruachan Power Station is progressing, which will add 40MW
ofadditional capacity by 2027, and improve unit operations
See CEO’s Review, page 12, for further information
Metric:
Development
expenditure/
Capital expenditure
(see page 67)
Opportunity 3: Development of global BECCS in North America
The US represents an
attractive investment
environment for
large-scale carbon
removals, in addition to a
supportive investment
horizon provided by the
Inflation Reduction Act
and associated schemes
The Group is developing
a pipeline of projects that
could contribute towards
its aim of being a global
leader in carbon
removals. We continue
engaging with
policymakers and are
screening regions and
locations for BECCS
inNorth America
LT Yes – Progressing with site selection, US Government engagement and
technology development ongoing, the Group is developing a
pipeline of projects that could contribute towards its aim of being
a global leader in carbon removals
– In 2024, we launched our carbon removals business, Elimini,
headquartered in Houston, Texas
– During 2024, we have agreed offtake CDR agreements with
Ultrabulk, Holborn Trading, Karbon-X, ClimateTrade, and NValue
– Through 2025, Elimini will continue to develop a pipeline of
project options, including new-build BECCS, the modification of
existing sites and other industrial applications outside the UK, in
North America and beyond
– New-build BECCS enables a wide choice of biomass materials,
including non-pelletised materials such as woodchips. Exploring
plants in regions closer to the sources of sustainable biomass is
expected to reduce the cost of transporting and processing fibre,
as well as reducing emissions associated with the supply chain
See CEO’s Review, page 12, for further information
Metric: Capital
expenditure (see
page 67)
Opportunity 4: Development of new sustainable biomass pellet capacity and self-supply in North America
One of Drax’s strategic
aims is to become a
global leader in
sustainable biomass
pellets. These biomass
pellets will be used for
third-party sales plus our
own generation
As a vertically integrated
producer, user, buyer,
and seller of biomass, we
operate a differentiated
biomass model from our
peers. We see the
current market as
representing a balance
of short-term risks and
long-term opportunities
for the Group
ST, MT
and LT
Yes – We have progressed development opportunities with the of
130kt expansion at Aliceville, and a new-build pellet plant at
Longview (Washington state), which includes the development
ofa new co-located port facility
– These developments, taken with existing operations, gives Drax
anetwork of 18 pellet plants capable of 5.4Mt of capacity
– Drax is developing a pipeline of biomass sales opportunities in
North America, Asia and Europe. In December we reached heads
of terms on a multi-year deal that could see Drax supply over 1Mt
of sustainable biomass pellets to Pathway’s proposed sustainable
aviation fuel (SAF) plant on the US Gulf Coast, in addition to other
similar contracts
See CEO’s Review, page 12, for further information
Metric: Annual total
volume of pellets
produced (see page
67)
Metric: Pellet
Production
business revenue
(see page 67)
Metric: capital
expenditure (see
page 67)
Sustainable development continued
Task Force on Climate-related Financial Disclosures
Drax Group plc Annual report and accounts 2024
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Metrics and targets
Climate-related metrics
We have developed our approach to report across the TCFD seven cross-industry climate-related metric categories (see table below).
For carbon emissions and energy use data, see page 38. For water use and waste data, see page 44.
TCFD Metric
Category Metric Unit 2024 2023 Link to climate-related risks and opportunities
GHG emissions See Carbon and energy performance table, page 38 Risks 1-4 and Opportunities 1-4.
Transition risks
Amount and extent
of assets or
business activities
vulnerable to
transition risks
Total non-renewable
generation capacity
(1)
GW 0.1 0 .1 Risk 3: Metric reflects the generation capacity potentially vulnerable to
policy, legal, and/or market-related risks in the context of a transition to a
low-carbon economy. The non-renewable generation capacity reported for
2023 and 2024 represents gas-fired start-up capacity at Drax Power Station.
Customers business
Adjusted EBITDA
£m 51 72 Risk 4: Market factors or reputation leads to a reduction of profitability of
the Customers business.
Physical risks
Amount and
extentof assets
FlexGen, Biomass
Generation, and Pellet
Production assets, exposure
to physical climate hazards
risks: potential financial
impact (absolute risk) as a
%of asset value
(2)
% 1.1 0.9 Risks 1-2: Proportion of Generation and Pellet Production asset value
potentially vulnerable to physical climate-related risks. An interruption to
biomass generation is the most likely way that physical risk could manifest.
Water consumed from areas
of water stress
(3)
m
3
248 347 Risk 1-2: This metric considers water use across Drax’s direct operations.
The volume reported represents water use at our London office, the only
location classified as baseline (current) “high water stress”.
Climate-related
opportunities
Generation business
revenue (external) –
Biomass Generation
£m 1,881 2,011 Risk 3 and Opportunity 1: Development of BECCS at Drax Power Station
inthe UK.
Generation business
revenue (external) – Flexible
Generation
£m 74 83 Risk 3 and Opportunity 2: Planned expansion of Cruachan Pumped Storage
Power Station
Pellet Production business
revenue (external)
£m 340 398 Opportunity 4: Development of new sustainable biomass pellet capacity
and self-supply in North America.
Generation business
Adjusted EBITDA – Biomass
Generation
£m 814 703 Risk 3: An interruption to biomass generation is considered to be the most
likely way that physical risk could manifest.
Opportunity 1: Development of BECCS at Drax Power Station in the UK.
Generation business
Adjusted EBITDA – Flexible
Generation
£m 138 230 Risk 3 and Opportunity 2: Planned expansion of Cruachan Pumped Storage
Power Station
Pellet Production business
Adjusted EBITDA
£m 143 89 Opportunity 4: Development of new sustainable biomass pellet capacity
and self-supply in North America. In 2024, the Pellet Production business
contributed £143m Adjusted EBITDA.
Development of new
sustainable biomass pellet
capacity: annual total
volume of pellets produced
Mt 4 3.8 Risk 1: and Opportunity 4: Development of new sustainable biomass pellet
capacity and self-supply in North America.
R&D relief: tax effect of
RDEC credit
The Group has utilised the relief available under the RDEC regime. See pages 203 to 204
Capital
deployment
Capital expenditure £m 332 524 Risk 3: £90m expenditure on the OCGTS.
Risk 4 and Opportunity 1: Development of BECCS at Drax Power Station,
and Opportunity 3: Development of Global BECCS in North America. £4.4m
of capital expenditure related to UK BECCS was recognised in 2024 (2023:
£18m), with a total capitalised spend on the project to date of £47m, as of
2024.
Opportunity 4: Development of new sustainable biomass pellet capacity
and self-supply in North America. £105m capital expenditure on pellet
production was recognised in 2024, including £64m on pellet plant
expansion projects (2023: Pellet Production capital expenditure £166m).
Opportunity 2: Planned upgrade and expansion of Cruachan Pumped
Storage Power Station. £34m of capital expenditure related to the
Cruachan upgrade was recognised in 2024.
Internal carbon
prices
Generation Capex process,
shadow carbon price: price
used on each tonne of GHG
emissions
GBP/
tonne
Coe
c.95
CO
2
e
90 Opportunities 1-4: A major shadow carbon price annex is embedded within
the capital expenditure decision-making process. It is principally used to
modify NPV/IRR models used to assess new investment cases.
Remuneration Proportion of remuneration
linked to sustainability
performance
(4)
% 15 20 The Safety and ESG element of the 2024 Group Scorecard (15% weighting)
included KPIs on safety, decarbonisation, and a colleague inclusion index
measure. See page 133.
Proportion of remuneration
linked to climate
performance
(5)
% 5 6.7 The Safety and ESG element of the 2024 Group Scorecard included
KPIs(5% weighting) relating to three decarbonisation projects (with
corresponding targets). See page 40.
(1) Total operational non-renewable generation capacity as at 31 December in the reporting year.
(2) Data source: S&P Global Climanomics. See page 63 for eight climate hazard types considered. Potential financial impact, as % of FlexGen, Biomass Generation, and Pellet
Production asset value, is the presented value for 2023, which represents the annual average over the period 2020-2029.
(3) Total volume of water from areas of water stress, as classified by the WRI Aqueduct Water Risk Atlas (Aqueduct 4.0), baseline “water stress” indicator.
(4) Total percentage weighting for Safety and ESG element of the Group Scorecard.
(5) Total percentage of sub-weightings for climate-related KPIs within the Safety and ESG element of the Group Scorecard.
Drax Group plc Annual report and accounts 2024
67
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Climate-related targets
See Climate positive pillar on page 41 for
our carbon reduction targets and progress
in 2024.
Looking ahead
Drax continues to monitor the
development of the IFRS ISSB standards
and the implantation in the UK under the
UK SDS. In addition to this, we continue to
monitor the development of CSRD scope
and requirements and any expectation that
Drax could have to report on in the future.
Drax prides itself on its efforts
totackle climate change through
innovation and decarbonisation
ofits operations and wider
supplychain.
Drax has been amongst companies
taking voluntary climate-related
disclosures as well as engaging on
climate issues with NGOs and the wider
corporate climate networks, to support
climate action.
We prioritise external commitments that
support our three strategic aims and
climate-related targets, including:
– Engagement with stakeholders in
understanding and supporting
delivery of elements of the Paris
Agreement, including Governments.
– Joining the World Economic Forum’s
First Movers Coalition (FMC), which
includes a commitment to purchase
upto 50,000 tonnes of durable and
scalable carbon removals. The FMC
isacoalition of companies using their
purchasing power to create early
markets for innovative clean
technologies across seven hard toabate
sectors (responsible for 30% of global
emissions, a proportion expected to rise
to over 50% by mid-century without
urgent progress on clean technology
innovation).
– Playing an active role in the Alliance
ofCEO Climate Leaders, a CEO-led
community committed to raising bold
climate ambition and accelerating the
net zero transition by setting science-
based targets, disclosing emissions
andcatalysing decarbonisation and
partnerships across global value
chains. Drax signed the open letter
forworld leaders at COP28.
– Joining the Carbon Business Council.
– Playing a role in the C2ES Carbon
Removal working group – an NGO
whose mission is to secure a safe and
stable climate by accelerating the
global transition to net zero, as well as
athriving, just and resilient economy.
– Joining the Sustainable Markets
Initiative and supporting their
taskforce work – aiming to drive
collective action towards a
sustainable future within andacross
industries in line with the Terra Carta.
Advocacy on climate
Sustainable development continued
Task Force on Climate-related Financial Disclosures
Drax Group plc Annual report and accounts 2024
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Non-financial and sustainability information statement
We have summarised our policies and disclosures in relation to non-financial matters,
in line with the Non-Financial Reporting (NFR) requirements of the Companies Act 2006.
Non-Financial Reporting requirement Policies, due diligence processes and outcomes Page
Environmental matters
Our purpose is to enable a zero carbon, lower cost energy future.
Our Environmental Policy sets out how we will manage, monitor,
and reduce the environmental impacts cause by our business
through improvements of our operations wherever practical.
Group Environment policy
Group Climate policy
Sustainability policy
Biomass sourcing policy
Climate positive 38
Nature positive 44
Climate-related Financial Disclosures
including TCFD and CFD
56
Employees
We operate a number of policies and guidance documents that
encompass aspects of a colleague’s experience at Drax, including
the systems we use, our policies, our values, and our culture.
Weare committed to creating a work environment that promotes
the importance of colleagues’ health, safety, and wellbeing.
Code of Conduct
Supplier Code of Conduct
Group Safety, Health and Wellbeing policy
Human Rights policy
Gender Pay Reporting
Our people strategy 51
Health and safety 51
Social matters
We aim to create a positive social impact within the communities
we operate. Our internal Community and Charity policy outlines
opportunities for colleague engagement.
Community and Charity policy
(internalpolicy)
Community investment 55
Respect for human rights
Our Human Rights Policy sets out our commitment to respect
human rights throughout our operations, and our expectation
forsuppliers and business partners to do the same.
Supplier Code of Conduct
Human Rights policy
Modern Slavery Act statement
Ethics and integrity 53
Anti-corruption and anti-bribery matters
We do not condone any behaviour that could lead to actual or
perceived bribery or corruption. Our Anti-Bribery and Corruption
Policy sets out our approach to bribery and corruption.
Code of Conduct
Anti-Bribery and Corruption policy
(internal)
Ethics and integrity 53
A description of the Company’s business model Business model 8
A description of the Principal Risks Climate-related Financial Disclosures,
including TCFD and CFD
56
Principal Risks and Uncertainties 70
A description of the non-financial key performance indicators Remuneration Committee report 126
ESG Performance Report 2024
Limited assurance, PwC
We have engaged PricewaterhouseCoopers LLP (‘PwC’) to perform an external independent limited assurance engagement over
theESG metrics denoted with the
. For the results of that assurance, refer to the ESG Performance Report 2024.
Limited assurance, Bureau Veritas
Bureau Veritas UK Ltd has provided independent assurance to Drax Group Plc over the following for the period 1 January – 31 December
2024: Total volume of fibre (material consumed at Drax Power Station) (t); Proportion of woody biomass consumed at Drax power
Station with a SBP Compliance claim (%); Average biomass supply chain GHG emissions (kgCO
2
e/MWh). The assurance process was
conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000 Revised, Assurance Engagements
Other than Audits or Reviews of Historical Financial Information (effective for assurance reports dated on or after December 15, 2015),
issued by the International Auditing and Assurance Standards Board. Bureau Veritas’ full assurance statement includes certain
limitations, exclusions, and a detailed assurance methodology and scope of work. The full assurance statement with Bureau Veritas’
independent opinion can be found at drax.com/sustainability.
London, 25 February 2025
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Viability Statement
Introduction
As part of the annual process to
update the long-range plan for
approval by the Board, an assessment
of viability is undertaken. This
process, led by the CFO and CEO:
– Took the Board approved long-range
plan, which includes significant strategic
capital expenditure and associated
earnings,
– Created a Viability base case that
removes future strategic capital
expenditure and associated revenues
and costs and excludes any income from
Drax Power Station after March 2027.
The assumption of post-March 2027
earnings at Drax Power Station is for
viability modelling only and is not the
assumption used in the Board approved
long term forecast,
– Sensitised the resulting forecast for a
reduction in power prices and a
reduction in Pellets margin to produce a
severe but plausible downside scenario,
including considering the mitigating
actions that could be employed to limit
the impact and how these mitigating
actions may be achieved.
The updated long-term forecast was
approved by the Board in the annual
strategy review in October 2024. The
Board’s review of the long-term forecast
covered both the viability period (five
years) and the longer-term period beyond
this. The review considered the principal
risks facing the Group, as outlined in the
Principal Risks and Uncertainties
disclosure on page 70 and distinguished
between those risks which are particularly
relevant over the viability period, and
those risks which could have an impact
over a longer-term time horizon. Further
information was presented to the Audit
Committee as part of their assessment
ofthe viability statement.
The key assumptions made in this analysis
were around:
– Power prices, including associated
impact on collateral balances;
– Potential biomass pellet sales margins;
– Subsidies available to Drax Power
Station after the end of the current
arrangements in 2027; and
– No changes to markets and regulatory
regimes other than those the Group was
aware of at the time.
Whilst a transitional support mechanism
was proposed in the heads of terms
agreed with the UK Government on 10
February 2025, that provided a Contract
for Difference arrangement for all four
biomass units from April 2027 to March
2031, as explained on page 17, there
remains a legal and parliamentary process
to undertake. As such risk remains that
afinal agreement may not be concluded
andas such the viability assessment is
prepared on this basis.
In addition to the analysis presented to
theBoard, forecasts were also subjected
to certain additional events (stress tests)
and longer-term changes in assumptions
(sensitivities), to consider the resilience
ofthe business. This information was
presented to the Audit Committee as
partof their review of viability.
Finally, a reverse stress test was
performed by incrementally increasing
theseverity of the sensitivities forming
thesevere but plausible scenario
presented to the Board, to determine
whether any scenario that presented a
threat to viability was considered plausible.
The conclusion of the above was that the
Group remained viable under each of the
individual stress tests and sensitivities.
Whilst the impact of the severe but
plausible scenario was significant the
Group continued to be viable. The increases
required under the reverse stress test to
reach a scenario where the Group was
notviable were not considered plausible.
Viability review
Period of assessment
Consistent with 2023, the Board has
formally assessed the prospects of the
Group over the next five years to the
period ending 31 December 2029. Factors
contributing to this decision were:
– The Group’s business plan includes a
range of financial forecasts and
associated sensitivities and is used for
strategic decision making. This process
covers one year in detail and then
extends to 15 years for each business
within the Group. Five years was
determined to be an appropriate
mid-point in this range and is the period
in which a greater degree of confidence
over the forecasting assumptions
modelled can be established.
– The Group benefits from stable and
material earnings streams in the
Biomass Generation segment, available
from current subsidies until 31 March
2027, covering two of the five years of
the viability period. In addition, the Pellet
Production and Flexible Generation &
Energy Solutions businesses are each
targeting £250 million of Adjusted
EBITDA post 2027.
– Within the forecast period, liquid
commodity market curves and
established contract positions, including
those for pellet sales, are used. Liquid
curves typically cover a one to two-year
window and contracted fuel
commitments with third parties extend
to the end of current subsidy regimes.
The Group’s foreign exchange exposure
is actively hedged over a rolling five-year
period, taking account of expected
generation levels. Selecting a five-year
period balances short-term market
liquidity whilst including medium-term
contractual positions.
– The Group has a plan for strategic
capital expenditure to bring assets
operational between 2030 to 2032.
– Following the refinancing during the
year a significant proportion of the
Group’s debt facilities mature in the
2027 to 2029 period.
– There is uncertainty around the Group’s
markets and regulatory regimes.
However, the Board has assumed no
material changes to the medium-term
regulatory environment and associated
support regimes beyond those already
announced at the date of this report.
On balance, five years was determined to
be an appropriate time horizon given the
level of visibility and certainty over future
expected cash flows over that period.
Asset out in note 2.4 to the Consolidated
financial statements, and in line with the
requirements of accounting standards, the
business considers longer-term forecasts
for areas such as value in use analysis and
estimates of useful economic lives.
Modelling performed
The key assumptions used in the modelling
are set out in the ‘Introduction’ section of
this report, and the table overleaf explains
the further analysis performed over areas
of risk. The scenarios presented were
considered to be the most likely ways in
which the principal risks would crystallise.
Political and regulatory and Biomass
acceptability principal risks do not appear
in the table. However, these are captured
through the Viability base case scenario
already, as a no biomass generation at Drax
Power Station after March 2027 scenario
is likely to be a result of a crystallisation of
these risks. A summary of the modelling
performed can be found overleaf.
Further information on risks and
opportunities related to climate change
can be found in the TCFD section, on page
56. Quantitative climate change risk
analysis on our operational Generation and
Pellet Production assets suggested that
asset exposure to impacts arising from
physical climate-related risks remains low.
This includes consideration over both the
viability period time horizon and longer-
term potential impacts, extending to 2050.
Therefore, these have not been explicitly
incorporated into the viability modelling
but the potential impact of a climate event
within the viability assessment period can
be inferred from the plant availability
scenario in the table overleaf.
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Whilst the various scenarios modelled
place the Group under significant financial
pressure, liabilities will continue to be met
as they fall due. Each scenario modelled
incorporates limited mitigating actions and
therefore management does have further
options to mitigate any downturn in
results, even when building in a reasonable
delay in these actions having an impact.
Liquidity and solvency
The annual business planning process
considers the Group’s financial position,
performance, cash flows, credit metrics
and other key financial ratios. In particular,
the Plan considered the solvency and
liquidity of the Group, as defined in the
Glossary. No issues were noted with
solvency or liquidity. Only in the reverse
stress test would the banking covenants
be breached, however this occurs before
the Group exceeded its available facilities.
The reverse stress test scenario was not
considered plausible. In particular, in the
severe but plausible case, modelling
suggests that the Group would still have
the ability to settle outstanding debt
facilities as they fall due.
The Group’s financial performance in
2024 was strong, delivering improved
profitability and a decrease in Net debt to
Adjusted EBITDA to 0.9 times (2023: 1.2
times) based on the updated definition
ofNet debt to include lease liabilities
(see
page 166), against a long-term target
ofaround 2 times. The viability base case
assumes repayment of the Group’s
borrowings as they fall due in the period to
January 2026. Following this, borrowings
are assumed to be refinanced at
appropriate rates, reflecting the Group’s
historical practices.
Longer term risks
All of the risks considered as part of the
review described above remain relevant
over a longer-term time horizon. In
addition, risks around strategy become
more relevant over this period. Namely,
that if returns from strategic capital
expenditure are below forecast then this
could present solvency and liquidity
challenges because of the significant
capital expenditure required to build these
projects. However, management notes
that these options will only be progressed
after a Board approved final investment
decision, which will include sensitivities
inrelation to potential returns. More detail
on the emerging risk around capital
construction is contained within the
Principal Risks report on page 70.
Other risks
The remaining principal risks were
considered and were not deemed to
present a significant threat to viability
overthe assessment period. The impact
ofincreased expenditure or a loss of
margin as a result of one of these risks
(e.g.a cyber-attack resulting in disruption
to planned generation) can be inferred
from the scenarios already modelled.
Expectations
Based on its review, the Board is satisfied
that viability would be preserved in a
rangeof scenarios, with various mitigating
actions available to manage the risks,
should they be required. Taking all of the
above into account, the Board has a
reasonable expectation that the Group
willbe able to continue in operation and
meet its liabilities as they fall due over
thefive-year period of their assessment.
The strategic report is set out on pages
1 to 85 and was approved by the Board of
Directors on 26 February 2025.
Will Gardiner
CEO
Principal risk Scenario modelled
Stress test or
sensitivity? Mitigations (assumed orpotential)
Impact over viability
period >20% of
opening cash and
committed facilities?
Trading and
commodity
Reduction in market power prices of £15MWh, based
ongas prices returning to levels seen before the
Ukraine/Russia conflict.
Sensitivity Re-optimise
generationprofile
Yes
Plant
operations/
climate
change
Decreased pellet sales margin/tonne in all years, based
on $7 per tonne cost increase and lower sales prices
resulting in a 13% lower margin over the viability period.
Sensitivity Potential to increase
sales prices
Long term fibre price
contracts
Yes
15% biomass generation forced outage rate (FOR),
based on this being above the highest level of annual
FOR experienced in the past 7years.
Sensitivity None assumed No
90-day outage on one biomass unit in 2025, which is
longer than any previous unplanned outage experienced
at Drax Power Station.
Stress test Re-optimise generation
(to other units) or sell
biomass
Insurance proceeds
No
Failure of a large supplier to deliver from 2025 to 2027,
equating to 11% of total delivered volume over this
period. This scenario assumes that the volume is
replaced with a more expensive source of pellets.
Stress test Replace lost volume
withmerchant
Re-optimise generation
No
Pellet production volume decrease of 7% into
perpetuity, approximating one pellet plant being
unavailable at any given time.
Sensitivity Re-optimise generation Yes
Combination Severe but plausible – reduction in power prices and
decreased pellet sales margin, asdescribed above.
Sensitivities Defer or cancel
capitalexpenditure
Reduction in dividends
Reduction in operating
expenditure
Yes
Reverse stress test – incrementally reduce power
prices, decrease pellet sales margin and increase FOR
atDrax Power Station.
Stress test Defer or cancel
capitalexpenditure
Reduction in dividends
Reduction in operating
expenditure
Yes
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Principal Risks and uncertainties
Our approach to risk management
Identifying, assessing, and managing risks
across the Group is an integral part of
enabling an informed assessment of the
current and potential challenges in the
delivery of our strategic objectives:
– To be a global leader in carbon removals
– To be a global leader in sustainable
biomass pellets
– To be a UK leader in dispatchable,
renewable generation
Our Risk Management Framework
underpins the Group’s approach to the
assessment, management and governance
of risks. Key components include a
Board-led holistic approach to determining
risk appetite, and risk management
policies and procedures to ensure a
consistent methodology across the Group.
This approach is summarised below.
Risk appetite
Risk appetite is the level of risk that the
Group is prepared to tolerate in seeking to
realise its business objectives. The Board
determines the Group’s risk appetite with
the intention of increasing the likelihood of
achieving its objectives, whilst minimising
the threat of adverse impact to the
financial and operational performance
andprospects of the Group from existing
and emerging risks. Where a risk facing
the business has increased, the risk
management governance process,
discussed further on page 72, will assess
what additional mitigating actions may be
required to ensure the risk remains within
the Group’s risk appetite.
Risk appetite therefore informs the
expected behaviours of our Board, senior
executives, colleagues, contractors, and
partners. Risk appetite varies depending
on the nature of the risk, the potential
impact it may have, the extent to which
the risk is foreseeable, and the potential
benefits to the Group and its stakeholders
from accepting a certain level of risk.
For example, the Group has developed a
commercial strategy that is designed to
manage the Group’s exposure to volatility
in commodity prices whilst also reflecting
the opportunity for commercial gain in this
area. We deploy forward hedging
strategies which seek to limit the Group’s
exposure to future adverse movements,
whilst also acknowledging that this same
market volatility provides an opportunity
for financial returns.
Our risk appetite on health and safety
differs significantly. For these risks the
approach focuses on protecting our
people, contractors and visitors, providing
appropriate safety equipment, awareness
(including training) combined with
adequate and clear processes. Through
these measures the Group seeks to reduce
the risk of harm and regularly discusses
across all levels of the business the
effectiveness of steps being taken.
Wetherefore have a very low risk appetite
The key elements of the policy and
framework are detailed in the diagram:
Identification
Senior leadership and risk owners are
collectively responsible for the identification
of risks with the potential to threaten the
achievement of strategicobjectives.
Assessment
Risk owners assess likelihood and possible
impact ofrisks occurring using the Group’s
risk scoring methodology.
They also seek to ensure appropriate
mitigating controls are in place to manage
identified risks to an acceptable level
aligned to risk appetite as reflected in
thetargetrisk.
Governance
Risk management committees undertake
regular risk reviews and receive reports
frombusiness units and risk owners which
reflect their specialist areas and technical
knowledge.
Monitoring and Reporting
The Executive Committee undertakes
deep-dive reviews of each Principal Risk
onan annual cycle and receives reports
fromthe risk management committees
andPrincipal Risk owners.
The Audit Committee and the Board review
the suitability and effectiveness of risk
management processes and controls.
Theyalso review and challenge the proposed
disclosures prepared bymanagement on risks
to consider whether they are fair, balanced
and understandable, provide adequate links
to the Group’s strategy (including the ability
to realise objectives over the near and longer
term) and reflect adequately wider macro
and emerging threats.
The Group has a Risk Management Policy, which defines its
approach to risk management. Its implementation through
a Risk Management Framework is overseen by the Board.
Drax Group’s
Risk Management
Process
Assessment
Monitoring
and
Reporting
Identification
Governance
The effective management of risk supports thedelivery
of our strategy
Group approach to risk management
for health and safety that is expected
tobe reflected in working procedures.
Weexplore the issues and challenges
associated with this risk further on
page76.
Risk identification and assessment
Risk reviews are undertaken bottom-up,
through the maintenance of risk registers
governed by risk management
committees, as well as top-down, by the
Board and Executive Committee, through
identification and consideration of any
external risks facing the Group, such as
those caused by macro-economic factors
or geopolitical unrest.
Risks are assessed consistently across
allareas of the Group, using a 5x5 matrix
thatconsiders both probability and impact.
Individual risks are scored on both a gross
and a net basis, which takes account of
the mitigations and controls that are
currently in place. A target risk rating is
also maintained for each risk, reflecting
the Group’s risk appetite. Where the net
risk exceeds the target risk, actions are
taken to align these two measures, such
as the introduction of additional
mitigatingcontrols.
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The risk management approach intends to
manage, rather than eliminate, the risk of
failure to achieve business objectives, and
provides reasonable, but not absolute,
assurance in accordance with the Group’s
risk appetite and the inherent nature of
the risk.
Emerging risks
Undertaking a holistic review to identify
emerging risks involves judgement and
isundertaken by gathering the views of
key internal stakeholders, including the
Executive Committee and Board, who
bring to bear differing perspectives and
also levels of technical knowledge,
industry experience and economic
awareness. Where appropriate,
management may also seek the views of
external experts or stakeholders, or the
Board may receive presentations on topics
that will help inform their shared
knowledge. For example in 2024, the
Board received an in-depth presentation
from the Trading & Optimisation team
andin January 2025 met with external
technical experts on cyber risks.
The execution of material capital projects
to deliver the Group’s strategic objectives,
such as the currently paused construction
of Longview, was identified as an emerging
risk for the first time in 2022. The Board
continues to assess options for BECCS
development both in the UK and overseas,
and the Cruachan expansion project. If
final investment decisions are taken this
would lead to significant levels of capital
expenditure being committed to build or
develop these projects.
This would expose the Group to increased
risks associated with the planning and
execution of significant and complex
programmes of innovative work,
dependency on new supply chains,
availability of skills and experience within
the business and the labour market,
andother operational and safety risks
associated with large-scale construction.
As these project evaluations progress
through 2025 and beyond, and decisions
to commit investment are required, the
Board will consider whether this
represents a new Principal Risk to the
Group, as well as continuing to monitor for
any new emerging risks facing the Group.
Internal control
The Group has a well-defined system of
internal control which has been in place
for the year under review and up to the
date of approval of the Annual Report.
The internal control framework is
supported by policies and procedures and
documented levels of delegated authority
which underpin decision-making by
management. These internal controls
operate as important mitigations of the
risks identified via the Group’s risk
management processes. Therefore, the
effective design and operation of these
internal controls is important to the
achievement of the Group’s strategic aims.
Annually, the Audit Committee review and
challenge an assurance map prepared by
management detailing the assurance for
each of the Group’s Principal Risks across
different lines of defence, including both
internal and independent external
assurance. This review considers whether
to increase the level of assurance obtained.
For example, in the context of the ongoing
heightened cyber risk facing the Group,
the Audit Committee discussed the need
for additional assurance to support
security risks, leading to the engagement
of a third party to undertake enhanced
penetration testing during the year.
The Audit Committee approves and
oversees a programme of internal audits
covering all aspects of the Group’s
activities after an assessment of the key
risks facing the business. Refer to page
124 for further information on this
programme of work. During 2024 the
majority of internal audits were performed
by KPMG, who provide a fully outsourced
internal audit function to the Group,
reporting tothe Audit Committee.
The findings and recommendations from
each internal audit are distributed to
members of the Executive Committee and
the Audit Committee. Where weaknesses
are identified, these are investigated and
the impact on the business is assessed,
with remediation actions established.
Refer to the Audit Committee report on
page 112 for further detail. None of the
findings reported during 2024 were
individually or collectively material to the
financial performance, results, operations,
or controls of the Group.
External Audit
Management Controls
Internal Controls
Management of Risk Controls
Independent Assurance of
Risk Management Framework
Limited or Reasonable
Assurance Engagements
Internal Audit
Management of Risk Controls
Provide Oversight of Risk
Development of Risk
Management Framework
Group Executive Committee
Drax Group plc Board Audit Committee
First line of defence Second line of defence Third line of defence
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Risk management governance
The Group’s risk management governance
structure includes the Executive
Committee and various other risk
management committees covering each
of the Group’s Principal Risks. The
committees have responsibility for:
– Assessing and understanding the risks
that may impact our business to ensure
any new, current or emerging risks
aremanaged within the defined risk
appetite and limits of the business
– Reviewing changes in the internal
business and external macro
environment and responding
appropriately
– Driving completion of the actions
required to improve the mitigation of
risks and where possible reduce risk
exposures to target levels
– Enabling an appropriate risk
management culture that promotes and
creates balanced risk-taking behaviour
and clear accountability
Risk management committees at the
business unit and Group function level
undertake risk reviews on a rotational
basis, receiving reports from subject
matter specialists and risk owners to
inform these reviews where appropriate.
The Executive Committee (from which
owners are identified as accountable for
each Principal Risk) undertakes deep-dive
reviews of each Principal Risk through an
annual cycle and receives ad-hoc reports
from the risk management committees
and Principal Risk owners as required.
Please refer to the Audit Committee report
on page 112 to understand how the Audit
Committee oversees the Group’s
PrincipalRisks.
Review of effectiveness
The Board is responsible for determining
risk appetite and ensuring the
effectiveness of risk management and
internal controls across the Group.
A quarterly update is provided at each
meeting of the Audit Committee. More
information about the Audit Committee’s
process of review and resulting findings
can be found on pages 112 to 125. During
2024, enhancements torisk management
included the strengthening ofthe
Sustainability Council; providing
independent governance and oversight
from stakeholders across the business;
ongoing alignment of second line IT
testing with best practice auditing
standards; and the continuing roll-out
ofan enhanced Group-wide compliance
framework to ensure that consistent,
risk-based controls and governance are
embedded across all areas of the business
responsible for external compliance
obligations. This work forms part of an
ongoing Compliance Action Plan. To date
work has been completed to collate a
register of the Group’s compliance
obligations, undertake respective risk
assessments and establish a self-
assessment of the current levels of control
and governance that support them.
The review of the effectiveness of the
Company’s risk management and internal
control systems is undertaken by the Audit
Committee and reviewed against FRC
guidance and any significant gaps are
highlighted to the Board. There were
noinstances in 2024 where management
identified gaps in risk management or
internal control that would have had a
material impact on the Group’s operational
performance, financial performance or
results. As such, the Committee was
satisfied that risk management and
control systems continue to operate
effectively in all material respects.
The Committee’s review is supported
bythe quarterly Risk and Control update
provided by management to the
Committee. These updates detail any
material changes inthe Group’s Principal
Risks andthe associated controls
employed tomanage them. It also
summarises the outcome of
management’s process of self-attestations
and second line sample testing of key
internal controls, as well as other
instances where significant weaknesses
ininternal control have been identified.
Finally, updates are provided on the
findings from the internal audit plan, which
is approved by the Audit Committee for
each forthcoming year in December, and
progress on implementing any resulting
actions is reported to the Committee at
each subsequent meeting. Taken together,
the Audit Committee forms a view on the
overall effectiveness of the systems of
riskmanagement and internal control.
The Audit Committee and Board consider
and challenge on the culture and
behaviours to risk management which
areimportant factors in establishing and
operating effective response to risks facing
the Group. This is supported by the
combination of business-led reviews of risk,
the contribution of risk committees and the
use of an external internal audit function
that evaluates managements approach.
Overall risk profile
Consistent with the prior year, the Group
continues to recognise nine Principal Risk
categories which represent inherent risk
areas with the potential to undermine the
delivery of our strategy.
The year-end risk review, as described on
page 70, took account ofchanging
external factors such as the geopolitical
conflicts in the Middle East and Ukraine,
political uncertainty and changes in both
Europe and North America, and ongoing
regulatory scrutiny in the energy market.
These factors, and their potential to
materially alter the Group’s riskexposure,
have been considered further below.
In the 2023 Annual Report, it was
concluded that both the political and
cyber security risks facing the business
were heightened above their historic
norms due to the uncertainty posed by
the2024 UK and US elections, and the
fact that geopolitical unrest, mentioned
above, has been known to increase the
likelihood of disruption to operational
activities throughcyber attacks.
Following discussion of various external risk
factors, in preparing this report, the Board
has concluded that thePrincipal Risks have
not materially changed from the previous
year. Political and cyber security risks were
deemed to remain heightened given the
potential for political uncertainty with
newly elected UK and US Governments
and continued geopolitical unrest.
Political risk
Commitment of significant capital to
execute the Group’s strategy, including
BECCS at Drax Power Station, will require
regulatory and government support
among other things.
Principal Risks and uncertainties continued
The Committee regularly reviews and
considers the effectiveness of the
Group’s internal controls, assessing
risks and mitigation activities, and
monitoring their potential impact
onthe Group’s strategy and viability.
Thisincludes assessment of emerging
risks, particularly as the Group
expands operationally and
geographically.
Rob Shuter
Audit Committee Chair
You can read more about the
AuditCommittee’s activities
onpages112 to 125
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Political uncertainty in the UK has the
potential to slow down processes to
secure this support.
As discussed in the CEO report on page 17,
in February 2025, the Group agreed
anon-binding head of terms for a support
mechanism. Notwithstanding the heads of
terms, the finalisation of the required long
form agreement remains subject to the
Parliamentary approval process and as
such uncertainty remains. Wecontinue to
engage with the UK Labour Government
onboth the transitional support mechanism
and cluster sequencing process.
Discussions remain positive to date.
Focus may also be diverted from the
climate change agenda as a result of
political instability in other countries
suchas the US, parts of Europe and Asia,
and ongoing geopolitical conflict as
discussed further below, and the trend
towards right wing political views which
place less importance on the
decarbonisation agenda.
This lack of clarity may ultimately impact
the Group’s capital investment and project-
related decision-making. Furthermore, the
general increase in political polarisation
could make it harder to affect our strategy
due to the partisan nature of legislation
supporting renewable energy investment.
The changes of government in both the
UKand US also have the potential to result
in amendments or delays to key energy
policies, and any such changes at a regional
or national level in the countries inwhich
we operate may increase the costto
operate our businesses, reduce operational
efficiency, and affect our ability to realise
our strategy. Equally, the potential
introduction of tariffs by the US and any
resulting retaliatory tariffs could impact
global trade and lead to increased costs.
The Group’s 2023 Annual Report and
Accounts explained that political risk had
materially increased owing to both the UK
and US elections being scheduled during
2024. Whilst nothing implemented to date
by either administration has caused this
risk to increase further, the Board has
concluded that the ongoing uncertainty
indicates that it remains heightened.
Geopolitical conflict
The Board is cognisant of the ongoing
conflict in Ukraine, as well as ongoing
tensions in the Middle East, noting the
recent ceasefire entered into between
Israel and Hamas.
The possible impacts on the Group, based
on the status of the conflicts in these
regions at the time of signing this report,
have been considered, including market
volatility, supply chain disruption and
pricing pressures. Because of the
mitigations and contingencies in place,
including high biomass hedge levels and
robust and diverse supply chains, the
Board does not currently expect these
impacts to be material. However, the Board
notes that escalation of these conflicts
could potentially change this assessment,
for example by creating volatility in energy
markets similar to thatexperienced in
2022, or impacting theavailability of the
skills and materials required to execute
strategic projects. Itisalso possible that
enduring conflicts could remove focus
from the global decarbonisation agenda,
therefore impacting the appetite for
technologies such as BECCS.
Increased geopolitical risk has been known
to heighten the risk of cyber-attacks. This
has been reflected in a heightened risk
assessment for cyber security, initially
disclosed in the Group’s 2022 Annual
Report and Accounts, due to the Russia-
Ukraine conflict. We continue to respond
to the UK Government’s request for
Critical Infrastructure to bolster their cyber
defences to meet this growing challenge.
Consistent with the conclusions discussed
in the Group’s 2023 Annual Report and
Accounts, the Board believes that cyber
security risks remain heightened. This is
aresult of ongoing geopolitical unrest.
Market price exposure and volatility
Short-term elevated power prices
exceeding hedged rates may result in
losses should an unplanned outage occur
on one or more of the Group’s generating
units, as the Group could be required to
buy back at spot rates (or the current
market price) which could be higher
thanthe original sale price. The Group’s
exposure to this risk has continued to
reduce during 2024 as system prices
havefallen significantly from their peak
atthe end of 2022, and are now lower
than the business’ forward hedged rates.
However, prices are still above historic
levels and the energy market remains
subject to potential significant volatility,
especially in the context of ongoing
geopolitical conflict inregions such as
theMiddle East and Ukraine. For example,
Ukraine’s closure ofthe Russian gas supply
into EU states on 31 December 2024 has
caused a reactionary rise in energy prices,
despite this being anticipated, and
therefore this risk remains under
continuous scrutiny. The risk of energy
market volatility is partially mitigated by
the flexible nature ofthe Group’s power
generation. Forexample, our pumped
storage infrastructure is able to react
quickly to movements in market price,
generating when prices are higher.
Strategy
Health, Safety and Environment
Political and Regulatory
Biomass Acceptability
Trading and Commodity
People
Climate Change
Plant Operations
Information Systems and Security
The Group’s nine Principal Risks:
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Strategy
Risk Statement
The risk that the Group’s strategic aims are materially undermined, thereby preventing the Group from delivering its stated outcomes
andfulfilling its purpose.
Risk Environment
The Group’s purpose is to enable a zero carbon, lower cost energy future, with an ambition to achieve our Science Based Targets (SBTis)
while delivering our corporate strategic aims, contributing to energy security within the UK, and carbon removals capacity globally. The
Group has three strategic pillars that underpin its purpose and ambition as detailed in the Group’s business model on page 8.
The Strategy Execution team monitors the delivery of strategic initiatives and mitigates risks. The Executive Committee undertakes a
quarterly review to gauge its confidence in delivery and determine the actions to be taken, should course correction or additional risk
mitigation be required.
Global leader in carbon removals
This strategic aim is being addressed through continued work to establish BECCS at Drax Power Station as well as the launch of our
globalcarbon removals business “Elimini”. The realisation of both will require the development ofeconomically attractive business
models within targetjurisdictions.
Risk and impact
– Current or future governments may not provide the fiscal and
legislative framework required to support the scale of the Group’s
BECCS plans and the taking of future investment decisions.
– Drax may not be able to successfully progress development
projects into execution due to challenges in engineering design,
procurement of capital items or establishing an economically
attractive commercial model.
– Either of these risks could result in the potential impairment of
ci rc a £47. 2 million of capitalised UK BECCS development costs if
the project does not progress as detailed further in the critical
accounting judgements on page 163.
– The process and time frame for UK BECCS remains dependent
ongovernment timelines. In the US, development and permitting
complexities for new BECCS developments, challenges around
transport and storage, or change in investment priorities away
from tackling climate change could slow down our ability to
execute the strategy relative to competitors. Additionally, delayed
development and scaling up of carbon markets to volumes and
price levels that can support BECCS could impact delivery of the
Group’s business strategy, particularly where there is competition
from lower cost sources of less permanent removals, such as
biochar and nature-based solutions.
Key mitigations
– The establishment of the Elimini leadership team, advisory board
and brand acts as a key mitigation. This provides increased focus
on project delivery and supports the development of attractive
commercial models.
– In the UK, we have developed options for the BECCS project at
Drax Power Station, and are in ongoing engagement with UK
Government and other stakeholders to secure the right
commercial model. As discussed in the CEO report on page 17,
inFebruary 2025 the Group agreed a non-binding heads of terms
for a support mechanism, however it remains subject to
Parliamentary approval process. Refer also to Political and
Regulatory risk on page 77.
– We have developed several options for BECCS projects in other
jurisdictions, providing a degree of resilience against various
country-specific risks such as political and regulatory uncertainty.
– We have ongoing engagement with US and UK regulatory and
planning bodies.
– We continue the proactive development and marketing of carbon
removal products. We have produced a CDR standard and we are
seeking alignment in the market.
– Our fibre strategy, ensures we will be able to produce and deliver
pellets to our customers and to supply Drax Power Station.
Strategic enabler: Capital
Delivering any one of the strategic aims requires the ability to access and effectively allocate the capital required, whilst maintaining
acorporate credit rating in the BB range, to support power trading and B2B energy sales to customers.
Risk and impact
– The ongoing process to finalise post-2027 support for generation
at Drax Power Station and the associated uncertainty exposes
the Group to increasing costs of financing.
– Despite a successful refinancing in 2024, the risk remains that the
Group is unable to raise sufficient finance to fund the execution
of our strategy, or associated collateral requirements due to poor
performance, illiquid capital markets, changes in investment
priorities by institutions or poor credit rating, leading to lack of
investor appetite for the Group’s credit and/or equity.
– Wider economic or geopolitical challenges may impact the
availability of financing due to changes in market liquidity and
costs of capital.
Key mitigations
– The Group’s financial position including working capital and cash
resources is carefully managed.
– We continue to run an investor relations programme, covering
equity and debt markets.
– We are proactively managing the business and investment plans
to accommodate a range of possible outcomes for Government
support at Drax Power Station post 2027.
– The Group’s capital allocation process provides rigour and
consistency in assessing the technical, financial, and strategic
justification of new projects across the Group, in particular where
investment is related to new and emerging technologies.
Principal Risks and uncertainties continued
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Strategy continued
Global leader in sustainable biomass pellets
Achieving a leading position requires the economic production ofbiomass pellets while ensuring sustainability requirements continue
tobe met.
The primary objective is to secure a profitable and compliant Pellet Production business, and optimise the production capacity relative
todemand from third-party sales and self-supply to our own assets. We make efforts to improve the biomass pellet supply chain to
maintain pellet costs at a sustainable economic level.
Risk and impact
– Increased fibre costs have passed through to the cost of pellet
production in recent years. In addition, there is a continuing risk
that inflationary pressures could increase, especially if
geopolitical conflicts escalate, creating the potential for
disruption to, and increasing costs of shipping. We have also seen
increases in capital costs, particularly with respect to assets
required to meet compliance standards for new development
projects. For more information on how existing assets meet
compliance standards, refer to page 77.
– New, higher value markets may emerge with a willingness to pay
more for white wood pellets, for example Sustainable Aviation
Fuel (SAF). This would increase demand for fibre and place
further inflationary pressure on pellet production costs.
– There is a risk that biomass does not have stakeholder support
inour target markets (for example, governments, investors and
energy asset owners) leading to a lower rate of adoption than our
strategic plan assumes. This risk extends to communities who live
in the proximity of biomass pellet plants, who allege harm caused
by the emission of particles to the atmosphere, for example,
volatile organic compounds and have threatened litigation in this
respect. Refer also to Biomass Acceptability risk on page 78.
– There is a risk that government support for biomass power
generation reduces through changes to subsidy regimes or levels
of carbon tax, resulting in lower demand for pellet volumes
leading to lower sales volumes or weaker achieved prices.
– In the event of increased global demand for biomass, there is a
risk that should additional capacity be required there is a limited
availability of feasible expansion opportunities, and successful
identification and delivery of initiatives to reduce the current cost
of biomass.
Key mitigations
– Our vertically integrated business model provides a degree of
protection from inflationary pressures on production costs.
Asaproducer, user, buyer and seller of biomass, the Group can
balance short-term risks and long-term opportunities.
– Continued execution of the integrated plan to improve output
ofbiomass pellets at existing production facilities. These plans
include improved operational effectiveness, together with the
development and execution of pellet production cost reductions
to ensure the cost of sustainable biomass pellets remains at an
economically sustainable level.
– Engagement with stakeholders including government and other
stakeholders in understanding the cost and benefits of
sustainable biomass as part of the power system and achieving
decarbonisation. Engagement with our local communities to
understand their concerns, requirements and expectations
around sustainability and environmental compliance.
– The progression of opportunities which may lead to future
increased demand of biomass both in the UK, such as BECCs
ordata centres, or internationally such as SAF or global BECCS.
Consideration is being given to both existing and new markets.
UK leader in dispatchable, renewable generation
To maintain the position as the leading provider of UK dispatchable, renewable generation requires the right portfolio of assets and
associated business models. Thesemust operate within a system thatvalues the dispatchable characteristics ofthose assets at the right
economic levels.
Risk and impact
– There is a risk that our asset portfolio is not appropriately valued
by the market, is excluded from effective participation in power
markets, or might be outperformed by a future technology.
– Drax Power Station does not receive the right economic support
beyond 31 March 2027 required to operate and invest in assets
which provide dispatchable renewable generation.
– The current market mechanism and incentives do not support
investment in new assets.
– Unexpected changes to electricity supply and demand could
reduce both demand and volatility, and therefore limit the market
for dispatchable renewable assets.
– For our Customers segment, there is a risk that we do not develop
the correct products or service offerings to meet the evolving
demands of our customers.
– Some of the Group’s assets are significantly aged and, as plants
age, despite an established maintenance programme, their
reliability and integrity are expected to reduce which may result
inunplanned outages. Refer to Plant Operations risk on page 82.
– Developing our FlexGen portfolio is reliant on developing new
assets and successfully connecting them to the National Grid.
Across the industry we have observed delays in grid connection,
including for our own assets. Continued delays in this area means
that business cases for new-build generation assets could be
adversely impacted.
Key mitigations
– We continue to actively engage with relevant UK Government
departments and regulators in relation to ongoing support for
dispatchable renewable power generation at Drax Power Station.
See page 15 of the CEO’s report.
– We also engage actively with the UK Government on a range of
measures that would facilitate the development of long duration
energy storage, this has been supported by the launch of the
“Long Duration Electricity Storage investment support scheme”
in October 2024 and the “Clean Power 2030” report published
byNESO which indicates a clear role for theGroup’s assets in
anyfuture power system.
– Through focusing on the I&C segment of the Customers market,
we are able to target our products and service offerings to meet
demand, such as Electric Vehicles and flexible power supply
services.
– We regularly evaluate current and projected performance of
ourown portfolio of assets, and value gained from changing the
composition of the asset portfolio in line with the Group’s view
ofthe outlook for the market and emerging technologies.
– A comprehensive plant investment and reliability programme
hasbeen implemented. Refer to page 82 for further detail.
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Health, Safety and Environment
Risk Statement
The risk of detrimental impact to the health and safety of our employees and contractors, or negative impact on the environment
asaresult ofour operations.
Risk Environment
The health and safety of our employees and contractors, and effective management of our environmental impact are priorities for the
Group. Our operations involve a range of potential hazards which could affect colleagues, contractors, others attending our sites, as
wellas the wider environment. These hazards are inherent to the materials and equipment we use and the processes we perform. We
therefore seek to respond proactively to emerging legislation and regulatory changes as well as industry best practice for both safety
and environmental matters. Refer to page 51 for more information.
We also assess how changes in our own understanding of these risks could improve standards and potentially further reduce
adverseimpacts.
Risk and impact
– The biomass we use to generate electricity, and the particulates
that can occur if the biomass pellets degrade, are highly
combustible, contributing to Health, Safety and Environment
(HSE) risks.
– Our operations in North America may be disrupted by severe
weather events such as wildfires or hurricanes. Refer to Climate
Change risk on page 81.
– In the generation of electricity, supplied to the National Grid at
upto 400kV, we operate various plants at high temperatures
andpressures, as well as managing significant volumes of water,
for example, used by our nine hydro plants in Scotland. These
areinherent attributes of our operations which contribute to
HSErisk.
– The day-to-day operation of our assets includes maintenance
work on plant and machinery that is large and comprised of
numerous parts. Additionally, capital projects require large-scale
construction activities. Work of this nature carries risks to our
colleagues and also the large number of contractors and
temporary workers we have on our sites.
– For more information on emissions risks, refer to the Political
andRegulatory Risk disclosure on page 77.
Key mitigations
– Continued investment in safety equipment, environmental
mitigation, and plant equipment and its regular maintenance.
– Maintaining robust management systems which are subject
toperiodic review, and are refreshed as appropriate.
– An effective governance framework including an executive-level
Group HSE Committee, chaired by the CEO, to review and
challenge the management of HSE across the Group.
– We report our safety performance including our total recordable
incident rate (TRIR) and our Near Miss & Hazard Incidents Rate
(NMHIR) monthly and share this with the Board regularly. These
measures form part of the safety metrics in the Group Scorecard
to assess how all colleagues are responding to the effective
operation of safe ways of working.
– A HSE IT reporting system is used for tracking and reporting
events and near misses, prompt investigations, and
implementation of corrective actions by directing attention
andencouraging continuous improvement.
– Development of plans to align all business units on key focus
areas to drive improvement in our HSE performance, learn
through shared experiences of events and near misses, and a
programme of training to provide colleagues with an appropriate
level of competence and awareness in addition to system
implementations to support understanding and management
ofoperational compliance obligations.
Principal Risks and uncertainties continued
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Political and Regulatory
Risk Statement
Due to the nature of the Group’s operations and the markets we participate in, we are exposed to external policy and regulatory changes
with the potential to impact our current operations and the ability to achieve our strategic aims.
Risk Environment
Generation of electricity using sustainable biomass has continued to play a crucial role in UK energy security, and the case for the future
role of BECCS in supporting UK energy independence and its net zero ambitions has continued to strengthen. In November 2024, the
National Energy System Operator (NESO) published its advice to Government on different pathways that the UK can take to achieve the
Government’s ambition of Clean Power by 2030. The advice included the continued operation of biomass generation in both pathways
and at least one biomass unit being converted to BECCS by 2030. NESO’s advice isclear that carbon removals from BECCS have a key
role to playin supporting carbon targets. NESO also highlighted the importance of investment in new Long Duration Electricity Storage
capacity, and particularly Pumped Storage Hydro. Following consideration of the NESO’s advice, Government published its 2030 Clean
Power Action Plan in 2024. The Government’s plan was largely aligned with the advice received from NESO, although Biomass and
BECCS were included within the broader capacity category of “Low Carbon Dispatchable Power”.
However, the Group remains conscious of the ongoing discussion associated with biomass sustainability (refer to Biomass Acceptability
Principal Risk on page 78) and the need for further commitment and financial support from the UK Government, and other critical
partners, in order to deliver the decarbonisation of UK power generation and enable the Group to realise its negative emissions strategy.
In 2024, the Government continued work on its Review of Electricity Market Arrangements (REMA) and consulting on further reforms
tothe Capacity Market, seeking to strengthen the security of supply and provide greater clarity around the transition to net zero. While
the options under consideration in the REMA programme have narrowed, there remains considerable uncertainty as to the final package
of measures that may be introduced, including but not limited to the possible move to a more locationally derived wholesale price.
Risk and impact
– Ongoing cost of living challenges and geopolitical issues, continue
to have an impact on socio-economic policy as well as UK
Government funding. These factors, along with political
uncertainty, have resulted in delays to the introduction of
newlegislation to deliver investment frameworks that support
reducing carbon emissions and bringing forward investment
inLong Duration Electricity Storage.
– Following the outcome of the 2024 UK and US elections we
areassessing the impact of any resultant changes or delays to
government policy at a regional or national level which could
increase the cost to operate our businesses, reduce operational
efficiency, and affect our ability to realise our strategy.
– The UK Government, in their Biomass Strategy, confirmed that
they intend to facilitate the transition from biomass to BECCS. In
2024 the Government announced funding allocation for Track 1
projects under the CCUS cluster sequencing programme.
Announcements on the Track-1 Expansion and Track 2 projects
are expected in 2025. As discussed in the CEO report on page 12,
in February 2025 the Group agreed non-binding heads of terms
for a support mechanism. However, both this mechanism and the
cluster sequencing process remain subject to ongoing processes
with the UK Government before finalisation and therefore the risk
remains that Drax is not successful or a change may occur in the
government’s approach or policy.
– Given the industry in which the business operates, the Group is
subject to a large number of regulations which are broad ranging
in nature. As a matter of course, there are many areas where
regulators may see fit to request information on compliance
frameworks, reporting processes, internal/external assurance
and/or market interactions in relation to our regulatory
obligations. In an environment of increasing regulatory standards
and scrutiny there is an increased risk that regulators consider
theGroup is not meeting expected standards.
– Adverse changes to energy regulation, market design and/or
energy market policy, can impact our ability to deliver forecast
earnings if we are unable to easily meet the requirements or
harness the resulting market opportunities. The Government’s
REMA programme is one such area where the review’s findings
are expected to result in changes to the prevailing market
arrangements. While there has been no decision yet on the
possible move to a more locationally derived (“zonal”) wholesale
price versus a reformed national pricing model, either outcome
from the REMA programme will require changes to internal
systems, processes and ways of working.
– As the global regulatory environment continues to mature
andevolve, it’s possible the Group will incur additional costs
andcomplexity in ensuring compliance. Our increasing global
presence, including the launch of the Elimini business during
2024 and our interaction with evolving international supply
chains and pellet markets in locations such as Asia, introduces
additional compliance responsibilities and associated costs as
wellas the complexity of compliance with misaligned standards
and legal frameworks between markets.
Key mitigations
– Engaging with politicians and government officials, to both listen
to and inform understanding and perception of our business.
Thisincludes our commitments on sustainability and the creation
of socio-economic value (including jobs, training, and investment
incommunities), plus the critical role that our strategy will play in
supporting the UK Government’s Clean Power by 2030 ambition
and the UK’s committed target to achieve net zero by 2050 while
continuing to ensure security of supply.
– Working with regulators and industry bodies to understand their
priorities, provide constructive feedback that may contribute
totheir strategic direction, and undertake scenario planning
andcommercial impact analysis in response to potential reforms,
andin preparedness for ensuring compliance.
– Exploring opportunities for the delivery of investment in
BECCSglobally, such as in the US. Working with leaders and
keystakeholders in those regions, to identify areas of common
purpose and share ideas for creating jobs, investment and new
growth opportunities. Refer also to Strategy risk on page 74.
– Implementation of an enhanced Group-wide compliance
framework to ensure our compliance governance, process and
controls remain robust and continue to focus on best practice
asregulation evolves and the business expands its
globaloperations.
– The Group’s UK asset base is reasonably diversified both in
termsof technology type and geographic location, the assets’
operational characteristics are aligned with the needs of the
system and Government’s Clean Power ambitions, and most
assets have some degree of support or guaranteed income stream
(e.g. through Capacity Market agreements), which taken together
could provide some mitigation against significant aggregate
impact across the Group from wholesale market price changes.
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Biomass Acceptability
Risk Statement
The Group’s exposure to unfavourable changes to biomass-specific Government policy or regulation which could be caused by
high-profile campaigning by groups opposed to the use of biomass, or non-compliance by parts of the Group’s activities with existing
ornew regulations or standards which could cause reputational damage to the Group.
Risk Environment
The use of sustainable biomass is a significant part of our business model and is important in the delivery of longer-term strategic
objectives, enabling the Group to meet its carbon removal target and the UK to realise its net zero goal.
There continues to be clear and reiterated acceptance and recognition by the UK Government and other key organisations of the
importance of biomass in enabling security of supply and in tackling climate change, seen predominantly within the supportive UK
Biomass Strategy. The UK Government has demonstrated support for biomass in the Biomass Strategy published in 2023, in particular,
how biomass sustainability can be assured when the CfD regime closes to biomass from 2027 onwards. The Clean Power 2030 Action
Plan published in December 2024 signals the potential to deploy large-scale power BECCS which can generate low-carbon electricity
whilst delivering negative emissions.
Risk and impact
– Reputation and market risks related to the transition to a
low-carbon economy include increased activity by eNGOs who
oppose the use of sustainable biomass; the potential for reduced
investor and customer confidence; reduced sales in the
Customers business; delays to our strategy (for example, more
stringent qualifying regimes or approval processes linked to
developing existing or new facilities, risk from legal challenge by
eNGOs to our development or operational activities, or to
government action which is supportive of BECCS and sustainable
biomass through the use of judicial review); and challenges with
employee recruitment and retention. Refer to People risk on
page80.
– If the UK Government’s support for biomass as a renewable
technology changes, this may negatively impact the Group’s UK
operations and revenues due to BECCS being unviable and also
lead to a reduction in demand for our North American pellet
production.
– Regulatory frameworks associated with the sourcing of biomass
materials are under development and subject to material changes,
including in regions where we currently conduct business and
others where we may seek to develop our business in the future.
This could result in reduced support for certain types of biomass
as a renewable energy source, increased costs of doing business,
or the introduction of barriers to entry which may adversely
impact our growth plans and financial returns versus
expectations. Forexample, the EU’s “Fit for 55” legislative
package, including updates to the Renewable Energy Directive
(REDIII) and a new EU Deforestation Regulation (EUDR). Likewise,
governments in Japan and South Korea, are expected to update
and strengthen requirements for the use of biomass over time
and replicate regulation such as REDIII and EUDR which could
impact our ability to supply these markets in the future or
increase the costs of doing business.
Key mitigations
– Engagement with stakeholders in all regions in which we operate,
to understand their concerns, requirements and expectations
around sustainability and environmental compliance in addition
toproactive education of stakeholders on the science of
sustainability practices and benefits of sustainable biomass.
– Develop and maintain appropriate relationships with policymakers
inthe UK, EU, North America and Asia via targeted engagement
across institutions. Refer also to Political and Regulatory risk on
page 7 7.
– We closely monitor the implementation of REDIII and EUDR
through our membership of member of trade associations and
engaging with different governments including the US, Canada
and the EU. For more information see page 25.
– Periodic independent audits of pellet mills are conducted through
the Sustainable Biomass Program (SBP) certification scheme.
– Engagement with eNGOs to discuss issues of contention and
potential areas of common ground, in support of more
constructive engagement on delivering change that is responsible
and sustainable. Equally, where we believe the views of eNGOs
are inaccurate or misleading, providing appropriate challenge and
explaining our approach.
– The Group’s Independent Advisory Board (IAB) includes experts
in thefield of forestry and associated disciplines, provides Drax
with advice on sustainable biomass and its role in our transition
tonet zero emissions. The IAB provides feedback on our approach
to sourcing, including feedstock options, procurement practices,
forest science and how Drax can optimise carbon benefits.
– Scenario and contingency planning and direct engagement with
voluntary certification schemes, notably the SBP, at Board and
technical levels to provide feedback in the preparation of revised
standards and suggest alternative options where necessary.
– Continued assessment of new markets from which to source
sustainable biomass.
Principal Risks and uncertainties continued
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Trading and Commodity
Risk Statement
The risk of negative impact on the Group’s financial performance due to the business’ exposure to volatility in commodity and foreign
exchange markets.
Risk Environment
The Group is exposed to volatility across a range of commodity prices, impacting both revenues and expenditures. Effectively managing
these fluctuations, their interconnections, and the resulting balance of opportunity and risk is fundamental to the successful financial
performance of the business. Despite remaining above historical levels, system prices are significantly reduced since their peak at the
end of 2022 and, therefore, the level of exposure to the business of an unplanned outage has reduced. However, this remains under
scrutiny given the recent volatility in commodity markets.
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, beyond the conclusion of the current CfD and RO support subsidy regime in 2027. Refer to page 17. The heads of
terms sets out the key commercial terms for the deal, which provide a viable future for Drax Power station to March 2031, and a planning
basis for fuel procurement and plant maintenance and operations. A long form agreement remains to be agreed with the UK Government.
The agreement will only be entered into if the detailed terms are acceptable. The risk remains that there is a delay to the agreement
ofalong-form contract, or failure to reach agreement with the UK Government, in which case we would need to explore other
commercial opportunities for Drax Power Station beyond 2027.
Risk and impact
– Despite power prices materially reducing since their peak at
theend of 2022, they remain subject to potentially significant
volatility, especially in the context of ongoing geopolitical
conflicts in regions such as the Middle East and Ukraine.
– Short-term elevated power prices in excess of hedged rates may
result in losses should an unplanned outage occur on one or more
of the Group’s generating units.
– Reduced volatility, below market norms, in the power market will
negatively impact our ability to capture forecast value through
our generation assets. This fall in volatility will impact our ability
tooptimise our assets’ generation profile from the forward
market through to generation which would reduce earnings.
– Delivery of commercial value from the flexibility of our portfolio,
and the optimisation of a complex supply chain against an
uncertain running regime, requires effective execution of our
trading strategy and opportunities to trade being available
through sufficient liquidity. Errors in execution, delays in carrying
out planned trading or interruptions to our trading platform could
all materially adversely affect the Group’s performance and
earnings.
– Continued cost pressures that have adversely impacted biomass
suppliers in the previous 12 months may continue to have an
impact on biomass production across 2025. As a result, Drax
could face shortages of the biomass required to meet the forecast
generation profile of Drax Power Station and/or significant
additional costs which could materially impact its operational and
financial performance in addition to impacting the Group’s ability
to fulfil contracts, resulting in higher costs due to needing to
source biomass from athird party.
– The Generation business may fail to secure future system support
services contracts or the value in providing those services may
reduce due to increased competition.
– The fibre market is impacted by both our suppliers and
competitors. For example, there is continued pressure in the
Canadian fibre market due to a decline in the lumber industry.
There has also been a reduced harvest due to a reduction in the
Annual Allowable Cut. All of these factors may increase the cost
of fibre.
– Across the international markets in which we trade, we are
exposed to foreign currency exchange risk, primarily in relation
tothe GBP cost of pellets to the Generation business, which is
typically contracted in USD or EUR.
Key mitigations
– Our hedge levels for 2025 to 2027 are currently above historic
levels and we continue to build on these high levels of forward
sales. The CfD on one of our biomass generation units also helps
to reduce our exposure to volatility.
– Our UK portfolio of Industrial and Commercial (I&C) electricity
customers provides an effective route to market for forward
power and renewable certificate sales from the Generation
business. Any power price exposure within the supply contracts
ishedged.
– The majority of our larger I&C contracts operate under flexible
purchasing agreements, which provide a framework under which
the customer locks in the power price according to their own risk
management strategy and risk tolerances rather than at the point
the contract is signed. We are able to regularly reforecast the
usage under these contracts and the customer absorbs the costs
or benefits of reforecasting.
– Regular meetings by our internal Risk Management Committees
covering Commodity and Financial risks, providing oversight and
challenge to the teams responsible for trading in commodities.
– Under our hedging strategy, our exposure to buying back power
at higher prices in the short term is mitigated by holding back a
percentage of generation. This provides some back-up should
there be an unplanned outage.
– Real-time monitoring of the Group’s credit exposure, both cash
and non-cash, and identification of strategies that could be
utilised should the Group’s market exposure move outside of
ourdefined levels.
– Ensuring the demand for sustainable biomass at Drax Power
Station can be satisfied by self supply of the Group’s Pellet
Production operations helps to avoid exposure to third parties
and changes in their charges and contract pricing.
– Operating three biomass units under a single ROC cap for Drax
Power Station provides increased opportunities for flexibility
ofgeneration and can create additional value.
– We actively engage with third-party pellet suppliers to ensure
delivery schedules are met and any changes to agreed schedules
are understood, to limit the impact on power generation.
– We deploy forward hedging strategies which seek to limit the
Group’s forecast exposure to future adverse movements in
foreign exchange over a five-year horizon.
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People
Risk Statement
The risk that the Group is not able to secure a workforce with the right skills and experience to run our current business in addition
toexecuting our growth plans and achieving the Group’s strategic aims.
Risk Environment
Many of the roles at the Group across our Pellet Production, Generation, Customer Services and core service require people with specific
skills, knowledge and experience. As the business changes and grows, these needs also evolve and as people’s careers develop it is
possible they may seek alternative employment outside of the Group. Attracting and retaining people with the skills knowledge and
experience tomeet the needs of the business may not be possible.
2024 continued to present a competitive employment market, specifically for skills related to the renewable power/green skills agenda,
both through direct hiring and in the supply chain. Work to understand the long-term skills and capabilities required has been undertaken
and attention is being given to fulfilling those needs using a combination of recruitment of new employees, skills development through
training and development; or where required out sourced contracting. Whilst addressing these market pressures and growth plans,
keeping our colleagues and contractors safe remains paramount in our planning and decision-making. Refer to page 76.
Our international growth plans and attraction to a potential workforce in new areas has progressed well, and we have developed a
familiarity in recruiting in new markets and regions. This will continue to require extensive forward planning and flexibility of existing
processes to ensure we remain compliant with regulatory and legal requirements.
Risk and impact
– Our ongoing performance and the delivery of our strategy is
dependent upon having a robust talent pipeline at all levels of the
organisation, which importantly also reflects the diversity in
thewider societies in which we operate. There is a risk that we
will not be able to source sufficient people with the skills and
capabilities required to address new and emerging aspects of
sustainable power generation, carbon removals and associated
markets.
– International growth brings with it increased complexity, which
requires an understanding and appreciation of cultural, legal
anddiversity matters in those territories. A failure to properly
accommodate those considerations could impact our pace
ofexecution or our ability to recruit and retain people.
– Pay negotiations with unions carries a risk of impacting both our
direct workforce, and our supply chain, and could impact project
delivery, as well as day-to-day operations, with an associated cost
of establishing appropriate contingencies to mitigate against any
threat of potential strike action.
– The execution of the Group’s strategy and continued efforts to
improve operational effectiveness brings a high level of expected
change for our colleagues. This could impactemployee
engagement, wellbeing, stress and retention, with subsequent
impacts on colleague turnover and productivity.
– Reputation and market risks related to the transition to a
low-carbon economy may result in challenges with employee
recruitment and retention. Refer to Biomass Acceptability risk
onpage 78.
Key mitigations
– Consideration is being given to scenarios where we may want
toundertake external recruitment, develop existing colleague
skills or subcontract to obtain the required capabilities. This
includes developing a Green Skills approach across the industry
and through the supply chain, as well as supporting the more
immediate needs through reskilling programmes. Our early
careers offering focuses on the business’ medium- to long-term
needs.
– We are delivering on our employee value proposition and
strategicworkforce planning activity to facilitate our growth
plans and ensure we remain an attractive proposition for
potentialcolleagues. Refer to page 54 for further information.
– We have developed a good relationship with all the unions we
work with, and proactively approach our pay negotiations with
them. We also have contingency plans in place to assure the
operations of our assets in the event of strike action.
– Continuing to enhance our diversity and inclusion strategy to
ensure it is responsive to stakeholder views, provides equality of
opportunity and aligns to our organisational vision and goals. You
can read more about our work in this area on pages 52 and 53.
– We carry out regular reviews of our succession and key talent
cover, mapped to our future workforce and capability needs, with
development opportunities mapped to the organisational needs
accordingly.
– There is a regular review of wellbeing offering and safety
provision in the workplace to ensure that everyone, regardless
oflocation or role, goes home at the end of every day safe and
well. We are focused on promoting and supporting a culture of
holistic wellbeing which empowers all colleagues to make
positivechange.
Principal Risks and uncertainties continued
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Climate Change
Risk Statement
The potential for either physical or transitional climate-related risks, such as sea-level rises or new regulation, to negatively impact
onthe current operations or the long-term value creation of the Group.
Risk Environment
Given the potential impact of climate change, the resilience of the Group’s strategy and operations to climate risks is important to the
functioning and long-term value creation of the Group. We identify climate risks in two main categories – physical and transitional.
Physical impacts of climate change include event-driven, acute impacts such as flooding, and chronic impacts such as sea-level and
temperature rises which may pose challenges to our operations. Overall, we observe a continued rise in frequency of severe weather
events with increased likelihood going forward that such events could cause greater disruption to North American Pellet Production
operations as well as Scottish Hydro operations.
Transitional impacts of climate change include policy, regulatory, technology and market-related changes associated with the transition
to a low-carbon economy that could affect the Group’s business model, but also serve as opportunities for growth. We provide further
detail on climate-related risks and opportunities in our TCFD disclosure starting on page 56.
Future changes to carbon accounting frameworks across both corporate emissions standards (such as the GHG protocol corporate
emissions reporting standards) and land use/forestry accounting standards (such as the upcoming GHG Protocol Land Use Sector and
Removals Guidance or FLAG from SBTi), may compromise our emissions reduction plans to hit our 2030 SBTi targets or impact markets
for pellets and unabated bioenergy.
Risk and impact
– Physical risks to our Pellet Production operations and supply
chain in the US and Canada include increased frequency,
variability and severity of weather events, such as hurricanes,
extreme low temperatures and wildfires. These have the potential
to cause damage to assets, impact on the supply and production
of raw material and finished goods, and create challenges in
executing work on site effectively and safely.
– Physical risks to our Generation operations and supply chain
include sustained rising water temperatures, and increased
frequency and severity of extreme weather events, such as heavy
rainfall, flooding and high winds, with potential to cause damage
to assets, breach of permits, interruption to operations, and
impact on transport infrastructure that could restrict or reduce
access to sites.
– Policy and regulatory risks related to the transition to a low-
carbon economy include changes in government and cross-
border climate or emissions policies that may negatively impact
our Generation and Pellet Production businesses. Refer to
Political and Regulatory, and Biomass Acceptability risks on pages
77 and 78 respectively.
– Changes in technology can mitigate risks in relation to the
transition to a low-carbon economy. If new technologies do not
develop in the expected timelines, this could impact the delivery
of the Group’s business strategy.
Key mitigations
– In recognition of the increased likelihood and frequency of severe
weather events, the Pellet Production business continues to put
contingencies in place to prevent outage periods where possible.
Mitigations include development of stockpiles toalleviate the
riskof harvesting or delivery disruption and the increase in
geographic diversity of pellet plant asset locations across the
USand Canada.
– Physical and transitional scenario analysis and modelling of
reservoir spillway capacities at Cruachan Dam, have been
undertaken to understand our resilience to extreme weather
events.
– The Group’s three strategic pillars, near-term SBTi targets, and
Climate Policy, underpin a business strategy consistent with UK
and international climate change policies. Refer to pages 3 and
40. Discussions with governments and policymakers continue
with recognition of the role the Group’s strategy can play in
combatting the adverse effects from climate change.
– Sourcing from a wide geographical range of third-party biomass
suppliers and continued evaluation of alternative fuels, using
different feedstock types and considering wider sourcing
geographies.
– Seeking engagement with eNGOs on carbon accounting and
reporting, and liaising with the UK Government on future policies.
Refer to Political and Regulatory and Biomass Acceptability risks
on pages 77 and 78. We have in place an internal Science and
Evidence function to collate and examine the science
underpinning our activities related to BECCS and biomass.
– An internal Innovation team track technology advances and the
development of new technologies, and compare this against the
Group’s current and future portfolio of decarbonisation projects.
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Plant Operations
Risk Statement
The risk we are unable to ensure the reliability or safe operation of our facilities which could result in us being unable to fulfil our
contracted obligations or achieve our strategic aims.
Risk Environment
The reliability and safe operation of our facilities is critical to our ability to create value for the Group as well as fulfilling our contracted
obligations in the generation of power for the UK power system. The Plant Operations risk profile is influenced by a number of key
activities, including the safe management of ageing assets, building inherent reliability and safety by design for new installations,
management of change, and operating equipment within intended design limits and parameters. The operational risk profile is varied
andsubject to change due to growth in the business, the construction of new assets and decommissioning of older assets.
Risk and impact
– Severe weather events (such as hurricanes, extreme cold
weather, fires and floods) across North America and in the UK
could result in interruption to operations and hinder the supply
ofrequired materials to operate our assets. Refer also to Climate
Change risk on page 81.
– Drax Power Station was built over 50 years ago and some of our
hydro assets, located in Scotland, nearly 100 years ago. As plants
age, their operational reliability and integrity can reduce.
Furthermore, there is an inherent linkage between physical
infrastructure and the systems that play an integral role in
supporting them. These systems also require upgrade and
investment to ensure operational reliability. Refer to Information
Systems and Security risk on page 83.
– The safe and effective operation of our assets also require people
with the right skills and experience. There is a risk we do not
attract or retain such people and face difficulties in acquiring
newskills and capabilities in order to respond to changing work
practices. See People risk on page 80.
– Any increase in the cost of fibre resulting from supply chain
pressure could cause challenges in maintaining optimum biomass
pellet production levels at a viable cost. In addition changes in
thequality of sustainable biomass could impact the operational
effectiveness of our plant, cause outages or even damage to
ourplant. Refer to Strategic risk on page 74.
– An inherent risk of handling biomass is the potential for fire and
explosion during its storage, production, transportation and
on-site delivery. Such events have the potential to cause
significant disruption to operations. Refer to Health, Safety and
Environment risk on page 76.
– There are also risks associated with our biomass supply chain due
to the reliance on the complex co-ordination of transportation
atvarious stages of the process. Therefore, Drax Power Station
could be exposed to unplanned interruption in supply.
– Decommissioning and demolition activities on a site that remains
operational brings additional challenges which may introduce
new safety and operational risks to people, plant and the
environment. Such work is ongoing at our sites, including Drax
Power Station, following cessation of coal operations.
– Cyber security threats to networks and systems continue to be
heightened as a result of geopolitical conflicts, with the potential
to compromise key plant and equipment. Refer to Information
Systems and Security risk on page 83.
Key mitigations
– Business continuity plans are in place for all plants, ports and
other logistics which cover weather impacts and other factors.
This enables Drax to be better placed to respond to abnormal
andone-off weather events.
– A comprehensive plant investment and reliability programme
hasbeen implemented, including the recent successful major
outage of generating Unit 3 at Drax Power Station.
– The potential cost of an outage is considered when determining
the running regime of our generation plant. For example, when
prices are higher, lower risk running options will be utilised,
whereas when prices are lower, we may look to take the
opportunity to perform short maintenance outages.
– Proactive reliability management including planned, rather than
breakdown, maintenance and embedding several condition
monitoring tools (e.g. infrared, vibration, spark detection) works
tominimise unplanned outages.
– Maintaining safety procedures for sourcing, acceptance and
handling of biomass, as well as the control of dust management
from both a respiratory, health, and fire and explosion
perspective.
– Maintaining plant standards and investment in plant to As Low
AsReasonably Practicable (ALARP) levels has been established,
such as for the chemical suppression systems at Drax Power
Station.
– Insurance is in place to cover potential material losses from
significant plant failure, where possible.
– Providing the required training and development for our
colleagues in conjunction with recruiting people with the right
skills and experience to safely and effectively operate the
Group’splant.
Principal Risks and uncertainties continued
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Information Systems and Security
Risk Statement
The risk of interruption to business operations whether caused by an internal error or external attack, or the inability to facilitate the
delivery of our growth strategy with the necessary Information Technology (IT) and Operational Technology (OT) systems.
Risk Environment
Our IT and OT systems and the data we use are essential to supporting the day-to- day business operations of the Group, in addition
tocontributing to the delivery of our growth strategy. As part of the UK’s critical national infrastructure and as an operator of essential
services, we are required to maintain the confidentiality, integrity and availability of our systems and data, and to ensure we have the
capability to adapt and respond to evolving external cyber threats.
Managing risks in an environment where threats and challenges are continually evolving requires careful assessment and understanding.
The ongoing conflicts in Russia-Ukraine and the Middle East have increased the Group’s risk exposure to attacks from groups including
cyber-criminals and state-sanctioned threat actors targeting our systems and those of suppliers on whom we rely.
Changes in technology such as AI/machine learning and quantum computing may provide benefits and efficiencies to the business.
However, they could also increase the capabilities of threat actors.
Risk and impact
– Any compromise of our systems from a cyber-attack may affect
the confidentiality, integrity and availability of our data (including
personal data). Attack methodologies seek to deny access,
whichmay cause operational and financial impacts, regulatory
non-compliance and impact safety.
– Evolving regulatory requirements present ongoing challenges and
costs to the Group. Operators of essential services such as Drax
are required to broaden the scope of systems that are deemed
“atrisk” and focus continues to be placed on enhancing resilience,
including the capability to respond and recover quickly from
disruptions, and ensuring the continuation of safe and secure
operations.
– Our partnerships with third parties support our information and
operational systems. If those businesses were themselves to
suffer systems failure, cyber-attack or financial difficulties, this
could in turn impact our business, operations and performance.
– Legacy systems are more difficult to maintain and are more
susceptible to cyber-attacks. Subsequent operational issues, such
as reduced performance, may impact the availability of systems,
data and facilities, adversely affecting our operations.
– The effective functioning of our IT and cyber-based resilience and
oversight of our IT & OT systems requires that the Group employs
people with the requisite skills, knowledge and experience. Such
capabilities are in high demand and there is a risk that the Group
may not be able to recruit nor retain the skills needed.
– Identifying and responding to emerging threats requires access to
people, industry experts and collaboration with organisations able
and willing to work with the Group. Whilst such collaboration has
been strong across multiple jurisdictions and agencies in the past,
willingness to share information, whether on a timely basis or at
all, may impact how quickly and effectively the Group is able to
respond to events.
– Industry regulations in this area, particularly for operators of
essential services, are increasing in scope and complexity.
Without long-term compliance plans, specialist skills, and
associated budgets to meet these regulations, the risk of
non-compliance increases.
– Our day to day operations require effective OT environments
thatcapture, evaluate and report on the breadth of activities
undertaken by the Group. Failure in those systems or the failure
todevelop them in a timely basis to reflect the evolution of the
business could adversely affect our ability to operate. For
example, our trading team rely on the continuous operation of
complex systems in order to perform their roles and which are
critical to Drax meeting its obligations in generating electricity
and meeting regulatory requirements.
Key mitigations
– As an Operator of Essential Services, Drax has controls in place
which are intended tomeet therequirements of the security of
Network and Information Systems (NIS) Regulations and which
are subject to regulatory inspection.
– Maintenance of a close working relationship with regulatory
bodies and other Government agencies, responding quickly
tochanging threat levels and their advice and requirements.
– Maintenance of effective and up-to-date cyber security
measures, including a prevent, protect, detect, respond and
recover strategy, which evolves to address known and
emergingthreats.
– We consult with external experts and develop our internal
capabilities so that we can respond to changing regulations and
standards. We continue to develop technology, security controls,
and resilience measures to maintain compliance.
– Regular campaigns and training events are undertaken to
improvecyber security awareness.
– Maintenance of a robust supplier onboarding methodology.
– Periodic internal and independent external assessment of the
integrity, adequacy and compliance status of our IT and cyber
security controls.
– Exercising and refreshing of business continuity, disaster
recovery and crisis management plans.
– Periodic technical refresh programmes to address legacy
infrastructure and systems, and adoption of secure-by-design
principles and design patterns.
– Working with regulatory bodies, Government agencies, and
qualified industry experts to develop and implement a compliance
plan which receives close scrutiny from Drax IT Board.
Drax Group plc Annual report and accounts 2024
83
Strategic report
Contents
Contents
88 Governance at Drax
90 Corporate governance report
93 Board of Directors
96 Stakeholder engagement
107 Nomination Committee report
112 Audit Committee report
126 Remuneration Committee report
145 Directors’ report
Governance
Good governance
is an essential
foundation to the
long-term success
ofour business.
Andrea Bertone
Chair
Governance
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Governance
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Contents
Drax Group plc
Board
The Board is responsible for leading the
Group and ensuring long-term value
creation forshareholders and wider
stakeholders.
It establishes and reviews the Group’s
purpose and values, assesses and
monitors culture, and takes responsibility
for setting and overseeing the Group’s
strategy and riskappetite. It also monitors
performance, making sure the necessary
controls and resources are in place to
deliver the Group’s plans and that the
Group meets its responsibilities to its
stakeholders.
Governance at Drax
Compliance with the UK
Corporate Governance Code 2018
(Code)
The Board’s view is that the Company
has applied the Principles and complied
with the Provisions of the Code
throughout 2024.
At two meetings during 2024, the
Board formally considered reports
onhow Drax, the Board and its
Committees applied the Principles
andcomplied with the Provisions of
theCode. The meetings included
discussions about the steps being
taken and how they might evolve, as
well as the effectiveness of stakeholder
and colleague engagement. The Board
also discussed how it assesses,
monitors and constructively
influencesculture.
The Board determines the Group’s purpose, strategy,
andbusiness model for long-term, sustainable value creation.
Corporate Governance Report: Introduction
Board leadership
and Company purpose
Principles
A. The Board promotes the long-term
sustainable success of the Company,
generating value for shareholders and
contributing to wider society
B. The Board sets the purpose and values,
and promotes the desired culture
C. The Board ensures sufficient resources
and effective controls
D. The Board engages effectively with
stakeholders
E. The Board ensures effective workforce
engagement and whistleblowing
Division of
responsibilities
Principles
F. The Chair provides effective leadership
G. There is clear division of responsibilities
and an appropriate balance of
independent Directors
H. Non-Executive Directors provide
constructive challenge and guidance
and have sufficient time to meet their
responsibilities
I. The Board has the information, time
and resources to function effectively
and efficiently
Seepage 90 Seepage 103
Governance
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Nomination
Committee
Andrea Bertone
Committee Chair
The Committee makes recommendations
on the size, diversity and composition of
the Board, and succession planning for
the Directors and senior management.
Audit
Committee
Rob Shuter
Committee Chair
The Committee oversees financial
reporting, key accounting judgements,
internal controls and risk management
systems, plus internal and external audit
effectiveness.
Remuneration
Committee
Nicola Hodson
Committee Chair
The Committee oversees the Group’s
approach to remuneration, ensures
remuneration policies support the
purpose and strategy, and sets pay for the
Executive Directors and members of the
Executive Committee in alignment with
the shareholder approved Remuneration
Policy. It also considers the alignment of
reward across the wider business.
Composition, succession
and evaluation
Principles
J. Appointments to the Board are on
merit and promote diversity, with
effective succession planning
K. There is an appropriate mix of skills,
experience, and knowledge of the
Board and Committees
L. Board evaluation is performed annually
Audit, risk and
internal control
Principles
M. The Board ensures the integrity of
thefinancial statements and the
effectiveness of the internal and
external audit functions
N. Reporting is fair, balanced, and
understandable
O. Processes are in place to manage risk
and oversee internal control
Remuneration
Principles
P. Remuneration policies and practices
promote long-term success and are
aligned to long-term strategy
Q. There is a formal and transparent
procedure for developing policy on
Executive remuneration
R. Directors exercise independent
judgement and discretion when
determining remuneration outcomes
Seepage 107 Seepage 112 Seepage 126
Governance
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Contents
I am pleased to present our
Corporate Governance Report.
Good governance is an essential
foundation for the long-term success of
our business and realisation of our goals.
The Board recognises the importance
ofhaving policies and procedures that
support sound decision-making
throughout the Group. Acting responsibly
and sustainably also underpins our licence
to operate across the breadth of our
activities. For more information, see the
CEO review on page 12.
The information presented in this report
reflects the Board’s assessment of the
application of the UK Corporate
Governance Code. It also reflects how the
business has applied and evolved its values
and governance practices during 2024.
Strategy and performance
In 2024, we generated a record levelof
renewable electricity across our portfolio
of flexible and renewable generation
assets. In doing so we continued to play an
important role in theUK energy system
and supporting energysecurity.
Our principle supply chain, primarily based
in North America, supports UK power
generation; anddownstream our Energy
Solutions business continued to support
our customers on their decarbonisation
journeys. This resulted in a strong financial
performance, dividend growth and capital
returns to shareholders.
At the same time, we made good progress
with our medium and long-term objectives
for growth in our core business. We also
progressed our plans for carbon removals,
which are aligned with our purpose.
Our purpose, strategic
objectives and values
Letter from
the Chair
Our purpose
Our purpose is to enable a zero carbon,
lower cost energy future.
Our strategic
objectives
Safety, sustainability and compliance
underpin our three strategic objectives:
To be a leader in UK
dispatchable, renewable
generation
Flexible renewable power –
biomass, hydro, pumped
storage.
To be a global leader in
sustainable biomass pellets
Pellet sales, self-supply, margin
enhancement, fibre sourcing
and technology.
To be a global leader
in carbon removals
Development of projects
in the UK and internationally.
Our values
Prioritise safety
We all deliver our One Safe Drax vision
by caring for ourselves, our assets,
ourenvironment and our communities.
Unlock potential
We see challenge as opportunity and
push ourselves to grow, cultivating
anenvironment where continuous
development and holistic wellbeing
sitside by side. We value everyone’s
differences and unique contributions.
Deliver our promise
We each play an important role in the
delivery of our strategy and are driven
to give our best every day. We focus
onmeeting our commitments, listen
tofeedback, share ideas and celebrate
ourcollective successes.
Shape the future
We seek out everyday improvements to
take steps towards positive outcomes
for the climate, nature and people.
Corporate Governance Report
Governance
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Principles of the UK
Corporate Governance
Code
A
Promoting the long-term sustainable
success of the Company, generating
value for shareholders and
contributing to wider society
B
Purpose, values and culture
C
Resources and effective controls
D
Engagement with stakeholders
E
Policies and practices including
whistleblowing
The Board has clearly articulated the Group’s purpose (to enable a zero carbon, lower
cost energy future) and business model focusing on its core Flexible Generation, Pellet
Production and Biomass Generation operations. The Company is also exploring
further areas for growth such as carbon removals. The Board believes this will support
the UK Government’s aim to deliver a clean energy system. For more information see
the Strategic report from page 2.
The Board promotes a culture of openness and collaboration, as well as acting with
honesty and integrity, setting a clear and positive tone to promote the Group’s values.
To align our culture with these values, the Board regularly considers critical areas
including health, safety, wellbeing, ethics, compliance, and employee engagement
atBoard meetings. This provides oversight and identifies areas for improvement
andpractices that enable positive engagement, underpinning the culture of respect.
The Board regularly reviews the Group’s performance against its strategic and
financial objectives, and its KPIs. At each Board meeting the Directors review the
status across a portfolio of projects and discuss progress. The Board also assesses
theopportunities associated with expected execution, as well as the risks which might
impact delivery. The Board has conducted a robust assessment of principal and
emerging risks, and has established a framework of prudent and effective controls to
manage risk. Formore information on this please see Principal Risks and Uncertainties
on page 70 and the Audit Committee Report on page 112.
The Board values the views of stakeholders and undertakes extensive engagement
with shareholders, the workforce, Government, regulators, customers and other
stakeholders. For more information on engagement and its impact on Board decision-
making, please see pages 96 to 102.
The Board recognises that having the right policies and practices in place contribute
to a culture aligned to the Group’s purpose and values. For example, policies relating to
health and safety protect employee wellbeing and environmental policies help ensure
the Group promotes positive outcomes for nature, the climate and people. Colleagues
who have any concerns can raise them using the Group’s confidential whistleblowing
telephone hotline. The Board oversees Speak Up and whistleblowing and receives
regular updates; it also discusses findings from investigations.
ofthe Group’s strategy. There is more
information in the report of the Audit
Committee on page 112.
Wider macro-economic conditions and
political uncertainty can have a material
impact on the realisation of the Group’s
objectives. The Board regularly considers
those matters along with the principal and
emerging risks and believes that robust
mitigation processes for material risks
arein place. During 2024, this included
anassessment of the Group’s UKBECCS
programme taking into account
engagement with the UK Labour
Government, who were elected in July
2024. For more information, please see
thePrincipal Risks report on page 70.
The Board is responsible for determining
the Group’s capital allocation policy. The
policy targets a strong balance sheet,
investment in the core business and a
sustainable and growing dividend. To the
extent that these conditions are met, the
Board considers the return of residual
capital to shareholders. During 2024, the
Group put in place over £1 billion of new
longer dated debt and facilities,
significantly extending the Group’s maturity
profile post 2027. The Board also
announced a share buyback programme for
the purchase of up to £300 million of Drax
shares over a two-year period to return
value to shareholders. As at 26 February
2025, over 23 million shares had been
purchased into treasury for c.£150 million.
An important part of our strategy includes
investment in the technology and business
activities enabling the removal of carbon
dioxide as an integral part of power
generation. To progress our global BECCS
and carbon capture ambitions, we
launched Elimini, our carbon removals
business, at New York Climate Week in
September 2024. During the launch we
were pleased to have the opportunity to
meet with NGOs to understand their views.
Culture and values
The Board recognises the importance
ofhaving the right culture to align with
theGroup’s purpose, values and strategy.
Culture is determined through what
wedo,and how we act – the culture of
theorganisation sets the tone for good
governance, high ethics, inclusion
andcompliance.
With this in mind we continued to focus
onculture, values and compliance. An
important part of that is the continued
two-way engagement with the workforce
and our value proposition to colleagues
(see page 54).
The Board believes that maintaining the
health, safety and wellbeing of all Drax
colleagues is a key aspect of setting the
Through these opportunities, we believe
we can deliver sustainable long-term value
to our stakeholders as werealise our
purpose of enabling a zero carbon, lower
cost energy future.
The Board regularly reviews the Group’s
performance against its strategic and
financial objectives, and its KPIs. At each
Board meeting, the Directors review the
status across a portfolio of projects and
discuss progress with Executive Directors
and senior management. The Board
assesses the opportunities associated
withexpected execution as well as the
risks which might impact delivery.
At its meeting in October 2024, the
Boardconsidered in detail the strategic
objectives for the Group. The Board
continues to consider that developing
theGroup’s Flexible Generation, Pellet
Production and Biomass Generation
portfolio is appropriate. These priorities sit
alongside the continued development of
opportunities for growth which include
our plans for carbon removals. The Board
also considered the appropriate
governance, internal controls, and
infrastructure required to support delivery
of the strategy. The Board continues to
hold management to account on the
importance of such frameworks, which
the Board considers represent a critical
part of supporting the proper execution
Board leadership and company purpose
Governance
Drax Group plc Annual report and accounts 2024
91
Contents
Chair’s statement continued
right culture critical to the Group’s
success. As part of his regular reporting
tothe Board, the CEO’s report includes
ahealth and safety update. A summary
ofour safety performance can be found
from page 50.
Visits to Drax sites across the Group and
engagement with external organisations
are a key part of learning and continual
improvement. In October 2024, the Board
and executive management visited
Sellafield, which is the most complex
nuclear site in Europe. Its operations
involve cleaning up the UK’s highest
nuclear risks and hazards, safeguarding
nuclear fuel and the UK’s stockpile of
special nuclear materials, managing all
forms of nuclear waste, major construction
projects, and supporting the continued
operation of the UK nuclear reactor fleet
by safely receiving and storing their spent
nuclear fuel. This requires stringent health
and safety measures to protect workers,
the public and the environment. The Board
and management welcomed the
opportunity to share knowledge and ideas,
exploring areas of shared interest such as
safety, high hazard operations, and cyber
security. I would like to thank Chris Train,
Chair of the Sellafield Board, and his
colleagues for their time during our
two-day visit.
Acting with honesty and integrity and in
compliance with all laws and regulations
isalso a necessary foundation for how we
operate. To emphasise the importance of
compliance as everyone’s responsibility
atDrax, the Board included a compliance
metric as part of the 2024 Group
Scorecard. You can read more about this
on pages 53 and 133 to 134. Feedback
from the colleague MyVoice Forums was
positive; colleagues appreciated that this
measure affirmed the importance of
compliance.
Drax places particular emphasis on the
wellbeing and mental health of our
people.Important to this is creating an
environment where colleagues are
empowered and resourced to understand
the importance of wellbeing. The Group
has also invested in health screening,
physical and mental wellbeing education
for all colleagues, support through our
benefits programme, and the provision
ofmental health first aiders. The Group
has also acted to support the wellbeing
ofleaders, including initiatives intended to
address the challenges which come from
working in a business undergoing change.
In addition, colleague engagement
activities took place during 2024 to
promote open conversations around
various aspects of wellbeing. These
included pension awareness sessions, to
help colleagues navigate saving for their
future; and, in Mental Health Awareness
week, webinars to promote physical
wellbeing (which plays an important role
inmental wellbeing). In October 2024, the
Group focused on women’s health with a
series of events to mark World Menopause
Day and Breast Cancer Awareness month.
This included a panel event and workshops
hosted by a menopause specialist to allow
men and women to learn more about the
menopause and how to provide support.
In November 2024, our focus turned to
male wellbeing as we marked ‘Movember’
and International Men’s Day. All colleagues
were invited to a webinar that discussed
key risk factors to men’s health, including
mental health, suicide prevention, and
testicular and prostate cancer. It is
important we create a supportive culture
where all employees feel able to have
meaningful discussions around physical
Acting responsibly and
sustainably underpins
ourlicence to operate across
thebreadth of our activities.
and mental health and that such
conversations are not seen as a weakness.
We continue to develop our Colleague
Resource Groups (CRGs), having
introduced our ‘Parents & Carers’ and
‘Enable’ CRGs during 2024. These sit
alongside our existing CRGs (Race &
Ethnicity, Neurodiversity, Pride, and
Women). These offer members of the
respective communities opportunities
toshare ideas and experiences in a safe
space. We are also evolving our recruitment
strategies to attract candidates from
under-represented groups. For more
information, see from page 52.
Stakeholders
Meaningful feedback from stakeholders is
very important to the Board and we aim to
maintain open, collaborative engagement
with stakeholders.
I would like to thank all the stakeholders
who have engaged with us. For more
information on how stakeholder feedback
has informed Board decision-making
during 2024, please see pages 96 to 102.
Andrea Bertone
Chair
26 February 2025
Governance
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Contribution and experience
Using his strong financial and commercial
skills built over 25 years, Andy provides
thefinancial oversight and controls
thathave supported the growth of
Draxfromarenewable energy company
toaninternational company with
adifferentiated portfolio.
Highly values driven, with a personal
commitment to our climate, nature
andpeople positive ambitions, during
2024, Andy represented Drax as a member
of the Northern Powerhouse Partnership,
helping create more opportunities and
abetter economy for the people of the
North of England, where he also lives.
Previously Andy was CFO at Fidessa
Group plc and has held a number of senior
finance positions at CSR plc, Ericsson
andMarconi, including two years as CFO
of Ericsson Nikola Tesla. Andy has a BA
inaccounting and finance and qualified
asa chartered accountant in 1994.
On 4 December 2024, Andy informed the
Company of his intention to retire from the
Board and from his role as CFO. Andy will
remain as a Director of the Company and
as CFO until a successor is in place.
Appointment to the Board:
January 2019
Contribution and experience
Will has driven the vision and operations
ofthe Company since becoming CEO
inJanuary 2018, inspiring our
transformation from a leading UK
renewable energy company to a diversified
global energy company with strong
businesses in sustainable wood pellets
inNorth America, flexible and biomass
power generation in the UK, and more
recently, the carbon removals business,
Elimini, based in Houston.
Will is deeply committed to creating a
company where everyone feels valued.
Working with our stakeholders, Will is
creating a purpose-led company at Drax
toensure outcomes thatare positive for
people, nature and theclimate, as well
asshareholders.
Will is also a Commissioner of the Energy
Transitions Commission, a member of the
World Economic Forum’s (WEF) Alliance
ofCEOClimate Leaders and a member
ofConservation International’s
EuropeanCouncil. Will joined Drax in 2015
as CFO and was appointed as CEO in
January 2018. In September 2024, Will
became Executive Chair of Elimini. He has
a wealth of experience in finance and
technology, having held CFO and divisional
Finance Director roles at a number of
major companies, including CSR plc
(acquired by Qualcomm, Inc in 2015) and
Sky. He has dual US-UK citizenship and
has lived and worked in the UK since 1998.
Appointment to the Board:
November 2015
Contribution and experience
Andrea is an experienced leader of large,
listed businesses, having held both
Executive and Non-Executive roles at
international energy companies. She has
adeep understanding of global markets,
including the US, and their underpinning
regulation.
Andrea is the former President of Duke
Energy’s international division (‘DEI’).
Shespent 15 years at Duke Energy,
including seven years as President of DEI
with executive responsibility for hydro and
thermal assets across countries in Latin
America. Prior to her role as President,
Andrea held senior executive legal
positions at DEI, including as associate
General Counsel between 2003 and 2009.
Andrea also served as Latin America
counsel with Baker McKenzie. Andrea has
Non-Executive Director appointments at
Waste Connections, Inc., Amcor plc and
Peabody Energy Corporation. Andrea was
also previously a Non-Executive Director
atDMC Global Inc. and Yamana Gold Inc.
Andrea has dedicated her career to
successfully leading international teams
with diverse cultures and backgrounds.
Andrea earned a Bachelor of Law from
theUniversity of São Paulo Law School in
Brazil and a Master of Law in International
and Comparative Law from Chicago-Kent
College of Law at the Illinois Institute of
Technology. She is a member of the
Brazilian Bar Association.
Appointment to the Board:
August 2023
The Board shapes our purpose, strategy, culture
andvalues to generate long-term sustainable value
and provide strong stewardship of the Group.
Andrea Bertone
N
R
Chair
Will Gardiner
CEO
Andy Skelton
CFO
Corporate Governance Report: Board of Directors
Governance
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Contribution and experience
As Chair of the Remuneration Committee
Nicola brings to the role a wide range
ofexperience of international business,
Government organisations, and dealing
with a variety of stakeholders.
Nicola is currently Chair (formerly Chief
Executive) of IBM UK and Ireland and
Deputy President of TechUK. Previously
she was Vice-President, Global Sales and
Marketing, Field Transformation at
Microsoft, Chief Operating Officer of
Microsoft UK, and she previously held P&L
andsales roles at Siemens, CSC (now DXC)
and EY. Nicola is a Non-Executive Director
of Beazley plc.
Nicola brings expert level technology
knowledge, with her current working
experience at the forefront of global
organisations. She is also skilled in
business and digital transformation, and
sales. Nicola is committed to inclusivity
and enabling people to realise their full
potential, irrespective of their background.
Appointment to the Board:
January 2018
Contribution and experience
Rob brings a wealth of complex financial,
regulatory and strategic experience
gained from over 30 years in the
telecommunications and financial
servicessectors.
Rob served on the BT Group plc executive
committee as the divisional CEO of BT
Enterprise between 2021 and January
2023, prior to which he served for three
years as Group President and CEO of
MTNGroup Ltd, a telecommunications
company listed on the Johannesburg
Stock Exchange. Rob has also held a
number of senior executive positions
within the Vodafone Group between 2009
and 2016 including most recently as CEO,
European Cluster in addition to serving
between 2009 and 2011 as CFO of
Vodacom Group Ltd, listed on the
Johannesburg Stock Exchange.
Rob worked in the financial services sector
between 1992 and 2009 which included
executive positions in retail and
investment banking. Morerecently Rob
served as Non-Executive Director and
Chair of the Audit and Risk Committee
forThe GSM Association, the global
tradeassociation for mobile network
operatorsworldwide. Rob is currently a
Non-Executive Director and member of
the Supervisory Board ofRoyal KPN N.V.
He holds a Bachelor of Commerce degree
from the University ofCape Town, a
Post-graduate Diploma in Accountancy
from the University of Natal and is a
Chartered Accountant (South Africa).
Appointment to the Board:
June 2024
Contribution and experience
David holds a portfolio of Board
appointments, including as Chair of
International Alert andof the Joffe Trust.
He also serves as amember of the Board
(‘Council’) of Chatham House, and of the
International Budget Partnership; is
President of the Advisory Council of
Transparency International UK; and is
amember of theEthical Investment
Advisory Group oftheChurch of England.
David’s executive career included being
the Chief Executive of The Elders, of
WWF-UK, and of Transparency
International. He was previously Finance
Director and Deputy CEO of Oxfam, and
CFO of Field Group plc. In a Non-Executive
capacity, David has been Chair of Anthesis
Group, Deputy Chair of the International
Integrated Reporting Council, Deputy
Chair of Shared Interest Society, a
Non-Executive Director of Low Carbon
Accelerator Limited, and Chair of
Traidcraft plc.
David is a chartered accountant, and has a
Masters in Theology from both Cambridge
and Edinburgh universities, and a Masters
in Finance from London Business School.
David’s extensive experience in
international development and
environmental matters, in addition to his
prior experience as CFO of a UK-listed
industrial company, is of significant value
to Drax and contributes to the Board’s
discussions and understanding of the
perspectives of and engagement
undertaken with stakeholders.
Appointment to the Board:
August 2017
Nicola Hodson
A
R
Independent Non-Executive Director
Rob Shuter
A
R
Independent Non-Executive Director
David Nussbaum
A
N
Senior Independent
Non-Executive Director
Corporate Governance Report: Board of Directors continued
Governance
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Contribution and experience
Erika’s extensive experience, gained
fromover 25 years working in global
organisations, enables the delivery of
change and growth in complex, world-
leading businesses. Her broad knowledge
has been built serving various parts of
thechemicals industry, across a range
ofsectors including plastics,
petrochemicals, agriculture and pharma.
Erika is currently serving as Senior Vice
President Chemical Intermediates and
Oxyfuels at multi-national chemical
company LyondellBasell. Erika was
previously Senior Vice President at BASF
Corporation, where she led the North
American Chemical Intermediates
business. Erika held other senior executive
roles with BASF, covering manufacturing
and production, engineering, strategy,
andcommercial business management.
Passionate about STEM and DEI, she
actively supports community workforce
development programmes, as well as a
range of diversity and inclusion initiatives.
Erika sits on a variety of College of
Engineering Advisory Boards, including
those for the University of Houston and
the Georgia Institute of Technology. She
serves as a Board Trustee for The Chatfield
Edge, a scholarship foundation based in
Cincinnati, Ohio. She is also a member
ofthe Executive Leadership Council, a
non-profit organisation whose mission is
to accelerate the development of black
executives to C-Suite positions. Erika holds
a BSc in chemical engineering from the
Georgia Institute of Technology and an
MBA from the University of Houston.
Appointment to the Board:
October 2021
Contribution and experience
Kim is a Professional Engineer with over
25 years of broad international experience
in the oil and gas, nuclear, hydropower,
and mining sectors. Most recently, Kim
was the Chief Operating Officer of the
Cahill Group, one of Canada’s largest
multi-disciplinary construction companies.
Prior to joining the Cahill Group in 2013,
Kim held a variety of progressive
leadership roles from engineering design
through to construction, commissioning,
production operations and offshore field
development with Petro-Canada (now
Suncor Energy Inc.).
Kim is currently Board chair of Major
Drilling International Inc. and a Non-
Executive Director of Pan American Silver
Corp. Kim is also a founding member of
Makwa-Cahill Limited Partnership, a
nuclear qualified indigenous fabrication
company. Kim is a Fellow of the Canadian
Academy of Engineering and holds a
Bachelor of Civil Engineering degree and
an MBA. She also holds the Canadian
Registered Safety Professional (CRSP)
designation and Diligent Climate
Leadership certification. She is a graduate
of the Rotman-Institute of Corporate
Directors Education Program and was
awarded herICD.D designation.
Throughout her career, Kim has made
significant engineering and project
management contributions to complex
major energy projects. She has a deep
appreciation and insight into the value
ofinclusive community partnerships
particularly with indigenous groups.
Appointment to the Board:
October 2021
Contribution and experience
John has over 45 years experience of
working across thenuclear, electricity,
oiland gas sectors. John was previously
atBPplc, most recently as Group Head
ofEngineering & Process Safety, prior
towhich he worked at the UK utility
Powergen plc as Group Engineering
Director, as well as roles as a UKAEA Board
member and also as a nuclear submarine
engineer officer. John was also previously
aNon-Executive Director of Sellafield Ltd.
He is a Chartered Engineer and a Fellow
ofboththe Royal Academy of Engineering
and the Royal Society of Edinburgh.
Johnhas served as President of both the
Institution of Mechanical Engineers and
The WeldingInstitute.
John has broad and expert level
experience in engineering, health and
safety, and energy generation. He is
passionate about people development,
particularly advancing the opportunities
for young people in STEM careers,
including via apprenticeships. His
dedication to charity work and fundraising
to support young people provides a depth
of understanding during Board discussions
on stakeholder engagement and culture
matters. Also, having been born and
brought up in Scotland he brings
important insights to Drax on the local
environment and culture relevant to our
business in the west of Scotland.
Appointment to the Board:
April 2019
Key to Committees
A
Audit Committee
N
Nomination Committee
R
Remuneration Committee
Chair of Committee
John Baxter CBE
A
N
Independent Non-Executive Director
Kim Keating
N
R
Independent Non-Executive Director
Erika Peterman
A
R
Independent Non-Executive Director
Governance
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Effective engagement helps us
meet evolving expectations as
weadvance our business, fulfil our
purpose, deliver our strategy, and
create lasting value and positive
outcomes for stakeholders.
Many of our strategic and investment
decisions have multi-year time horizons.
We recognise that these decisions can
have an impact far beyond our immediate
business and well into the future. This is
why we seek to understand the needs
andperspectives of our stakeholders
andconsider these views to improve
thequality of our decision-making. The
following pages explain how the Board
considered those matters during 2024.
During 2024 the Board received a
scheduled deep-dive presentation from
the External Affairs team and discussed,
assessed, and challenged the quality of the
team’s engagement in satisfying Section
172 of the Companies Act. Will Gardiner’s
CEO report, which is a standing item in
Board packs, contains regular updates on
engagement with various stakeholders.
We conducted a comprehensive Double
Materiality Assessment, which assesses
the impact of Drax on environmental and
social factors (an “inside-out” perspective)
and the risks these pose to the Company
(an “outside-in” perspective). The
assessment provides a holistic view of
theimpact of our business activities, not
only on our financial performance but
alsoon the broader social, environmental,
and governance (ESG) context in which
we operate. This balanced approach
tomateriality reflects our belief that
theperspectives of a wide array of
stakeholders provide essential insights
into financial and non-financial risks
andopportunities. You can read more
about our Double Materiality
Assessmenton page 37.
Stakeholder engagement
Section 172 matter How the Board considered those matters
A. The likely consequences of any
decision in the long term
– Business model (page 8)
– Carbon removals (page 16)
– Principal Risks (page 70)
– BECCS project developments in the UK
andglobally (page 15)
B. The interests of the
Company’semployees
– Workforce engagement (pages 97 and 98)
– Diversity and inclusion (pages 52 and 109)
– Safety, health and wellbeing (pages 51 and 91)
C. The need to foster the
Company’s business
relationships with suppliers,
customers and others
– Engagement with customers (page 101)
– Engagement with suppliers (page 101)
– Supplier Code (page 53)
D. The impact of the Company’s
operations on the community
and the environment
– Responsible sourcing (page 22)
– Climate Positive (page 38)
– Nature Positive (page 44)
– People Positive (page 50)
– Taskforce on Climate-related Financial
Disclosures (TCFD) (page 56)
– Climate change risk (page 81)
– Engagement with communities (page 102)
– Drax Foundation (page 55)
E. The desirability of the
Company maintaining a
reputation for high standards
of business conduct
– Ethics and integrity (page 53)
– Culture and values (pages 54 and 91)
– Speak Up (Whistleblowing) (page 53)
– Corporate Governance Code (page 88)
F. The need to act fairly as
between members of the
Company
– Shareholder engagement (page 99)
– Rights and obligations attaching to shares
(page 146)
Section 172 statement
Under Section 172(1) of the Companies Act, the Directors have a duty to promote
thesuccess of the Company, having regard to a range of matters and stakeholders.
TheBoard is responsible for ensuring effective engagement with stakeholders:
itrecognises that decisions taken today can have an impact on stakeholders, as well
asshape longer-term business performance. Appropriate consideration enables Drax
inrealising positive outcomes for the climate, nature and people, and delivering
sustainable value creation. During 2024, the Board’s discussions and decision-making
considered the matters contained within Section 172 and acted in good faith to
promote the sustainable long-term success of the Company.
Understanding and assessing how to address the
needs of our stakeholders are essential to our long-
termsuccess. The Board recognises the duty itowes
toarange of stakeholders to safeguard the operational
integrity and prospects of the core business and
strategy.We aim to maintain open, collaborative
engagement with our various stakeholders.
Governance
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and an HR representative attends each
meeting to support the Forums. The
Forum chairs then meet with Andrea
Bertone, Chair of the Board, and Will
Gardiner, CEO, in a safe environment
where colleagues are able to speak
openly and candidly, share sentiments,
and ask direct questions of the Chair
andCEO. You can read more about Board
engagement with the Forums in the case
study below.
The Board receives regular updates on
safety, our people strategy, diversity,
equity, and inclusion (DEI), and colleague
engagement, including the outcomes
from the workforce engagement surveys.
The CEO sends a weekly Group-wide
update, that both shares important
information on Drax and responds to
colleagues’ anonymous questions
through a weekly “Talk to Will” Q&A.
Thequestions raised by colleagues cover
a range of topics including strategy,
changes within the business, climate
change, and wellbeing. During 2024
colleagues asked over 1,700 questions
ofthe CEO. Employees can also speak
informally with the CEO at “Coffee with
Will” events.
Key issues
– Health, safety and wellbeing
– Cost-of-living crisis
– Diversity and inclusion
– Culture and values
– Engagement, recognition
Principal risks
– Safety, health and wellbeing, and
environment
– People
Engagement activities
We maintain regular dialogue through
various workforce engagement activities.
The Board believes our workforce
forums (My Voice Forums (Forums)) are
the most appropriate means to facilitate
colleague engagement and to foster
direct engagement between the Board
and the workforce. The Forums are a key
part of our listening strategy, providing
further insight to colleague feedback.
Amember of the senior leadership team
In 2024, our My Voice Surveys became
quarterly, providing more regular
engagement insights for managers and
leaders. Support is given to managers to
enable discussion of results and actions
with their teams. For the first time,
colleagues were given access to their
personal survey results, allowing them
totrack their own engagement journeys.
First introduced in 2023, our Colleague
Resource Groups (CRGs) now cover six
distinct groups, as we launched two new
CRGs in 2024. Supported by the DEI
team, these colleague-led groups come
together through meetings, events, and
advocacy to support our commitment
tobuild an inclusive and fair working
environment. Each quarter one of the
CRGs attends the Drax DEI Advisory
Group to share their views so their
perspectives are considered. Over 400
colleagues (over 12% of the workforce)
are members of a CRG. CRG co-Chairs
attend DEI Advisory Group meetings to
share their views and challenges. The DEI
Advisory Group is made up of senior
leaders across Drax and is chaired by
amember of the Executive Committee.
Workforce
North America to better support colleague
access to information and engagement.
Ienjoy and look forward to these mutually
beneficial conversations. The views and
insights that Will and I gain are then shared
with, and discussed at, Board meetings
toenable all Directors to offer informed
Employee
engagement
Will Gardiner and I meet regularly
withthe Chairs of the MyVoice
Forums. In 2024, topics included
the launch of Elimini, colleague
recognition, and our values.
The Forums provide the opportunity to
respond and take action. For example, on
discussing communication of the carbon
removals deal with Karbon X, the Forum
chairs advised that colleagues wanted
tobetter understand how the BECCS
programmes in the UK and US were
expected to develop over time. As a
result, an explanation was built into future
colleague communications. The Forums
provided feedback on the ways we might
improve communications to those
colleagues in operational roles atour
power stations and pellet mills, whohave
less ready access to computers and
digital channels compared to other
colleagues. This has been accounted for
inour communications. For example,
weengaged with plant managers in
guidance and reflections on our
responses. My thanks to the My Voice
Forums and their contribution during
2024.
Andrea Bertone
Chair
CASE STUDY
Governance
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Board visit to
Drax operations
The Board of Directors undertake
site visits which provide a valuable
opportunity for us to meet with
colleagues across different
functions and geographies and
gaininsight into the progress of
keyprojects.
The Board recognises that the culture
and values of Drax are integral to
everything we do, so visits such as these
are a good opportunity for Directors to
see first-hand how the culture is
informing day-to-day activities.
In 2024, we visited Drax Power Station
and heard from colleagues working on
UKBECCS and managing improvements
to the power station. We also saw a new
wellbeing space for colleagues called
the‘Muckers’ wellbeing hub, introduced
in response to colleague feedback.
Thewellbeing rooms contain health
monitoring stations, information
resources, and a relaxing space where
colleagues can speak to a mental health
first aider.
In November 2024, Will Gardiner, Rob
Shuter, David Nussbaum, John Baxter
and I spent several days visiting three
pellet plants in the US – Lasalle,
Morehouse, and Amite. At each site we
met the local team, had atown hall
session, and toured the plant. We heard
about the importance of continuing to
build our strong safety culture and of
thesignificant efforts in recent years
toimprove safety performance. Also in
October 2024, together with our Chief
Operations Officer Lee Dawes, I visited
ourCanada operations at Burns Lake,
Houston, Meadowbank, and the Prince
George office.
On each of these visits the Board and I
enjoyed meeting with local management
and colleagues, and learning more about
their experience of working at Drax.
Icontinue to be impressed by the high
standards and commitment colleagues
demonstrate, and these visits were no
exception. The Board and I value seeing
in person the work involved, listening
tocolleague feedback, ideas, challenges,
and opportunities, as we look todeliver
our purpose. We also witnessed the
commitment of teams and see this asan
integral part of making Drax successful.
My thanks to all who have made these
visits possible and for the welcome and
feedback we received.
Andrea Bertone
Chair
CASE STUDY
Stakeholder engagement continued
decarbonisation strategy and the
development of its Energy Solutions
business (which is focused on I&C
customers, renewable power, and energy
services) and was inthebest interests
ofthe business and stakeholders.
As part of its discussion, the Board
considered in detail the expected impact on
colleagues within the SME business. The
Board spent considerable time discussing
with management the likely impact and
the need to ensure a robust programme
ofarrangements be put in place to best
support affected colleagues. This included
communications, consultation, the
provision of resources tocolleagues where
redundancies were expected (including
re-training and engagement of external
bodies to support through the period of
change). The programme also included a
Board decision-
making and
stakeholder
considerations
In June 2024, we announced
theasset sale for the majority of
the Opus Small and Medium-sized
Enterprise (SME) customer meter
points to EDF Energy.
The decision to sell followed the
completion of a strategic review of the
Group’s non-core SME energy supply
business. The Board believed that the
sale further supported its
thorough assessment of the terms being
provided, and the other arrangements
to help support them during the
transition. TheBoard reviewed
management’s proposals for how
colleagues would be supported
througheach phase of the process.
During a meeting with the My Voice
Forum chairs, we were pleased to hear
that colleagues welcomed the level of
support and sensitivity provided to
directly impacted colleagues. Colleagues
also recommended further actions to
help support those who remain with
thebusiness. These were highlighted
tolocal leadership teams, which
subsequently took further action.
CASE STUDY
Governance
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Through our engagement with
shareholders, the Board received
feedback on the importance that
investors attach to the Group’s financing
facilities.
In 2024, we concluded a programme
ofwork to extend the Group’s debt
facilities. Ahead of the €350 million
bondissuance in April 2024, the
CFOmembers of the finance senior
management team met with potential
investors to explain the nature and
purpose of the bond and answer
questions. The €350 million bond
issuance was oversubscribed and had
the tightest credit spreads of any recent
Drax bond issuance.
Engagement in the UK included
attendance at industry conferences,
where we hosted one-to-one and group
investor meetings. The IR team attended
these events, sometimes accompanied
by management.
Engagement internationally included the
CFO and Director of Investor Relations
undertaking an investor roadshow in the
US, meeting around 20 investors. The
IRteam also visited Milan and Geneva
during 2024. Key topics covered in
thesemeetings were consistent
withthekey issues identified opposite.
The IR team, working with the Chief
Sustainability Officer, met with investors
to discuss issues around biomass
sustainability and carbon accounting.
This was part of an ongoing series of
engagement activities.
Through engagement with investors,
wecontinue to develop our sustainability
reporting, with a desire to present clear,
consistent, meaningful metrics in a
transparent manner.
Discussions were held with a number
ofour investors at the AGM in 2024. We
remain open to such dialogue and the
Board remains attentive to such matters.
Key issues
– Strategy
– BECCS delivery
– Financial and operational performance
– Capital allocation
– Biomass sustainability
– Environmental, Social and Governance
(ESG)
Principal risks
– Strategic
– Biomass acceptability
– Political and regulatory
Engagement activities
The Group has an active Investor
Relations (IR) programme through which
we engage with existing and potential
investors to inform on progress with the
Group’s strategy, investment case, and
performance.
Meeting our
shareholders
During 2024, as part of her
introduction to the role as Chair,
Andrea Bertone met with major
shareholders, along with Senior
Independent Director David
Nussbaum.
These meetings were independent
ofmanagement. Andrea and David
discussed the Board’s approach to
strategy, governance, financial and
operational performance, and
sustainability. This was useful in helping
Andrea to understand current investor
sentiment and for her toexpress her
early views on the Group. Andrea also
chaired the 2024 AGM and answered
shareholder questions.
In February and July 2024, management
met with investors as part of full- and
half-year results roadshows. Through
these sessions, led by the CEO, CFO,
andDirector of Investor Relations, we
continued to outline our strategy and
thelong-term options this could
Shareholders and investors
CASE STUDY
provide. The sessions also included
continued consideration of capital
allocation, explained current financial
and operational performance, and
provided the opportunity for Q&A
sessions with the CEO and CFO.
At the full-year results announcement
and roadshow, and reflecting investor
feedback, we provided medium-term
targets for our Flexible Generation,
Energy Solutions, and Pellet Production
businesses. We also further developed
the way we report on thebusiness units.
Governance
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In the UK, we engage with MPs,
Ministers, Shadow Ministers, Peers,
andadvisors, from across the political
spectrum. We do this within Parliament
and with MPs directly. We share
briefings, attend events, and respond
tocalls for evidence. We also engage
with these groups outside ofParliament,
including at events local to our sites,
inaddition to the annual Party Political
Conferences. We engage with relevant
teams at the UK regulator, Ofgem, and
the Department for Energy Security
andNet Zero to promote an appropriate
regulatory framework. Key topics of
engagement in 2024 included the
Government’s Review of Electricity
Market Arrangements (REMA) and the
proposed introduction of an investment
(Cap and Floor) mechanism for Long
Duration Storage.
In the EU, we continue strategic
engagement to build support for biomass
and BECCS. This includes advocating for
BECCS in the context of the EU Carbon
Removals and Carbon Farming
Certification (CRCF) Regulation and
related methodologies for the
certification of permanent carbon
removals. In 2024 we met the Cabinet
ofthe Commissioner for Climate, Net
Zero and Clean Growth todiscuss the
financing of carbon removals. Following
publication of two pieces of legislation
– the Renewable Energy Directive (REDIII)
and the EU Deforestation Regulation
(EUDR) – we remain engaged on these
as the EU works on implementation, to
ensure the rules are practical and
implementable and that trade into and
from the EU can continue. We are
members of, and engage with, various
Key issues
– Energy security
– Energy costs
– Tackling climate change
– System stability and flexible
generation
– BECCS delivery
Principal risks
– Climate change
– Biomass acceptability
– Political and regulatory
– Strategic
– Information systems and security
Engagement activities
As part of the UK Critical National
Infrastructure, it is vital that we seek
tounderstand the views of politicians,
political parties, policymakers, and other
stakeholders. It is also important we
contribute our experience and expertise
to the relevant areas of policy
development that shapes the regulatory
environment in which we operate. Such
collaboration can support informed
decision-making. We engage with
government bodies in the UK, EU, North
America, and Asia on topics including
energy security; decarbonisation; BECCS;
and the need for system stability and
flexible generation. Drax makes no
political donations, but it is important
that we engage with politicians, political
parties, policymakers, and other
stakeholders to understand their views
and explain our plans and strategy.
trade associations and others in
theforest sector concerning the
responsible sourcing of sustainable
biomass.
In Japan, we met with the Ministry
ofAgriculture, Forest and Fisheries
toshare our experience in enabling
coal-to-biomass conversion that could
help decarbonise the region while
supporting energy security. In Japan,
we focused our engagement onthe
sustainability criteria for woody
biomass that is currently under review.
We work with government officials
from the UK, Canada, and US to
discuss logistics, trade, sustainable
sourcing policies, and supply chains.
In the US and Canada, we engage with
policymakers at the federal, state,
provincial, and local levels to ensure
our sustainability and supply chains
arewell understood. We discuss how
power from biomass and BECCS can
contribute to grid stability, economic
development, and the realisation of
emissions targets to combat the
effects of climate change.
It is important for Drax to participate
inconversations on topics such as
carbon capture, clean technologies,
energy permitting, pipeline regulatory
reform, sustainable biomass and
BECCS as a pathway to enable policy
goals and netzero targets. At the state
level, we engage with state and local
policymakers on the opportunities we
can provide for job creation and
economic development, particularly
inrural communities, which reflect
thelocations of many of our sites.
Engaging
with experts
A valued part of our engagement
with scientists and forestry
expertsis our Independent
Advisory Board (IAB).
ofbiomass that underpins them. The IAB
provides independent scrutiny, challenge,
and advice. It makes recommendations on
how we can improve various initiatives
within our sustainability strategy, including
best practice on ensuring that biomass is
sourced sustainably.
In 2024, the IAB played an important role
in helping Drax develop the Evidence Hub
and our final response to the BECCS Done
Well report. The IAB also reviewed and
provided feedback on the Drax
Sustainability Framework during the
drafting process. In November 2024 the
IAB met the Drax Executive Committee
The IAB advises Drax on the science
andevidence surrounding our three
sustainability outcomes of Climate,
People, and Nature Positive, and in
particular the responsible sourcing
todiscuss the work programme and key
topics on which the IAB had advised.
Feedback from 2024 activities was
given on the development of research
questions to learn more about
biodiversity in the areas from which we
source. Feedback was also provided on
community engagement plans, activity
around our sites, our forest carbon
strategy, and ways to engage with the
research community. More details are
available in our half-yearly updates
published on our website.
You can read more about the IAB
onpage 35.
Government, political bodies, and regulators
CASE STUDY
Stakeholder engagement continued
Governance
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During 2024, Drax engaged with the UK
Government, the local community, and a
range of other stakeholders, as we saw
some important milestones being reached.
The UK Government has recognised that
new long-duration, large-scale electricity
storage (LDES) projects can play a pivotal
role in delivering a flexible energy system
Cruachan expansion
We are developing an option for
a600MW expansion of Cruachan
PowerStation.
to meet future needs and represent
value for consumers. A key focus of
engagement in 2024 was to progress
the new investment mechanism to help
enable investment in and promote new
LDES projects such as the expansion of
Cruachan Power Station, and in October
2024 the UK Government announced
anintention to develop a “cap and floor”
mechanism to help give operators the
confidence to progress with project
developments, after having consulted
on the mechanism earlier in the year.
We also engaged with the local
community and schools to discuss
thesocio-economic benefits of the
expansion.
During 2024, we welcomed around
35,000 visitors to our visitor centre,
where visitors can take guided tours
inside the subterranean world into the
heart of the power station to learn about
the history of the site and the critical
role it plays today in helping to keep the
lights on.
CASE STUDY
To improve our customer experience,
wehave enhanced our communication
channels, investing further in our digital
portal which now enables customers to
access granular information about their
energy usage and receive notifications
when they need to act. To support our
high-quality service provision, we have
also upgraded our telephony platform.
Our relationships with relevant suppliers
are governed by contracts that include
compliance with relevant regulatory and
legal requirements, anti-bribery and
corruption, modern slavery and supplier
code of conduct, to which suppliers are
expected to adhere. These are regularly
reviewed by our Procurement, Legal, and
Business Ethics functions. Drax is
committed to the fair payment and
treatment of its suppliers and is a
signatory to the Prompt Payment Code.
Engagement through our biomass supply
chain is a key focus for the Group. We
engage with suppliers to understand
where they source from, and our standard
biomass purchase agreements require
suppliers to mitigate for specified
risksidentified in their sourcing areas.
You can read more about our biomass
sourcing on page 22.
Key issues
– Energy costs
– Ethical business conduct
– Reducing environmental impact
– Long-term partnerships
Principal risks
– Climate change
– Safety, health and wellbeing, and
environment
– Biomass acceptability
– Plant Operations
Engagement activities
Recognising the speed at which the
energy markets are evolving, Drax
Energy Solutions has invested in its
market insight activities. It offers a range
of material to help inform customers
about relevant market developments,
with the primary platform being our
LinkedIn newsletter, with over 2,400
customers subscribed.
Customers and Suppliers
In 2024 Drax signed an agreement
with Kier, a major UK construction
and infrastructure provider, to install
and manage its Electric Vehicle
charging requirements. Part of this
agreement included access to the
Drax My Electric Vehicles portal, an
online platform that allows Kier to
manage charge points and generate
usage reports. Responding to a
request from Kier, we developed and
implemented Single Sign-On (SSO)
for the portal, streamlining access
and enhancing security. SSO was
delivered on time and is now fully
operational for Kier, aswell as for
other customers.
Governance
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Stakeholder engagement continued
our outreach to a range of stakeholders
in our operating communities. We also
built new relationships with non-profit
organisations through the Drax
Foundation and Community Fund.
In the US, a priority has been to address
environmental justice issues in
Mississippi (see case study). We are also
expanding engagement across our US
communities, with initial meetings held
inLouisiana and Alabama during 2024.
As we grow our carbon removals
operations in the US, our focus has been
on community engagement at potential
sites for new BECCS facilities. Our
community stakeholder engagement
plan will be scaled to the project risks,
impacts, and development stage, and
willbe tailored to the characteristics and
interests of the affected communities.
During 2024, across all US operating sites
around $535,000 was disbursed through
our Community Fund to grassroots
organizations and community projects.
In Canada, engagement with First
Nations continued. A new First Nations
Advisory Committee was established,
which provides recommendations on
four performance areas: employment,
business development, community
investment, and community
engagement. We also maintained
engagement with other local residents
and community leaders across our
Key issues
– That Drax is a responsible business
and good neighbour
– Tackling climate change
– Environmental justice
Principal risks
– Climate change
– Biomass acceptability
– Strategic
Engagement activities
Our community strategy combines
Community Action and Engagement
Plans for our operating countries, with
strategic giving through the Drax
Foundation and a designated Community
Fund. This strategy is managed by a global
community team, with local community
managers and overseen by the Executive
Committee. Through the Drax
Foundation, we provide grant funding for
non-profit organisations that improve
equitable access to science, technology,
engineering, and mathematics (STEM)
education, community green spaces,
andrenewable energy.
In 2024 we made progress embedding
the community strategy and expanding
operational footprint in Canada. Our
partnership with Science World has
delivered STEM sessions reaching over
11,000 children across 58 schools.
Wealso disbursed around CAD$200,000
to anumber of non-profit organisations
through our Community Fund.
In the UK, our Community and
Education team undertook STEM
educational outreach in local schools
around Drax Power Station and our
hydro assets in Scotland. During 2024,
we reached over 14,000 young learners
through educational programmes.
Westrengthened our partnership with
Glasgow Science Centre to underpin
ourcommitment to advancing STEM
education, particularly within
underserved communities. Through the
Community Fund, we supported 158
organisations across the UK with around
£170,000 donated during 2024.
During 2024, the Drax Foundation
continued to develop partnerships with
non-profit organisations in the UK, US,
and Canada. We work across STEM
education, skills development, nature,
community green spaces, energy
efficiency, and fuel poverty. In 2024 we
disbursed £2.9 million in grant funding.
For more information about the Drax
Foundation, Community Fund, and our
community investment, please see
page55.
Board engagement
in Mississippi
We seek to play an important
rolein the communities where
weoperate, and engaging with
and supporting them on key issues
isakey part of what we do.
During 2024, Non-Executive Director
Erika Peterman, and Chief Sustainability
Officer Miguel Veiga-Pestana, visited
the Drax pellet plant in Gloster,
Mississippi. During the visit, Erika and
Miguel met the Mayor and Alderman,
and spent time with our local
Community Liaison Officer and plant
workers. Our objective is to build
relationships and trust over time, and
akey part of the visit was listening to
residents, including those who live on
the perimeter of the Amite plant. They
shared their views on priority areas for
social investment in the town and other
practical measures that Drax could take
tohelp support the community, improve
two-way communications, and build trust.
Erika’s and Miguel’s visit was part of a
broader Community Engagement Plan
thatwe are implementing in Gloster. In
February 2024, we held a series of focus
group meetings with community leaders
and stakeholders to improve our
understanding of how the community
feels about Drax, and what measures can
be taken to deliver on our promise to be
agood neighbour. We incorporated the
feedback from these sessions into the
Community Engagement Plan. This
included more transparent communications
and regular engagement, plans to improve
access to jobs, education and training, and
ensuring that social investment in Gloster
is well-targeted and benefits the
community. ACommunity Advisory Panel
(CAP) was established in 2024, with
members including representatives of the
Gloster community who provide insight on
priority areas for social investment.
TheCAP also improves the two-way
flow of information. We established a
Community Fund for Gloster, which has
supported a range of local non-profit
organizations and community initiatives.
The CAP is feeding into the decision-
making process on how the funds will
bedisbursed. During 2024, the Gloster
Community Fund supported local
initiatives including the local school,
childcare centre, and field health
system. In addition, during 2024 we held
meetings and calls with those within the
community who live on the perimeter
ofthe Amite plant, to ensure we are
listening and responding to their
concerns.
In November 2024, CEO Will Gardiner,
Chief Operations Officer Lee Dawes,
and Executive Vice President ofPellet
Production Matt White also attended a
meeting of the CAP to learn more about
their work and how Drax can help.
CASE STUDY
Communities
Governance
Drax Group plc Annual report and accounts 2024
102
Contents
to measure performance and evaluate
progress. As part of this, it challenges
management on the means by which the
Group’s priorities and initiatives, including
those related to sustainability and
environmental practices, are being
realised. There is more information about
this on page 28.
The Board reviews the effectiveness
ofthe Group’s governance structure,
commenting on how it should be revised
to reflect the evolution of the business.
Reviews may cover business conduct;
regulatory compliance matters; ethics and
whistleblowing; the prosecution, defence
or settlement ofmaterial litigation; and
Directors’ Remuneration Policy. They may
also include the terms of reference of Board
Committees, and the Board structure,
composition and succession planning.
How the Board functions
Before the formal meetings of the Board,
the Chair and the Non-Executive Directors
meet in private. This allows for the
exchange of views, share any concerns
and discuss matters of priority. As part of
the formal process, the CEO reports on
key business and operational matters,
starting with safety, and the CFO reports
on financial aspects pertaining to the
Group. In addition, the Board receives
reports from senior management across
the Group, which include stakeholder
considerations. The Chair is responsible
forensuring adequate time is allocated
toeach agenda item, to support effective
discussion and challenge by Directors.
TheBoard also holds dinners before some
of the meetings to allow more informal
consideration of topics. From time to time
other members of the executive and
management, advisers or external
speakers may contribute to these sessions.
The Board receives updates on macro-
economic factors influencing the markets
in which the Group operates (such as
availability of capital and cost of debt) and
how these might impact the realisation
ofthe Group’s objectives. The Board also
assesses the best use of the Group’s
resources including its cash. During 2024,
the Board concluded that sufficient cash
was available for the Company to continue
to meet its financial obligations while also
undertaking a buyback of the Company’s
issued shares.
The Board receives industry, regulatory and
topical updates from internal specialists
aswell as external experts andadvisers.
In2024, the Board received reports on
theevolution of sustainability and
ESG-related reporting requirements,
global political tensions, andcyber
relatedrisks, and their potential impact
onthe Group.
Role of the Board
The Board sets the Group’s purpose,
strategy and business model for long-term
value creation, and the Group’s appetite
for risk and risk management policies. In
assessing and implementing our strategy,
the Board recognises the importance of
stakeholder views. The Board not only
undertakes its own engagement but also
periodically receives reports and assesses
the adequacy of engagement that
management undertakes. This includes
with shareholders, the workforce,
Government, NGOs and the communities
where the Group’s businesses operate.
Formore information see the stakeholder
engagement section on page 96.
The Board assesses and approves the
annual plan and its budget, challenging
management on the sufficiency of
resources to support delivery of the
strategy. The Board is responsible for
considering investment in large-scale
projects, such as renewable energy and
carbon removals projects, and the Group’s
capital structure and capital allocation
policy. The Board evaluates proposals for
acquisitions, disposals, and other
transactions outside ordinary delegated
limits. For more information, see the
Financial Review that starts on page 18.
Linked to the delivery of plans, the Board
sets the key performance indicators (KPIs)
Principles of the UK
Corporate Governance
Code
F
The role of the Chair
G
Board composition
H
Non-Executive Directors
I
The Company Secretary and Board
resources
The Board comprises the Chair of the Board, two Executive Directors and six
independent Non-Executive Directors, including one who is appointed as the Board’s
Senior Independent Director. The Chair and the Non-Executive Directors were all
considered independent on appointment and the Board is satisfied that appropriate
independence and objectivity has continued to apply.
The Chair leads the Board and is responsible for its overall effectiveness in directing
the Company, promoting a culture of openness and debate. There is a clear division
ofresponsibilities between the leadership of the Board and the executive leadership
ofthe Group’s business.
Non-Executive Directors routinely scrutinise performance against business objectives
(including financial and strategic in addition to other measures in the Group Scorecard).
They hold management to account while providing challenge and guidance in an open
and constructive environment.
Before regular Board meetings, the Chair and Non-Executive Directors meet without
the Executive Directors being present, giving them the opportunity to consider and
discuss matters in a separate forum. The Audit Committee, which the Board Chair
attends by invitation, also provides agenda time to discuss matters in the absence
ofmanagement. The Audit Committee members also routinely meet with the external
and internal auditors, in the absence of management.
The Board considers additional external appointments involving any Director, taking
into account the additional demands on their time. No Executive Director has a
non-executive position in a FTSE company.
All Directors have full access to the services of the Company Secretary, who works
closely with the Chair. This ensures the Board has the policies, processes, information,
time and resources it needs to function effectively and efficiently. The whole Board
approves the appointment or removal of the Company Secretary.
Division of responsibilities
Governance
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Position Role
Chair
Responsible for leading and managing the Board, its effectiveness, and governance.
Makes sure Board members are aware of, and understand, the views and objectives
ofmajor shareholders and other key stakeholders. Helps to set the tone from the top
in terms of the purpose, goal, vision and values for the whole organisation.
CEO
Responsible for the day-to-day management of the business, developing the Group’s
strategic direction for consideration and approval by the Board and implementing the
agreed strategy.
CFO
Supports the CEO in developing and implementing strategy. Responsible for the
financial management and performance of the Group.
Senior Independent
Non-Executive Director
Acts as a sounding board for the Chair and a trusted intermediary for other Directors.
Available to discuss any concerns with shareholders that cannot be resolved through
the normal channels of communication with the Chair or the Executive Directors.
Independent
Non-Executive Directors
Responsible for bringing sound judgement and objectivity to the Board’s deliberations
and decision-making process. Constructively challenge and support the Executive
Directors. Monitor the delivery of the strategy within the risk and control framework
set by the Board.
Corporate Governance Report continued
operandi of bad actors and the proactive
and reactive measures available for
implementation and how management
deployed them.
All Board Committees are authorised to
obtain legal or other professional advice
asnecessary to perform their duties.
Thisincludes securing the attendance of
external advisers at meetings and seeking
required information from any member
ofthe Group’s workforce.
The Company’s Articles of Association
(the Articles) give the Directors power
toauthorise conflicts of interest when
presented with such matters for their
review. The Board has an effective
procedure to identify potential conflicts
ofinterest, consider them for authorisation,
and record them. In 2024, no conflicts of
interest were identified. The Articles also
allow the Board to exercise voting rights
inGroup companies without restriction
(for example, to appoint a director to a
Group company). The Articles are available
on theGroup’s website at drax.com.
The Board also receives periodic updates
from the Ethics and Business Conduct
Committee (EBCC). The EBCC helps the
Board and Executive Committee to
monitor and assess ethical behaviour
andbusiness conduct across the Group,
including providing updates from the
Group’s Speak Up (whistleblowing)
programme. For more information, please
see page 53.
Time commitment
Directors’ commitments outside of Drax
are kept under review to make sure they
have sufficient time to dedicate to the
business and effectively perform their role.
Under the terms of the Chair’s letter of
appointment, the Chair is expected to
commit up to 100 full days a year to this
role. Under the Non-Executive Directors’
letters of appointment, each is expected
to commit approximately 15 full days a
year. That includes attendance at Board
meetings, the AGM, one annual Board
strategy event, and at least one site visit
each year.
In addition, Non-Executive Directors are
expected to devote appropriate
preparation time ahead of each meeting.
The time commitment expected as a
member of the Audit, Nomination and
Remuneration Committees is an additional
three to four full days a year in each case.
However, in practice, considerably more
time is devoted, particularly by the Chairs
of the Committees.
Executive Directors may, with the prior
approval of the Chair, take on one
additional role in an external listed
company. Neither one of the Executive
Directors has taken on such a role.
Non-Executive Directors may, with prior
approval from the Board, take on
additional roles provided the individual
cancontinue to devote sufficient time
tomeet the expectations of their role.
The core activities of the Board and its
Committees are planned on a forward
agenda that the Chairs of each Committee
consider and regularly review. The Group
Company Secretary maintains a list of
matters arising from each meeting and
reports on how these are being addressed
at subsequent meetings. The Group
Company Secretary also advises the Board
on governance matters, ensuring good
information flows within the Board, its
Committees, the Executive Committee
and senior management. The Group
Company Secretary assesses and advises
the Board on compliance with the Listing,
Prospectus, Disclosure Guidance and
Transparency Rules, the Corporate
Governance Code and the Companies Act.
An important part of this is effective
collaboration with other parties across
allGroup functions.
Good training, regular discussions on key
issues, and support in evaluating the
potential for change from those in areas of
critical operational risk are also important.
In 2024 the Trading and Optimisation team
delivered training to Directors that
included information on trading and risk
management strategies.
In January 2025, the Board considered
how management evaluates and responds
to cyber related risks. Supported by
internal and external experts, the Board
considered the evolving threats, including
profiles of cyber activists and the modus
Governance
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Board attendance 2024
The table below shows the number of meetings held and the Directors’ attendance during 2024.
Director Date appointed as a Director and member of the Board
No. of scheduled
meetings
(1)
No. of meetings
attended
% of meetings
attended
John Baxter 17 April 2019 8 8 100%
Andrea Bertone 24 August 2023 8 8 100%
Will Gardiner 16 November 2015 8 8 100%
Nicola Hodson 12 January 2018 8 8 100%
Kim Keating 21 October 2021 8 8 100%
David Nussbaum 1 August 2017 8 8 100%
Erika Peterman 21 October 2021 8 8 100%
Rob Shuter
(2)
11 June 2024 5 5 100%
Vanessa Simms
(3)
19 June 2018 3 3 100%
Andy Skelton 2 January 2019 8 8 100%
Notes:
(1) The number of scheduled meetings that each individual was invited to attend.
(2) Rob Shuter joined the Board on 11 June 2024.
(3) Vanessa Simms stepped down from the Board on 18 June 2024.
Board statistics (As at 31 December 2024)
Non-executive 67
Executive 22
Chair 11
0-2 28.5
3-4 28.5
5+ 43
Female 44
Male 56
Gender diversity (%)
Composition (%)
NED tenure in years (%)
programme. There are more details in
theNomination Committee report on
page109.
Throughout 2024, the Directors also had
access to the advice and services of the
Group Company Secretary. Directors may
take independent advice at the Company’s
expense, when they judge it necessary to
discharge their responsibilities effectively.
No such independent advice was sought
in 2024.
Non-Executive Director
independence
The Board has reviewed the independence
of each Non-Executive Director. None of
the Non-Executive Directors who served
during 2024 had any material business
orother relationship with the Group.
Inaddition, there were no other matters
likely to affect their independence of
character and judgement. The Board
recognises that, in view of the
characteristics of independence set out
inthe Code, length of service is an
important factor when considering the
independence of Non-Executive Directors.
Furthermore, Directors who have served
more than nine years may not be
considered independent. The Board
considers all the Non-Executive Directors
to be independent.
Diversity
The Board appreciates the value of
diversity including gender, social and ethnic
diversity, as well as cognitive ability and
personal strengths. The Board approves
the Board Diversity Policy which takes into
account the above factors as well as FCA
targets on gender and ethnic diversity.
Formore information, see the Nomination
Committee report on page 109.
Terms of reference
The Board has a schedule of Matters
Reserved for its decisions, and formal
terms of reference for its Committees
(which it reviews periodically). The terms
of reference of the Committees of the
Board are available to view on the Group’s
website at drax.com.
Matters not specifically reserved to the
Board, and its Committees under their
terms of reference, or to shareholders
inGeneral Meeting, are delegated.
Delegation is to the Executive Committee,
or otherwise in accordance with a
schedule of delegated authorities.
Themost recent review of the Matters
Reserved for the Board occurred in 2024
with approval of a new schedule at its
meeting in December 2024.
Non-Executive Directors are encouraged
to undertake visits to Drax operations and
spend time with management and the
workforce. This is designed to build and
then maintain their knowledge of the
developing business, and help them to
understand the operational challenges.
You can read more about this on page 98.
Directors’ development and
induction
To assist the Board in undertaking its
responsibilities, a programme of training
and development is available to all
Directors. Training needs are assessed as
part of the Board evaluation procedure.
Training includes presentations from
management, and informal meetings, that
help to develop an in depth understanding
of the business and sectors in which we
operate. Such training is intended to equip
the Non-Executive Directors with insight
into how the Drax approach compares
with the practices of its peers.
All new Directors receive a comprehensive
and tailored induction programme. It
includes meetings with key managers,
international site visits, briefings on key
operational matters and training with
external and internal providers on Board
procedures and governance matters.
Following his appointment in June 2024,
Rob Shuter undertook an induction
Governance
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Role of the Executive Committee
The Executive Committee focuses on the
delivery of the Group’s strategy, assessing
the adequacy of the Group’s financial
structure, operational and financial
performance, innovation, organisational
development, and management of
change.These activities are informed
byengagement with the workforce
andexternal stakeholders, including
Governments, regulatory agencies, and
NGOs. There are more details about such
engagement on page 96.
The Executive Committee develops and
considers policies and procedures that
provide an effective framework for
operating in line with required standards,
laws and regulations. These policies and
procedures include our Code of Conduct,
Supplier Code of Conduct and Diversity
and Inclusion Policy.
The Executive Committee considers
business performance against the annual
plan, and reviews progress in realising
longer-term objectives. It receives reports
on each of the business units, covering
financial and non-financial metrics.
Thelatter include matters affecting the
safetyand wellbeing of our workforce,
which isthe opening agenda item for
eachmeeting.
In 2024, the Executive Committee
completed an in-depth review of all nine
Principal Risks; each of which is the
responsibility of a member of the Executive
Committee. You can read more about our
principal risk processes on page 70.
The Executive Committee meets
informally most weeks, in addition to
holding eight monthly meetings. Where
relevant to agenda items, Committee
members receive briefing papers in
advance of meetings. To support specific
discussions, senior managers from within
the business units also attend.
The Committee meets with management
teams three times each year for deep dives
into operational and financial performance
matters. Typically, such meetings are held
over the course of two days and allow for
amore detailed review of key programmes
and initiatives, to assess delivery against
the Group’s strategy.
Biographies of the Executive Committee
members are available on the website
drax.com.
Ethics and Business Conduct Committee
Monitors ethical behaviour and practices
across the business.
Financial Risk Management Committee
Provides oversight and challenges the effective
management of all financial risks, including trading,
commodity, treasury and currency.
Corporate Governance Report continued
The focus of this committee is the Group’s strategy, financial structure, planning, operational and
financial performance, and governance framework. It also closely considers culture and diversity,
succession planning and organisational development below Board level.
Executive Committee
IT Board
Provides oversight and co-ordination of IT activities
and strategy, information systems and security risk.
Operating Review Committees (Pellet Production,
Generation, Core Services andCustomers)
These committees review the operational and
financial performance of the business units.
Group HSE Committee
Reviews and challenges the management of process
and people safety, health, environment and wellbeing risks.
Sustainability Council
Provides Group-wide oversight and co-ordination
of sustainability activities, governance, and reporting.
Governance
Drax Group plc Annual report and accounts 2024
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Role of the Committee
The Nomination Committee has responsibility for:
– Reviewing the Board’s structure, size and composition
(including requisite skills, diversity, knowledge and
experience) so that it is effective in delivering the Group’s
strategic priorities and promoting long-term success of
the Group
– Ensuring that a succession planning process is in place
for the Board and executive management, including the
identification of candidates based on merit and objective
criteria, and taking into account the need for diversity
with regards to gender, social and ethnic backgrounds,
cognitive and personal strengths
– Undertaking a search and selection process for new
Directors, taking advice from independent search
consultants as appropriate
– Monitoring and challenging initiatives and progress
in addressing diversity and inclusion
Nomination Committee activities
since the last report
– Search for a new Non-Executive Director and
Audit Committee Chair
– Recommendation for the renewal of appointments for
Kim Keating and Erika Peterman
– Considered a report on succession planning at executive
and senior management levels
– Provided input to the hiring of the new Chief Operating
Officer position
– Developed the skills matrix and reviewed over-boarding
Committee members
– Andrea Bertone (Chair)
– John Baxter
– Kim Keating
– David Nussbaum
Attending by invitation
CEO
Number of meetings held in 2024: Three
The Group Company Secretary is Secretary to the Committee.
Attendance in 2024
(1)
Committee member
Date appointed
a member
No. of
scheduled
meetings
No. of
meetings
attended
% of
meetings
attended
John Baxter 17 April 2019 3 3 100%
Andrea Bertone 24 August 2023 3 3 100%
Nicola Hodson
(2)
12 January 2018 2 2 100%
Kim Keating 21 October 2021 3 3 100%
David Nussbaum 1 August 2017 3 3 100%
Erika Peterman
(2)
21 October 2021 2 2 100%
Vanessa Simms
(3)
19 June 2018 2 2 100%
(1) The table shows the scheduled meetings of the Committee within the ordinary
annual cycle of the Committee’s activities.
(2) Nicola Hodson and Erika Peterman served on the Committee until 1July2024.
(3) Vanessa Simms stepped down from the Board and the Committee on
18June2024.
Terms of reference
The Committee’s terms of reference are reviewed
annually, most recently in February 2025. The terms
ofreference areavailable on the Group’s website at
www.drax.com/governance
Nomination Committee report
Our people are our biggest
asset and our focus remains
onretaining and recruiting
the best people to execute
ourstrategy.
Andrea Bertone
Chair
Drax Group plc Annual report and accounts 2024
107
Governance
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Nomination Committee report continued
Principles of the UK Corporate
Governance Code
J
Appointments to the Board
and succession planning
K
The skills, experience and knowledge
of the Board and Committees
L
Board evaluation
The Nomination Committee comprises the Chair of the Board (who also chairs the
Committee) and three independent Non-Executive Directors.
All appointments to the Board are subject to a formal, rigorous and transparent
process, and all new Directors undergo a thorough induction programme.
Each year the Nomination Committee reviews the Group’s succession plan, identifying
colleagues who have the potential to progress to more senior roles in one to five years.
Based on merit and objective criteria, the review focuses on various aspects such as
technical skills, experience, behaviours, attitudes and diversity. This ensures the
business has the right leaders in place to deliver our purpose and strategy. The most
recent review, conducted in December 2024, also assessed the capabilities required to
support progress in delivering the breadth of projects across key functions of the Group.
All directors seek re-election at (or following their initial appointment to the board,
election at) the Annual General Meeting.
An internal performance evaluation of the Board and its Committees was conducted
in2024. The most recent external review was in 2022.
Introduction
I am pleased to present the Nomination
Committee Report for the year ended
31December 2024.
I joined the Board in 2023 and assumed
the role of Chair of the Board and of the
Nomination Committee on 1 January 2024.
Through the people I meet at Drax,
Icontinue to see the passion and pride
that employees have in doing what is right
in supporting each other and the
communities inwhich we work to deliver
positive outcomes for nature, people and
the climate. As explained by Will on pages
12 to 17, Drax’s business combines
ambitious plans for growth with a need for
continued focus on realising our existing
obligations and business objectives. The
combination of operational excellence and
transformation requires people with
talent, personal commitment and
experience working with us. We are proud
of the contribution which all our people in
Drax make and, as we grow, we must both
retain our colleagues and also attract new
talent – people who will also make their
contribution to the future of Drax. The
work of the Nomination Committee forms
an important part of assessing how these
requirements are met.
A key activity for Nomination Committee
members in 2024 related to the retirement
of Vanessa Simms, Non-Executive
Director and Audit Committee Chair, after
six successful years at Drax. On behalf of
the Board, I wish to thank Vanessa for her
commitment in both positions which she
undertook with professionalism and
distinction. Following a comprehensive
selection process, we were pleased to
welcome Rob Shuter who joined us in
June 2024. More information about the
search process for Rob and his induction
can be found below.
During 2024 we reviewed the development
of talent within our senior leadership team
and were kept informed on the recruitment
processes for Executive Committee roles.
In February 2024, Laurie Fitzmaurice
joined as President of Global BECCS –
anewly created position to further our
strategic aim to become a global leader in
carbon removals. In September 2024, we
announced the creation of Elimini, our new
carbon removals business, of which Laurie
is now President.
In August 2024, Lee Dawes joined as the
Chief Operations Officer (COO). Lee
replaced Penny Small who stepped down
as interim COO in August 2024. The brief to
the search firm was for a diverse long- and
short-list. I was kept up to date with the
progress of the search due to its strategic
importance in the business and John Baxter,
Kim Keating, and I each met with Lee during
the search process. Since joining, Lee has
visited many of the Drax sites, meeting
with colleagues from across the Group.
Feedback from the workforce through the
My Voice Forums has been positive, and
they are excited to learn of his plans on
how the Group will execute its strategies
for generation and capital projects.
In December 2024 two of our valued senior
leaders announced their plans to leave
theCompany. Andy Skelton, our CFO,
informed the Company of his intention to
retire from the Board and leave the
Company following six successful years
with us. Andy will remain as CFO until a
successor is in place on the understanding
a recruitment process to identify Andy’s
successor has commenced. In December
our Chief HR Officer, Karen McKeever also
announced her decision to leave the
Company in 2025 after nearly five years
with the Company and she will remain
with us until a new appointee is identified.
We will provide more information on the
search process for both roles in the 2025
Committee Report.
During 2024 I undertook a review of the
membership of the Audit, Nomination, and
Remuneration Committees. A proposal
was discussed at the Board meeting in
June 2024, and the changes to the
memberships of these Committees took
effect from 1July 2024. You can find
details of the changes in the respective
Committee reports.
Skills and availability
The main focus of the Committee is
examining the skills, knowledge and
experience of Board Directors and
ensuring that the Company has the
appropriate leadership in place to deliver
its long-term strategy. During the year
theCommittee commenced a skills matrix
review which captures the skills across
ourBoard. The Committee is satisfied that
Directors have the right balance of skills,
experience and diversity across key areas
such as knowledge of the energy market,
government policy, diversity, sustainability,
digital, clean energy, M&A, large capital
projects, culture and safety. These skills
provide foran environment that
encourages thoughtful deliberations,
constructive, challenging and insightful
Board and Committee discussions.
Time Commitments
During 2024 the Committee also assessed
Directors’ external commitments. Whilst
active external experience is recognised
ashaving value for market context and
current best practice, the Committee
recognises thatDirectors should not
Composition, succession and evaluation
Drax Group plc Annual report and accounts 2024
108
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assume commitments which risk
impacting theirability to effectively
fulfiltheir role asa director at Drax. The
Committee isattentive to such matters
and is comfortable that Directors are
operating within the guidelines set by
theUK Corporate Governance Code,
generalindustry standards for
companyappointments as well as our
ownexpectations of the demands of
theirrole in supporting Drax.
Succession planning
The Nomination Committee has a
regularprogramme to ensure that orderly
succession planning is being considered
both for the Board and Committees and
also at senior leadership levels. This
includes the identification of candidates
based on merit and objective criteria,
andwhich takes into account the need
fordiversity with regards to gender, social
andethnic backgrounds, cognitive and
personal strengths.
The annual reviews include identifying
colleagues with the potential to progress
into more senior roles, across a timeframe
of one to five years and incorporates
factors such as technical skills, experience,
behaviours and attitudes.
In 2023, the business recognised the
needfor a COO and Penny Small, who
hadserved first as Group Transformation
Officer and then Group Generation
Director, agreed toaccept the role of
interim COO whilst a permanent COO
wasrecruited. Following a recruitment
process, Lee Dawes was appointed as
COO in August 2024. With the ongoing
capital investment programme and the
importance of managing the performance
of our assets, Lee’s role willbe pivotal to
deliver our strategy and enable greater
collaboration, co-ordination and efficiency.
In 2024, our first Strategic Workforce Plan
was drafted which identified the future
critical skills required to achieve our
strategy and provided a roadmap of
activity to 2027 to close the skills gap,
which is now underway.
Our management team identified the
broader organisational capability
requirements (the processes and systems
required alongside people and skills) and
presented these to the Board in October
2024 with next steps agreed to build out
combined, detailed plans.
Diversity and Inclusion
We recognise the importance of diversity
at Board and Committee level and
throughout the Drax Group. Diversity
ofbackground, skills, thought and
perspective, as well as gender and ethnic
diversity, are important to providing an
appropriate breadth of insights, debate
and challenge, ultimately contributing
tomore effective decision-making and
goodgovernance.
The Board and its Committees have a
Board Diversity Policy which is reviewed
and updated annually. The policy informs
the Directors in enabling a rounded Board
and Committee structure, comprised of
talented and dedicated directors with a
diverse mix of expertise, experience, skills
and backgrounds, that reflect the business
environments in which the Group operates.
The policy reflects the FCA Board diversity
targets as well as the recommendations
bythe FTSE Women Leaders Review
andthe Parker Review. More information
onthe skills and backgrounds of the
Company’s Directors that contribute to
theformulation of the Group’s strategy
can befound on pages 93 to 95.
How the Board meets the FCA’s Board
diversity targets is set out below. In
collecting the data to measure progress
against the three targets, Board Directors
were asked to self-report against ethnicity
categories as defined by the Office for
National Statistics.
1. At least 40% of the Board should
bewomen.
Met: As at 31 December 2024, 44%
ofthe Board were women.
2. At least one of the senior board
positions (Chair, Chief Executive
Officer (CEO), Chief Financial Officer
(CFO) or Senior Independent Director
(SID) should be a woman.
Met with effect from 1 January 2024
when Andrea Bertone became Chair.
3. At least one member of the Board
should be from an ethnic minority
background excluding white ethnic
groups (as set out in categories used
by the Office for National Statistics).
Met: The Board has one Director from
an ethnic minority background.
The search for a new Audit Chair
Prior to conclusion of her second
three-year term, Vanessa Simms
indicated she was considering standing
down and we initiated a search for a
replacement. The search process was led
by me with the assistance of search firm
Lygon. Lygon have successfully assisted
us with previous leadership level searches
and were chosen for their global network
and stated advocacy for diversity, in all its
forms, and are accredited by the FTSE
Women Leaders Review for promoting
diversity in the makeup of boards. The
role criteria was drafted with
consideration of the Board’s current mix
of skills and experience. The criteria also
highlighted our values and strategy and
set out the time commitment expected
from Directors.
Possible candidates were identified and
met with executive management.
Following a series of discussions, a final
determination was reached. Rob Shuter
was subsequently offered the role and
appointed to the Board on 11 June 2024.
Rob brings a wealth of complex financial,
regulatory, and strategic experience
gained from over 30 years’ in the
telecommunications and financial
services sectors. He has operated as
botha Group CEO and Group CFO in
listed company environments and his
experience in capital allocation, risk,
finance, and M&A is invaluable in his role
as Chair of the Audit Committee.
Rob’s induction was tailored to his specific
needs by the Group Company Secretary,
working with me. A detailed information
pack was provided to Rob containing
relevant company information. As part
ofhis induction, Rob spent time with both
Will Gardiner, CEO, and Andy Skelton,
CFO. Rob also met with external advisors
Slaughter & May and the Group General
Counsel to discuss the legal environment
in which Drax operates and recent legal
matters; outgoing auditors (Deloitte) and
incoming auditors (PwC), to discuss the
audit, the auditor’s views on the Group’s
financial reporting and related controls
and processes; theCompany’s brokers,
RBC and JP Morgan, to discuss
performance, stakeholders, and strategy;
and with senior managers from
compliance, finance, tax, and investor
relations.
Andrea Bertone
Chair
Drax Group plc Annual report and accounts 2024
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Nomination Committee report continued
In accordance with Parker Review
guidance, during 2024 we set a target
of5% of senior management positions
globally to be occupied by ethnic minority
executives by 2027.
Board and Committee evaluation
The Board conducts an annual
performance evaluation, ensures there
areongoing Board development activities,
and provides a comprehensive induction
for new Board members.
The most recent externally facilitated
evaluation of the Board and its
Committees was conducted by Board
Alchemy in 2022 and those for each of
2023 and 2024 were internal evaluations.
The next externally facilitated evaluation
will take place in 2025. The most recent
review was supported by a questionnaire
with sections including culture and values,
enabling Board decisions, sustainability,
governance, advisors, Board skills and
engagement with stakeholders.
Feedback on the performance of the
Chairwas requested and each of the
Committees were included for comment
by Committee members and the wider
Directors.
The Board concluded that it continues to
operate effectively, with strong leadership
from the Chair and the respective
Committee chairs, open and transparent
discussions, and an effective relationship
between the Board and management.
Examples of areas with recommendations
for improvement included enhancing the
succession planning process, the
development of a pipeline of leaders from
under-represented groups globally,
andfurther focus and training on cyber
security.
Following the Board meeting theChair
discussed feedback with Directors and
their performance. The Senior
Independent Director also met with
directors individually to discuss the
performance ofthe Chair.
Sex/gender representation on the Board and Executive Management
Number of Board
members
Percentage
of the Board
Number of senior
positions on the Board
(CEO, CFO, SID
andChair)
Number in
executive
management
Percentage
of executive
management
Men 5 56% 3 6 67%
Women 4 44% 1 3 33%
Other categories 0 0% 0 0 0%
Not specified/prefer not to say 0 0% 0 0 0%
Ethnicity representation on the Board and Executive Management
Number of
Boardmembers
Percentage
of the Board
Number of senior
positions on the Board
(CEO, CFO, SID
andChair)
Number in
executive
management
Percentage
of executive
management
White British or other White (including
minority white groups) 7 78% 3 9 100%
Mixed/Multiple Ethnic Groups 0 0% 0 0 0%
Asian/Asian British 0 0% 0 0 0%
Black/African/Caribbean/Black British 1 11% 0 0 0%
Other ethnic group 0 0% 0 0 0%
Not specified/prefer not to say 1 11% 1 0 0%
Diversity
We explain our work promoting diversity on page 52. The table below shows the gender and ethnicity representation on the Board,
and in the wider workforce, as at 31December 2024.
Gender diversity of the Board and wider workforce
Gender
Male Female Tot al
No. % No. % No. %
Board members 5 56 4 44 9 100
Senior managers
(1)
45 64 25 36 70 100
All employees
(2)
2,273 72 900 28 3,17 3 100
Total 2,321
(3)
71 929 29 3,250 100
(1) Direct reports of the Board (i.e. Executive Committee), their reports (not including PA’s and equivalent) and subsidiary entity directors.
(2) Excluding Board members and senior managers.
(3) Two Executive Directors are also members of the Executive Committee (“Senior Management”). They are included in both sets of figures to ensure the correct diversity
isreflected, but have been removed from the total to ensure the correct headcount is reflected.
Drax Group plc Annual report and accounts 2024
110
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A summary of the key recommendations from the 2023 Board and Committee evaluations, and how we acted upon them during 2024,
is provided below:
2023 internal recommendation Action taken during 2024
1. Additional information and/or training on Task Force on
Climate-related Financial Disclosures was requested,
including clarification on how the reporting impacts
Drax.
A detailed update on TCFD was provided to the Board in
July 2024. A review of wider ESG matters was also provided
to the Board in June 2024.
2. Board training on matters relating to BECCS was
requested.
In March 2024, the Board visited Drax Power Station and
received an update on the BECCS project, and at the
September Board meeting, the Board received a detailed
update on the Bridging Mechanism and Trading and
Optimisation.
3. Following the highlighted requests for improvements
and a better understanding of stakeholder views on
sustainability matters, increased systematic reporting on
stakeholder interactions/feedback was requested.
The business has increased the number of formal Board
presentations on the subject from once a year to twice a
year. The CEO report at each Board meeting also includes
updates on relevant stakeholder matters.
4. Review the services of the Remuneration Committee
adviser.
In 2024 the Remuneration Committee conducted a review
of the Committee’s adviser, resulting in the appointment
ofDeloitte LLP as new advisers.
Non-Executive Director
re-appointment
Under the Board’s policy, Non-Executive
Directors are appointed for an initial term
of three years, which can be renewed by
mutual agreement. The Board must be
satisfied with the Director’s performance
and commitment, in order to recommend
that each Director be put forward for
re-election at each annual general
meeting. The Board will not normally
extend the aggregate period of service of
any independent Non-Executive Director
beyond nine years. Also, the Board will
review any proposal to extend a Non-
Executive Director’s aggregate period
ofoffice beyond six years.
In 2024, the Board considered the
re-appointment of Kim Keating and Erika
Peterman, each for a second term of three
years. The Board considered their skills
and contribution, together with the
feedback from the evaluations of the
Board and Committees. On the
recommendation of the Committee, the
Board approved the re-appointment of
KimKeating and Erika Peterman. The
biographies and areas of experience of Kim
and Erika can be found on page 95. Both
Kim and Erika will stand for re-election at
the next Annual General Meeting.
Renewal and re-election
Any newly appointed Director may hold
office until the first AGM following their
appointment. At that meeting, they must
submit themselves for election by
shareholders.
In accordance with the Company’s Articles
of Association, and in line with the
recommendations of the Code, each of
theDirectors will retire annually and offer
themselves for re-election by shareholders
at the AGM. The evaluation and review of
the Board and its Committees, described
above, concluded that each Director
continues to demonstrate commitment,
management and business expertise in
their particular role. They continue to
perform effectively.
Accordingly, Andrea Bertone, John Baxter,
Will Gardiner, Nicola Hodson, Kim Keating,
David Nussbaum, Erika Peterman, and
Andy Skelton will all retire at the
forthcoming AGM. Being eligible, they
willoffer themselves for re-election. Rob
Shuter, having joined the Board since the
last AGM, will be seeking election by
shareholders at the forthcoming AGM.
The Executive Directors’ service contracts
and Non-Executive Directors’ letters of
appointment are available for inspection
(by prior arrangement) during normal
business hours at the Company’s
registered office. They will also be available
for inspection at the venue of the AGM,
before that meeting takes place. Details
are contained in the Notice of Meeting.
During the year, I met regularly with the
Non-Executive Directors in the absence
ofthe Executive Directors. Separately,
theSenior Independent Director held a
meeting with the Non-Executive Directors
without me being present, as required by
Provision 12 of the UK Corporate
Governance Code.
This report was reviewed and approved
bythe Nomination Committee.
Andrea Bertone
Chair of the Nomination Committee
26 February 2025
Drax Group plc Annual report and accounts 2024
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Role of the Committee
The role of the Committee is to assist the Board in fulfilling
itsoversight responsibilities in respect of financial reporting,
internal control, and risk. This includes undertaking
thefollowing:
– Monitoring the integrity of the Consolidated financial
statements and other information provided to shareholders
– Reviewing significant financial reporting matters and
judgements contained in the Consolidated financial
statements, including application of accounting policies,
andinviting challenge from the external auditor on the
approach taken
– Advising the Board on whether the Committee believes
theAnnual report and accounts and other periodic financial
reporting are fair, balanced and understandable
– Reviewing the systems of risk management and internal
control, including consideration of emerging risks
– Supporting the Board in establishing a culture of honesty
andethical behaviour, including oversight of whistleblowing
and Speak Up procedures, fraud, risk, and controls
– Assessing the requirement for, and reviewing the outputs
from, independent external assurance and verification
– Maintaining an appropriate relationship with the Group’s
external auditor and reviewing the effectiveness and
objectivity of the external audit process
– Maintaining and monitoring the non-audit services policy
toensure the external auditor’s ongoing independence
andobjectivity
– Making recommendations to the Board (to put to
shareholders for approval) regarding the appointment
oftheexternal auditor
– Monitoring and reviewing the effectiveness of the internal
audit function
Committee members
– Rob Shuter (Chair)
– John Baxter
– Nicola Hodson
– David Nussbaum
– Erika Peterman
The Board is satisfied that the Committee’s membership has the
appropriate level of independence, skills, and recent and relevant
financial experience. Rob Shuter is a chartered accountant (South
Africa) and has been a CFO in listed company environments.
Hisexperience in capital allocation, risk, finance, and M&A is
highly complementary to the activities of the Group and in the
performance of his role as Chair of the Audit Committee. David
Nussbaum is a chartered accountant who has served in several
senior financial roles. Details of the skills and experience of the
Committee members can be found on pages 93 to 95.
Attending by invitation
Chair of the Board, CEO, CFO, Group Financial Controller, internal
auditor (KPMG), external auditor (PwC), Group General Counsel,
and others as required. The Group Company Secretary is
Secretary to the Committee.
Number of meetings held in 2024: Four
In addition to the meetings mentioned in the table below,
Vanessa and Rob each attended several planning meetings with
management in advance to discuss key agenda items, plan for
papers and ensure that expectations were satisfactorily reflected
in the matters discussed and explained. During the year Rob met
with the external and internal auditors to discuss planning for
future work, responses to recommended actions from previous
reports, and other specific items as required.
Attendance in 2024
Committee member
Date appointed
a member
No. of
scheduled
meetings
No. of
meetings
attended
% of
meetings
attended
John Baxter
(1)
1 July 2024 2 2 100%
Nicola Hodson 12 January 2018 4 3 75%
David Nussbaum 1 August 2017 4 4 100%
Erika Peterman 21 October 2021 4 4 100%
Rob Shuter
(2)
11 June 2024 2 2 100%
Vanessa Simms
(3)
19 June 2018 2 2 100%
Audit Committee report
The Committee continues to
provide critical oversight and
challenge over the efficacy
ofgovernance and how
thatsupports the delivery
ofthe strategy.
Rob Shuter
Chair
(1) John Baxter joined the Committee on 1 July 2024.
(2) Rob Shuter was appointed to the Board and Committee on 11 June 2024.
(3) Vanessa Simms stepped down from the Board on 18 June 2024.
Drax Group plc Annual report and accounts 2024
112
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Introduction
Dear shareholders,
On behalf of the Audit Committee, I am
pleased to present our report for the 2024
financial year, and my first report as
Chairof the Committee, following my
appointment in June 2024, coinciding
withVanessa Simms standing down on
the conclusion of her second term of three
years. I want to start by thanking Vanessa
for her work over the past five years as
Chair of the Committee, which saw
significant change at Drax and increasing
complexity in its operations. Vanessa
provided strong leadership, bringing
tobear not only her knowledge and
experience but challenge and guidance
that contributed to strong controls,
governance and reporting.
This report reflects on the work of the
Committee during 2024 to continue to
provide critical oversight and challenge
over the efficacy of governance and how
that supports the delivery of the strategy.
It outlines the primary areas of focus,
consistent with fulfilling the Committee’s
obligations, and should be read in
conjunction with the section on our
compliance with the UK Corporate
Governance Code on pages 88 to 106,
Principal Risks and Uncertainties on pages
70 to 83, and our Viability Statement
onpages 84 to 85, in addition to the
Financial Statements.
The Committee regularly reviews and
considers the effectiveness of the Group’s
internal controls, which includes cyber
riskassessment and mitigation activities.
Throughout 2024, the Committee
monitored risks and their potential impact
on the Group’s strategy and viability,
suchas political uncertainty, biomass
acceptability, challenges in the global
pellet supply market, and support for
BECCS. This included the assessment of
emerging risks, particularly as the Group
expands operationally and geographically,
including our plans for growth in the US,
supported by both our established
sustainable pellets business and Elimini,
our new US-based business with its
ambition to be a leader in carbon removals.
The Committee continued to evaluate
theappropriateness of controls and
mitigation activities in responding to these
challenges. You can read more about this
throughout this report and in the sections
on Principal Risks and Uncertainties and
the Viability Statement.
There was a continued focus on
compliance in 2024. The Committee
assessed the robustness of the Group’s
compliance control environment, and
reviewed progress on the programme of
work to design and implement an updated
Group-wide compliance framework.
During 2024, the Committee reviewed
progress on management’s actions,
including: the processes being followed;
the audit trail being maintained; data
collection and reporting; risk assessments;
the internal scrutiny being applied to
external reporting before it is issued; and
the action plan for next steps to be taken
in 2025.
The Group continues to strengthen its
overall risk management and internal
controls around regulation and
compliance. The Committee received
regular updates on the assurance
processes and controls associated with a
sustainable business model incorporating
financial, operational, and regulatory
considerations. The Committee noted
theclosure of Ofgem’s investigation into
the Group’s profiling data – see the CEO
Report on page 17 for more information.
Drax was supported by KPMG in
responding to Ofgem’s investigation,
andOfgem were provided copies of
KPMG’s reports. Ofgem’s investigation did
not find any evidence to suggest that Drax
has been issued with ROCs incorrectly.
Ofgem identified process gaps in relation
to two aspects of its profiling data for
Canada for the period April 2021 to March
2022. The Committee is monitoring
progress against Drax’s commitment to
continued development and improvement
of its activities and overall reporting.
Principles of the
UKCorporate
Governance Code
M
The effectiveness of internal
and external audit functions
N
Fair, balanced and
understandable assessment
O
Risk management and
internal control
The Audit Committee comprises five independent Non-Executive Directors. The Committee
Chair was considered independent on appointment in that role, and has recent and relevant
financial experience.
The Audit Committee provides oversight and challenge of the Group’s financial statements
toensure they provide a fair, balanced and understandable assessment of the Group’s financial
position andperformance.
The Board sets the appetite for the nature and extent of the Principal Risks the Group is willing
to take to achieve its long-term strategic objectives, and the Audit Committee oversees the risk
management and internal control framework and processes to ensure they are effective. Details
of the approach to risk management, the process controls and principal risks, together with
mitigation strategies, appear on pages 70 to 83.
Audit, risk and internal control
Drax Group plc Annual report and accounts 2024
113
Governance
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The Committee also considered updates
on thesustainability audit programme,
anongoing, multi-year project to enhance
sustainability-related data governance
andreporting.
As part of the continued focus on the
importance ofcompliance within our
business, compliance-related KPIs were
adopted into the Group Scorecard in 2024.
In common with many other businesses,
Drax faces evolving cyber security threats.
During discussions with management, the
Committee and Board provided challenge
on the risk assessment, adequacy of
prevailing systems, investment, and
internal controls, as well as making clear
their support for implementing
enhancements where deemed necessary.
Following the disclosure in 2024 that as at
31 December 2023 Drax Power Station
had not fully achieved the required
minimum standards as defined in the
Network and Information Systems (NIS)
Regulations (Basic Profile), in April 2024
Drax achieved the required minimum
standards. During 2024, management
developed a further programme in order
tomeet the NIS Enhanced Profile by 2027.
The design of this programme had been
subject to an Operational Technology
internal audit as discussed further below.
The Committee provides oversight of
progress and challenge on this
importantproject.
The Committee also considered the
refinancing of the Group’s debt, which was
undertaken in 2024, and the associated
accounting and disclosure impacts. More
information can be found on page 217.
In preparation for changes under the
Corporate Governance Code, for financial
years starting 1 January 2026, and the
requirement for Boards to make a
declaration as to the effectiveness of
material internal controls, the Committee
received regular updates from both
management and the internal auditor on
the latest developments in this area and
discussed management’s progress in
responding to the changes. We continue
to expect the Group will be able to report
according to the new requirements, which
will be applicable for the first time for the
2026 financial year.
The Committee seeks to ensure
transparent, robust, and accurate external
reporting that covers financial and
operational performance, future
prospects, and the wider business controls
required for the day-to-day conduct of
thebusiness. The Committee assesses
whether stakeholders can gain a fair and
balanced understanding of how the Group
is performing, its underlying resilience,
andthe effectiveness of the governance
and controls applied. Through these
assessments, as well as receiving reports
from external experts, the Committee
alsoconsiders how the Group’s reporting
meets expected standards.
We were pleased toadvise the Board that
the Committee believed the 2024 Annual
report and accounts were fair, balanced,
and understandable, and that the
Directors have provided the necessary
information for our shareholders to assess
the Company’s and the Group’s position,
prospects, business model, and strategy.
The review process isdescribed in further
detail on page 122.
During 2024, the Committee considered
the sale of the small and medium-sized
enterprise (SME) customer meter points
from Opus Energy to EDF Energy. The
Committee assessed the appropriate
accounting treatment, including
management’s assessment of the
impairment on disposal, and the
explanation of the transaction. You can
find more information in note 2.7 to
theConsolidated financial statements.
At the 2024 AGM, shareholders
approvedthe appointment of
PricewaterhouseCoopers LLP (PwC)
asthe Group’s external auditor for the
financial year ended 31 December 2024.
During 2024, the Committee and
management oversaw the transition from
Deloitte LLP (our former auditor) to PwC.
During the year, Vanessa Simms, Andy
Skelton and I met with lead partners from
both firms to ensure that there was a
smooth handover. We would like to thank
Deloitte for the service given to the Group
over many years. We are satisfied with the
way the change has been managed as well
as the level of engagement by PwC
through the handover, and into the
commencement of their work.
As Chair of the Committee, I report to the
Board on the Committee’s activities and
considerations following each meeting.
Ihold regular meetings with the CFO,
external auditor, and internal auditor,
separate from the formal meetings of
theCommittee. I also attend planning
meetings with those preparing for
forthcoming Committee meetings, to
discuss relevant papers and key matters.
Committee members have access to
theservices of the CFO and the Group
Company Secretary, and the resources
oftheir teams, as well as access to
external professional advice as necessary.
I am pleased to confirm that the
Committee has reviewed the FRC’s Audit
Committees and the External Audit:
Minimum Standard during the financial
year, and believes that there are no areas
of non-compliance in respect of 2024.
The Committee allows time at each
meeting for members to discuss salient
matters in the absence of management or
advisers. In addition, theCommittee meets
both the external auditor and the internal
auditor without management present.
The Committee’s understanding with both
the external and internal auditor is that, if
they should at any time become aware of
any matter giving them material concern,
they are able to promptly draw it to the
Committee’s attention via the Chair of the
Committee. No such issues were raised
during 2024.
I would like to thank the members of the
Committee, the management team, PwC,
and KPMG for their continued support and
commitment throughout the year. I value
the open discussions that take place at
ourmeetings and the contribution they all
provide in support of the Committee’s work.
This report was reviewed and approved
bythe Audit Committee.
Rob Shuter
Chair of the Audit Committee
26 February 2025
Audit Committee report continued
Drax Group plc Annual report and accounts 2024
114
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February April July December
Item under review
– The 2023 year-end review of
key financial and reporting
matters
– An update on going concern
and viability
– Final report from Deloitte on
its 2023 audit findings
– The 2023 Annual report and
accounts and preliminary
results announcement
– The verification process
undertaken to support the
2023 Annual report and
accounts
– An update on the
effectiveness of risk
management and internal
controls
– An update on the compliance
assurance plan
– Year-end principal risk review,
including ongoing risks and
mitigations
– An update on whistleblowing
– Summary of internal audit
reviews for the period and
outstanding actions, and
thefinal internal audit plan
for 2024
– Management update on
key financial and reporting
matters
– Deloitte’s management
letter for the 2023 audit,
and management
responses
– An update on the
effectiveness of risk
management and internal
controls
– An update on the HSE
internal audit
– An update on the Group
assurance map
– An update on the
compliance action plan
– An update on risk
management and internal
controls around health,
safety and environment
– An update on
whistleblowing
– Summary of internal audit
reviews for the period and
outstanding actions
– A review of the
effectiveness of the 2023
external audit process
– Senior Accounting Officer
reporting to HMRC
– An update on the Group
tax strategy
– The 2024 interim review of
key financial and reporting
matters
– PwC presented the 2024
audit plan
– PwC’s report on its half-year
review
– The 2024 Half-Year Report
announcement
– An update on the
effectiveness of risk
management and internal
controls
– An update from the Ethics
and Business Conduct
Committee
– An update on the risk
management and internal
controls around regulation
and compliance, including
sustainability
– An update on cyber security,
including scenario testing
– An update on internal
controls around sustainability
data, plus external review
– An update on whistleblowing
– Summary of internal audit
reviews for the period and
outstanding actions
– Management update on key
financial and reporting matters
affecting 2024
– Plan and timetable for the 2024
Annual report and accounts
– Year-end planning report from
PwC
– Summary of internal audit
reviews for the period,
outstanding actions, and
theproposed plan for 2025
– An update on the effectiveness
of risk management and
internal controls during the
period
– An update on the compliance
action plan
– An update on the HSE
assurance programme
– An update on the Group
assurance map
– A review of the Group’s
Principal Risks
– An update on sustainability
reporting and assurance for
the2024 Annual report and
accounts
– A deep-dive review of
regulatory reporting and
controls, including
sustainability
– An update on whistleblowing
– The effectiveness of the
internal audit process
– The Audit Committee’s terms
of reference and Auditor
Independence Policy
– Audit Committee and external
audit minimum standard
assessment was also presented
Review of Committee effectiveness
In line with the FRC’s Guidance on
Committees, the effectiveness of the
Audit Committee is considered annually.
For 2024, this took the form of an internal
review (see page 110 for further details).
The review concluded that the Audit
Committee continued to function
effectively.
Meetings are well chaired; there is good
engagement between Committee
members; and there are positive
relationships with management and both
the external auditor and the internal
auditor. High-quality papers are produced
to support the meetings and Committee
members have fed back positively on the
information they receive. An externally-led
review is scheduled for2025.
Committee activities in 2024
The Committee follows a programme of
work designed to ensure that sound risk
management processes, a robust system
of internal control, and fair and balanced
external reporting are all in place. In
addition, where relevant to activities inthe
Group or to reflect changes in applicable
regulations or external conditions, agenda
items are incorporated to ensure members
of the Committee have the opportunity to
consider and contribute to an analysis of
material issues. The main areas of work
undertaken by the Committee during 2024
at its routinely scheduled meetings are set
out in the table below.
As part of his induction, Rob Shuter
reviewed the schedule of activities
andcertain changes were made to the
schedule to reflect his feedback. The
schedule is included within the regular
Committee meeting papers to assess
thetiming of topics being considered.
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Reviewing the effectiveness of
thesystem of risk management
andinternal controls
The Committee received updates on the
Group’s risk management and internal
control environment and reviewed the
findings of internal audit reports at each
ofits four meetings during 2024. There
was continued focus on compliance,
Health, Safety and Environment (HSE),
and on both political and geopolitical risks,
reflecting a combination of elections –
notably in the UK and US – in addition
tocontinued instability in certain regions,
including the Middle East and Ukraine.
Given the industry in which the business
operates, the Group is subject to a large
number of regulations, which are complex,
broad ranging in nature, and the subject
ofintensifying scrutiny. Management has
responded to these matters.
At all four meetings during 2024, the
Committee considered the robustness
ofthe Group’s compliance control
environment and reviewed progress on
the programme of work to design and
implement an updated Group-wide
Compliance Framework.
This has included a detailed mapping
exercise of theGroup’s compliance
obligations. Work will continue into
2025to fully embed the framework and
systemise this as far as possible. The
Committee agreed that this will help to
bring consistency to the processes and
controls we employ, whilst also enabling
these to be adapted to reflect changes
incompliance and control requirements.
In both July and December 2024, the
Committee considered the political risks
facing the Group – having noted in the
2023 Annual report and accounts that
thiswas heightened due to UK and US
elections in 2024. The Committee
discussed how these may have a bearing
on differing aspects of the Group’s
business and challenged management on
their plans to address the resulting risks
such as potential political uncertainty and
the evolving focus on the climate change
agenda. It was agreed that appropriate
controls are in place to monitor and report
on these risks.
At its December 2024 meeting, the
Committee recognised that wider
geopolitical uncertainty remained a matter
of concern, with the conflicts in Ukraine
and the Middle East impacting people,
international relations and trade. Potential
impacts for the Group included market
volatility, supply chain disruption, and
pricing pressures. At the date of
concluding this report, the Committee was
satisfied that management had suitably
considered the respective risks to the
Group, and that appropriate controls are in
place to monitor and report on these risks
internally. It was also assessed that the
risks were being appropriately reported
onwithin the Annual report and accounts.
For more information Principal Risks and
Uncertainties on page 70.
At the July 2024 Committee meeting,
consideration was given to the potential
impact of the sale of a significant
proportion of the Group’s small and
medium-sized enterprise customer meter
points to EDF Energy, noting that the
transaction was expected to give rise
toasignificant reduction in headcount
following a redundancy consultation
process. Management undertook a review
of impacted controls to ensure they
continued to be operated effectively,
andalso considered whether an inherent
increase in fraud risk required further
strengthening of controls, for example
around system access and datafiltration.
The Committee also dedicated time in
2024 to reviewing the trading and
commodity risks facing the business, and
analysed the key commodity movements
that could have an impact on the Group’s
operational cash flows. The implications
offluctuations in these commodities were
considered both before and after the
impact of the Group’s current forward
hedges, to assess the likely efficacy of the
mitigations in place. The Committee was
satisfied that the Group’s approach to
managing its exposures, as outlined in
theassociated policies and procedures
and based on the modelling and analysis
provided by management was an
appropriate response to the identified
risks, in line with the Group’s Board-
defined risk appetite. This analysis also
formed part ofthe broader viability
assessment, discussed inmore detail
onpage 84.
The Committee also works with the
Group’s internal auditor to assess the
overall system of risk management and
internal control.
The annual internal audit plan is designed
taking account of challenge and feedback
from the Committee and wider
management, and focuses on key areas
ofrisk for the Group. The appointment of
an outsourced internal auditor provides
the Committee with an additional external
perspective onwhether the key controls
designed to mitigate these risks remain
effective. Where appropriate, the internal
auditor provides recommendations to
improve the systems of risk management
and internal control. Further detail on the
role of the internal auditor is provided on
page 124.
In February 2024, the Committee approved
a proposal for the Group’s internal auditor
to perform a one-off implementation
review of the Group HSE management
system issued in 2023. This recognised
theimportance of not only maintaining
arobust set of central Group policies, but
also ensuring that they are effectively
embedded within each business unit’s
operating procedures. Thefindings arising
from this review were evaluated by the
Committee in December 2024, noting that
central Group HSE documentation was
found to be up to date and comprehensive,
but thatbetter accountability, training and
monitoring ofwider implementation were
required. Gaps were identified inthe extent
to which Group HSE requirements were
documented within business unit
procedures.
Management presented a programme of
work to address these findings as a matter
of priority to the Committee in December
2024. An update was provided by
management to the Committee in
February 2025 confirming that
remediation activity had been undertaken
for medium and high priority findings. The
Committee noted theprogress made to
manage the underlying risk, and the timely
manner inwhich it had been undertaken,
and requested further updates associated
with embedding the changes.
The Committee requested the Group’s
internal auditor undertake an Operational
Technology review as part of its 2024
internal audit plan. This review considered
the business’s approach to meeting the
Network and Information Systems
Enhanced Profile by 2027 which is
mandatory for operators of essential
services such as Drax.
Alongside the expert support provided by
the Group’s internal auditor, management
is required to perform a regular self-
assessment and review of risk
management and internal control activities
covering the Group’s Principal Risks.
Control owners provide an assessment on
the operation of key controls at least twice
annually, and report on any gaps or control
failures identified. These responses are
then reviewed by the second line Group
Risk team, and the assessments of control
operation and effectiveness are
periodically challenged and validated to
supporting evidence. The outputs from
the assessment are reported to the
Committee at each meeting. At the
meeting held in December 2024, this
included communication of the fact that
incomplete or inaccurate supplier data
was in some instances delaying due
diligence procedures. It was agreed that
resource should be dedicated to remediate
this control ineffectiveness as a priority.
Audit Committee report continued
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The second line review is undertaken in
the context of broader changes in both
the underlying risks and the environment
in which the Group is operating, and
considers whether prevailing controls
remain appropriate and sufficient. To
support this, the Committee annually
reviews a detailed assurance map for
theGroup, covering each of the Principal
Risks. The assurance map summarises the
controls and assurance in place across
thedifferent lines of defence, as outlined
on page 71. It also provides management’s
assessment of whether the level of
controland assurance is appropriate, and
highlights ongoing work to address any
opportunities for enhancement.
Having reviewed the latest assurance map
at its meeting in December 2024, the
Committee was satisfied that there were
no significant gaps in the levels of
assurance. Progress made during 2024
included the introduction of a Political
Engagement Register and respective
training for those authorised to undertake
political engagement, enhancing prevailing
practices and the establishment of a
framework of key human resources-
related controls for self-assessment and
verification to supporting evidence.
The Committee considered and approved
a series of management actions to be
implemented during 2025, including
theestablishment of Elimini-specific
governance where it isfelt the respective
Group policies and processes are not
relevant, and to formalise the Group’s
compliance governance structure,
including a dedicated second line function.
Additional detail on the Group’s Principal
Risks and key mitigations can be found
onpage 70.
Changes to the Corporate Governance
Code were announced in 2024, which
willrequire Boards to make a declaration
inrelation to the effectiveness of material
internal controls. This will apply to the
Group from the financial year beginning
1January 2026 onwards. In December
2024, management presented an updated
roadmap to the Committee setting out
thekey actions required in advance of
thefirst internal control declaration to
bemade in relation to the 2026 year end,
anda proposed definition of ‘material’
tobe applied in identifying which controls
fallinto the scope of thedeclaration.
The ‘business as usual’ operating model
formaintaining and governing the Group’s
framework of material controls beyond
31December 2026 was also presented to
the Committee along with a proposed plan
of internal and external assurance to be
obtained over the design and operation
ofthe Group’s material controls.
Progress against this roadmap during
2024 was discussed with the Committee,
including the formalisation of a library
ofEntity Level Controls and an initial
mapping exercise of those controls
considered to be material to the Group’s
operations, compliance, and reporting.
Thekey milestones to be achieved during
2025 were also considered by the
Committee, including an initial dry run of
assurance intended to support the internal
control declaration, the development
ofacontrols policy, and further training
ofcontrol owners.
Following its review, the Committee
approved the proposed materiality
definition and agreed with management’s
plans and the proposed levels of
assurance. It was confirmed that quarterly
updates would continue to be provided to
the Committee on the progress made and
any divergence from the roadmap.
The Committee routinely considers
information arising from internal ‘Speak
Up’ and whistleblowing reports. It
discusses with management the scope
ofinvestigations, providing feedback
and,where relevant, challenge on the
appropriateness of the steps being taken
in response. The Committee seeks to
understand how matters identified in
incidents inform training for colleagues
toaddress findings that effect positive
change, and how actions by management
can improve culture within the Group’s
operations. An explanation of the Group’s
whistleblowing programme can be found
on page 53. The Board was also separately
updated on responses to such reports.
The Committee reviews and discusses
findings and action points arising from
each of the internal and external reviews
that are performed, to assess whether
improvement plans are suitably robust and
have appropriate delivery targets. None
ofthe findings discussed during 2024
were considered individually or collectively
to have materially impacted the financial
performance, results or operations of
thebusiness. Taking this into account,
TheCommittee was satisfied that the
overall systems of risk management
andinternal control have continued to
operateeffectively.
Reviewing key judgements and
financial reporting matters
Explanations of all the Group’s material
accounting policies, critical accounting
judgements, areas of significant
estimation uncertainty and other material
financial reporting matters are set out in
the notes to the Consolidated financial
statements. The Committee reviewed
these aspects of the Consolidated
financial statements, with a particular
focus on theareas it deemed the most
complex or subjective, as highlighted
inthe table below.
In addition, the Committee considered
how these matters are disclosed within
the Annual report and accounts, to ensure
that appropriate context and explanation
are provided.
At each of its meetings, the Committee
receives a Financial Reporting and
Accounting Update from management,
covering any key changes in the period,
aswell as emerging issues.
These papers also incorporate any relevant
updated guidance or clarifications issued
by bodies such as the Financial Reporting
Council (FRC) or Financial Conduct
Authority (FCA), and management’s
assessment of the impact on the Group
and the timing of any planned actions in
response. These updates are discussed
with the external auditor in advance of
theCommittee meetings, ensuring that
they have the opportunity toconsider
andprovide their own views on the
matters raised. This includes highlighting
alternative approaches oraccounting
treatments to assist the Committee
initsconsideration of management’s
conclusions and proposals.
Changes from the prior year include the
removal of the Electricity Generator Levy
(EGL) as an area of significant focus for
the Audit Committee, with the levy now
being incorporated into the standard
running ofthe Biomass Generation and
Flexible Generation businesses.
The Committee, as a matter of routine,
seeks the views of the external auditor
onthe approach being taken by
management and their responsiveness
torequired standards – whether formal
orthrough accepted practice. Such
discussions also consider the adequacy
ofexplanations being provided within the
Group’s periodic financial reporting. Key
areas of such assessment can be found on
page 118 to 122.
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Accounting for derivative financial instruments
Description Audit Committee review and conclusion
Accounting for derivative financial instruments
As described on page 239, the Group makes use of
derivative financial instruments to help manage the key
financial risks towhich it is exposed.
The Group’s balance sheet includes significant assets
andliabilities arising from these contractual arrangements
thatare measured at fair value by virtue of being within
thescope of IFRS 9 ‘Financial Instruments’. Judgement
isrequired around which contracts meet specific criteria
andwhich do not (and therefore remain outside the scope
ofIFRS 9) and may also be required in the valuation
methodology applied, where different approaches or
sources of input information may be possible.
A judgement is made that biomass contracts continue to
falloutside the scope of IFRS 9, primarily due to the illiquid
nature of the market and the contractual terms in place
between counterparties. The market remains immature
andthere is not areadily accessible source of supply and
demand at present, whereby the nature of the biomass
purchase and sale contracts means they cannot be readily
settled in cash or other financial instruments.
Where a fair value calculation is required, this typically
involves a mark-to-market calculation, comparing the
contractual price to prevailing market rates. Whilst volatility
in several of the markets most relevant to the Group,
including power and foreign currency, continued to reduce
during 2024, returning tothe levels seen pre-2022, the
balances relating to these contracts remain significant, as
described on page 239. The size and scope of the Group’s
derivative portfolio means that small errors in the valuation
or disclosure process could have amaterial impact on the
amounts included in the Consolidated financial statements.
Whilst the inputs to these calculations are largely taken from
observable market prices or data points, in certain cases
more than one potential source of information is available.
Whilst differences in these forward-looking assumptions are
typically relatively small, the impact can become material
when applied to a large portfolio of contracts.
The accounting and disclosure requirements in relation to
derivative financial instruments are inherently complex and,
asa result, the controls in this area remain a key area of
focus for the Committee.
At each of its meetings, the Committee receives an update
onany new classes of derivative financial instrument that
theGroup has entered into, and the proposed accounting
treatment. During 2024, the only new class of instrument
thatrequired review was in relation to financial freight hedges
entered into in Q3 2024 which are not significantly different
to other instruments held by the Group.
Ahead of each reporting date, the Committee reviewed
management’s assessment that biomass contracts continue
to fall outside the scope of IFRS 9. This involved comparing
the requirements of the accounting standard with the current
situation in terms of observable practice and market
conditions, taking into account developments during the
period in question.
Having completed this review, the Committee was satisfied
with management’s assessment. However, it was noted that
this remains a critical judgement given the potential impact
on the Consolidated financial statements should biomass
contracts bedeemed to be within the scope of IFRS 9.
At each of its meetings the Committee was updated on the
operation of the financial control framework with respect to
thevaluation process, any enhancements made during the
period, and the output from a rolling self-certification process.
Improvements noted during 2024 included the continued
refinement of certain valuation models, and in particular
theineffectiveness calculation for inflation contracts.
Disclosures in relation to derivative financial statements in
theAnnual report and accounts are extensive and particular
consideration was given to these. The Committee discussed
theviews from PwC and invited comments arising from audit
work performed in their first year as external auditor.
Based on these reviews, and taking on board the comments
andrecommendations of PwC, the Committee was satisfied
thatthe reporting and controls in place around derivative
financial instruments were robust.
Audit Committee report continued
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Impairment of goodwill and fixed assets
Description Audit Committee review and conclusion
The Group reviews its goodwill and fixed assets (or, where
appropriate, groups of assets in cash-generating units
(CGUs)) for potential impairment. Impairment reviews are
triggered by either the existence of potential indicators of
impairment at a given point in time or, in the case of goodwill
and other intangible assets with indefinite useful lives, are
conducted atleast annually.
As part of its annual review, management considers the
classification of CGUs. For 2024, the OCGT CGU was
assessed and updated to separate this into three individual
CGUs to reflect how the Group will trade and operate the
assets. No goodwill was allocated to the OCGT CGU(s) prior
to, or after, this separation. Furtherdetail on these changes
is provided on page 182.
When an impairment review is deemed to be required, the
recoverable amount of the asset or CGU is assessed. This
assessment is made with reference to the present value of
the future cash flows expected to be derived from its value
in use, or its expected fair value on sale.
Assessments of value in use for each CGU are based on
themost recent Board-approved forecasts. The forecasts
include all the necessary costs expected to be incurred to
generate the cash inflows from the relevant assets in their
current state and condition.
Various assumptions are required in determining these
forecasts, and the reviews performed therefore also include
sensitivity and scenario analysis to help the Board
understand how changes in key assumptions impact the
assessment. Where these reviews suggest a potential risk
ofimpairment, further detailed work is undertaken.
The discount rates applied to the underlying forecasts (to
take account of future risk and the time value of money)
represent an important assumption, and are impacted by
market volatility, interest rates and inflation. These rates
arereviewed annually with input from external experts.
Impairment arises where management determines, and
theAudit Committee concludes, that the carrying amount
ofan asset (or group of assets) exceeds its recoverable
amount. Further detail on this process and the assumptions
made is provided in note 2.4 to the Consolidated financial
statements.
At its meeting in December 2024, the Committee considered
management’s review process and initial conclusions in respect
ofCGUs and impairment for the 2024 financial year.
Having considered and challenged management’s reports,
process and key assumptions, the Committee concluded that
the overall approach to impairment reviews was appropriate,
aswere the proposed changes to the Group’s classification
ofCGUs.
The Drax Power Station CGU does not have any goodwill or
indefinite life assets and is therefore not required to perform
anannual impairment assessment, however, its financial
performance is linked to its generation and sale of Renewables
Obligation Certificates (ROCs) under the Renewables
Obligation scheme. Thisscheme is due to end in March 2027
and whilst there has been consultation on a transitional
support mechanism between this date and BECCS operations
this has not been concluded at the year-end date. As such,
theCommittee has assessed whether this is an indicator of
impairment, including challenging management’s assumptions
and conclusions.
Atthe December meeting the Committee agreed with
management’s conclusion that the uncertainty associated
withthe transitional support mechanism was a sufficient
indicator to undertake a formal impairment assessment and
challenged management’s assumptions in respect of the
cashflows beyond 2027 tothe current expected useful life
ofthe power station in 2039. Based on current facts and
circumstances, the Committee concluded that this was an
appropriate judgement to make. The Committee enquired
ofPwC for their views.
The Committee was satisfied that as a result of the impairment
assessment, along with the current facts and circumstances,
there was not an impairment loss to be recognised for this
CGU. However, acknowledging that reasonably possible
changes to assumptions would result in an impairment the
Committee agreed additional disclosures were appropriate.
These have been reviewed by the Committee and are felt to
besufficiently transparent and reflect the risks associated
withthis CGU. The Committee was satisfied that no other
CGUs were impaired orhad indicators of impairment that
required further disclosure.
At its meeting in February 2025, the Committee reviewed a roll
forward of the analysis from December 2024 and considered
any significant internal or external changes. This incorporated
further analysis of the Drax Power Station CGU, taking into
account the announcement on 10 February 2025 of the
proposed head of terms agreed with the UK government, that
provided a Contract for Difference arrangement for all four
biomass units from April 2027 to March 2031. This review did
not indicate any changes in the conclusions from the December
2024 meeting, and the Committee was satisfied with
management’s assessment and that no impairment charge
isnecessary for any CGU.
Further scenarios and analysis were also considered to support
the review of going concern and viability conducted by the
Committee, discussed in more detail on page 84. This analysis
did not suggest any further indicators of impairment, and
supported the conclusions reached.
The Committee reviewed the impairment disclosures in the
Annual report and accounts and concluded that the key
assumptions and sensitivities had been appropriately disclosed,
and that all statements made were supportable.
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Calculation and presentation of alternative performance measures
Description Audit Committee review and conclusion
As described on page 191, the Group presents Adjusted
results excluding the impact of exceptional items and
certain remeasurements. Adjusted results are consistent
with the way executive management and the Board review
and assess the performance of the Group. The effects of
exceptional items and certain remeasurements are
presented separately in a column on the face of the Group’s
Consolidated income statement.
The Group has a clear policy that sets out the transactions
considered as exceptional, and the determination of certain
remeasurements.
However, the classification of transactions as exceptional
and the separate presentation of certain remeasurements
still requires judgement, as does the definition of appropriate
alternative performance measures such as Net debt.
A full glossary of alternative performance measures
referenced throughout the Annual report and accounts,
including the closest equivalent IFRS measure and an
explanation of why the measure is considered important, is
provided on page 277. Supporting reconciliations of certain
alternative performance measures from relevant IFRS
measures are provided in note 2.7 to the Consolidated
financial statements.
At each Committee meeting, management presents a paper
that sets out the transactions proposed to be classified as
exceptional in the period. The Committee reviews this paper,
and challenges each of the individual items. Formal approval
ofthe classification is provided at reporting dates.
In addition, the Committee reviews and approves the definition
of alternative performance measures. In the prior year the
Group presented its Adjusted results inclusive and exclusive
ofthe EGL, given that this was new to the 2023 Consolidated
financial statements. At its meeting in July 2024, the
Committee considered the presentation of the EGL within the
Half-Year Report and the Committee was satisfied EGL was
sufficiently embedded in the understanding of the results of
the Group and therefore confirmed that Adjusted results would
include the impact of the EGL and no separate presentation
was necessary; it similarly confirmed this is how it would be
reflected in the Annual report and accounts.
At its meeting in December 2024, the Committee considered
the Group’s definition of Net debt, noting that the refinancing
activity in the year had updated the covenants associated with
the new facilities to include the impact of lease liabilities under
IFRS 16 ‘Leases’ (previously lease liabilities were excluded from
the covenant reporting requirements). In previous reviews by
the Committee a significant factor in the definition of Net debt
was to align it with the covenant reporting requirements. As
such, the Committee was satisfied with the change in the
definition of Net debt to remain consistent with the Group’s
covenant reporting requirements.
At its meeting in February 2025, the Committee reviewed the
final classification of transactions as exceptional or certain
remeasurements in the 2024 Annual report and accounts. Italso
reviewed the final calculation and presentation of alternative
performance measures. Having considered analysis from
management, and the opinion of the external auditor, the
Committee was satisfied that the approach taken is appropriate
and that the policy in respect of exceptional items and certain
remeasurements had been applied accurately. The Committee
also considered these areas when reaching its overall conclusion
on whether the 2024 Annual report and accounts are fair,
balanced and understandable, as discussed further on page 123.
Audit Committee report continued
Impairment of goodwill and fixed assets continued
The Committee was satisfied that this area should be
highlighted as a key source of estimation uncertainty,
specifically associated with the Drax Power Station CGU,
within the Annual report and accounts, given the sensitivity of
the conclusions reached to certain assumptions, as described
in more detail on page 185.
In light of external announcements related to Carbon Capture
and Storage (CCS) projects and the change in UK Government
during 2024, the Committee continues to consider
management’s review of capitalised costs associated with
theUK BECCS project, given that these are material to the
Consolidated financial statements.
Based on this review, the Committee was satisfied that no
indicators of impairment were identified during the year, and
accordingly no impairment of these capitalised costs was
required. The Committee also noted that this continued to
warrant inclusion as a significant judgement in the Consolidated
financial statements, as described in more detail on page 163.
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Review of other significant judgements and estimates
Description Audit Committee review and conclusion
The other areas of significant judgement and key sources
ofestimation uncertainty in the Consolidated financial
statements are set out on pages 162 to 164. Management
regularly reviews these other areas to ensure they are kept
up to date, and also considers whether other items should
be included.
As part of the preparation for the 2024 Annual report and
accounts, management considered the sale of certain meter
points and associated customer contracts in the Opus
business in June 2024, including the impact of the
transaction on the Half-Year Report upon signing the Asset
Purchase Agreement (APA), where there was judgement as
to when the sale should be recognised at 30 June, and the
impact on related aspects such as restructuring, impairment
and onerous contracts for the remaining business, as well the
presentation of the related balances in the Half-Year Report.
Subsequent to the Half-Year Report the Committee
assessed the accounting impact of the transaction,
including those items that should be included within the
exceptional item charge and the associated judgement
related to this matter.
The Group is currently in the process of developing several
large capital projects, as part of its overall strategy. These
projects include the development of BECCS at Drax Power
Station, the expansion to Cruachan (pumped storage)
Power Station in Scotland, and several BECCS projects in
North America. Judgement is required to determine if the
expenditure associated with these projects meets the
criteria to be capitalised under IAS 16 or IAS 38, or whether
it should be expensed as incurred.
At each of its meetings, the Committee reviews a paper
prepared by management that includes a summary of
significant accounting judgements and key sources of
estimation uncertainty, and an update on any changes in the
period. In particular, any material emerging issues are discussed
in detail.
In the July meeting, the Committee reviewed the approach
taken to assess the impact of signing the APA for the sale of
Opus meter points and related customer contracts in June
2024. It noted the timing of the signing of the APA and that
thetransaction completion was conditional on future events,
which if not met could prevent the transaction completing. In
addition, the Committee considered management’s assessment
of the APA and the relevant accounting standards, IFRS 5
‘Disposal of subsidiaries, businesses and non-current assets’,
IAS 36 ’Impairment of assets’, and IAS 37 ‘Provisions,
contingent liabilities and contingent assets’, taking into account
the Half Year Review report from the external auditor. Having
completed this review the Committee was satisfied that the
recognition and presentation of the sale was appropriately
reflected in the Half-Year Report.
In the December meeting, the Committee reviewed
management’s update on the accounting for the transaction,
which confirmed the two conditions precedent had been met
in the required timeframe and included the assessment and
calculation of the impact of the restructuring on the remaining
business following the successful migration of the meter points
and related customers to EDF. Having completed this review,
the Committee was satisfied that appropriate consideration of
all factors relating to the transaction had been made, including
the calculation of related provisions, treatment of costs as
exceptional and disclosure of the transaction and related cash
flows in the Consolidated financial statements. The Committee
also concluded that the risk of a material change in the
estimated carrying value of the related assets and provisions
within the next financial year, including the recoverability of
those receivables retained by the Group, does not represent
akey source of estimation uncertainty under IAS 1.
The Committee reviewed management’s assessment that
capitalisation of certain costs associated with the UK BECCS
project remained appropriate. As well as internal progress on
the technical development, the Committee considered external
developments during the year, including potential changes
toGovernment policy following the election of a Labour
Government in July. Having completed this review, the
Committee was satisfied that ongoing capitalisation was
appropriate.
The Committee also noted that judgements were being made
to not yet capitalise costs associated with other potentially
significant future projects, such as the expansion of the
Cruachan (pumped storage) Power Station and BECCS projects
in North America. The Committee was satisfied that the
proposed disclosure incorporated sufficient detail to cover
these areas and that the ongoing treatment within the
Consolidated financial statements was appropriate.
Given the current pause to construction of the Longview pellet
plant in the US in order to obtain the appropriate air discharge
permit, management assessed the carrying value of the asset.
No impairment was identified, however, this was included in
the disclosure of critical judgements in respect of capitalised
costs alongside UK BECCS. The Committee agreed with this
conclusion.
Drax Group plc Annual report and accounts 2024
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Review of other significant judgements and estimates continued
Having considered the other matters raised in management’s
papers, the Committee was satisfied that the items disclosed
as critical accounting judgements and key sources of
estimation uncertainty on pages 162 to 164 are appropriate
and complete. In addition, the Committee was satisfied that
thedescriptions clearly and accurately reflect the matters
disclosed and the positions taken.
Reviewing the 2024 Annual report
and accounts
The Annual report and accounts
incorporates the information needed
toassess the Group’s position and
performance, business model and
strategy. The finance team worked
alongside the external auditor to make
sure that the level of disclosure was
adequate and the presentation of certain
remeasurements, exceptional items and
alternative performance measures were
appropriate and consistent with IFRS.
At its meeting in December 2024, the
Committee received reports from
management on its planning for the
various elements of the 2024 Annual
report and accounts. This included a
timetable for preparing drafts and for the
contributions, including peer review and
commentary, being made by members of
the wider management and Executive
teams. The Committee also discussed how
such review would support the task of
ensuring the Annual report and accounts,
taken as a whole, was fair, balanced and
understandable.
Between the year-end date and the date
of the approval of the Annual report and
accounts, the Committee Chair was
updated on progress with the year-end
audit process and key financial reporting
matters. Updates were also provided by
the external auditor and the internal
auditor. At its meeting in February 2025,
the Committee reviewed both the external
auditor’s findings and the draft 2024
Annual report and accounts.
At its meeting in December 2024, the
Committee also reviewed and approved
management’s proposed plan for internal
and external assurance over the different
parts of the Annual report and accounts,
considering the complexity of the
information and the key focus areas for
stakeholders. This included TCFD
reporting, for which the Committee
considered both the requirements of the
disclosure, and the data points that would
be included. As in 2023, PwC provided
limited assurance on certain aspects of
the TCFD reporting, which is separate
from the audit opinion over the
Consolidated financial statements
presented on pages 152 to 160. The
results of this assurance were presented
by management and evaluated by the
Board at their meeting in February 2025.
The Committee also reviewed the
verification process undertaken by
management around key information
included in the Annual report and
accounts. Having completed this
assessment, the Committee was satisfied
that the verification process was robust
and that appropriate assurance had been
obtained over key information and
statements included within the Annual
report and accounts.
As part of its review, the Committee also
considered the internal controls, forecasts
and relevant assumptions underpinning
the Viability Statement and the ongoing
adoption of the going concern basis in
preparing the Consolidated financial
statements. This included assessing a
scenario analysis prepared by
management, reviewed by the external
auditor, which considered the potential
future impact of the Group’s Principal
Risks on its financial projections. Particular
focus was given to the scenarios relating
to plant operations and commodity price
risks, given the potential medium to
long-term impacts they could have. This is
discussed in further detail on page 84.
Both plant operations and commodity
price risks are Principal Risks. More details
can be found on pages 79 and 82.
The Committee reviewed the financing
activity undertaken by the Group during
2024 and ensured that this was
appropriately considered in management’s
assessment, including any impact on
covenant compliance and the period
ofassessment for viability. Whilst
management and the Board consider
longer-term forecasts for other purposes,
including strategic planning and capital
allocation, the Committee concluded
thatit was appropriate for the viability
assessment period to remain at five years.
The Committee was satisfied that the
proposed Viability Statement was robust,
fair and balanced, including consideration
of the disclosure around longer-term risks
extending beyond the viability assessment
period. This included reviewing the
assumptions and disclosure around
long-term biomass generation at Drax
Power Station, and the impact of this on
the viability modelling. In addition, the
Committee was satisfied that the level of
assurance, challenge and verification was
appropriate, taking into account the work
undertaken by the external auditor.
Consequently, it was also concluded that
the ongoing use of the going concern
basis of preparation for the Consolidated
financial statements was appropriate.
As noted above, the Committee
considered and reviewed management’s
disclosure on certain remeasurements and
exceptional items (see page 165) and the
presentation of these items in the
Consolidated income statement. This
included a review of the calculation and
presentation of alternative performance
measures. The Committee was satisfied
that the use of alternative performance
measures and the way in which they are
presented remains appropriate, and that
they provide helpful information to the
users of the Annual report and accounts.
Audit Committee report continued
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122
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Fair, balanced and understandable
As a result of the Committee’s review, it
advised the Board of its conclusion that
the 2024 Annual report and accounts,
taken as a whole, are fair, balanced and
understandable. This view is underpinned
by the Committee’s discussions with
operating and finance management
regarding the Strategic report, and with
the finance team regarding the
Consolidated financial statements. In
addition, the Committee believes that the
Annual report and accounts provide the
information necessary for shareholders
toassess the Company’s and the Group’s
position and performance, business model
and strategy, and that statements made
are supported by appropriate verification
and assurance, including those made
around the systems of risk management
and internal control.
External audit
External auditor transition
During 2024, the Committee oversaw
atransition from the former external
auditor, Deloitte, which included PwC
shadowing Deloitte through the full-year
audit process for 2023 and attending all
Committee meetings from July 2023
onwards, prior to their formal appointment.
PwC also provided updates to the
Committee on their transition planning and
the progress being made. Throughout this
process, Andy Skelton, Vanessa Simms
and I met with the lead partners from the
firms to ensure that there was a smooth
handover. The Committee would like to
thank Deloitte for the service given to the
Group over many years.
Bringing in a new auditor has brought
fresh energy to the role, new questions
have been asked and areas have been
reassessed. The Committee is pleased
with the way the change has been
managed as well as the output.
As part of the audit transition process,
PwC reviewed Deloitte’s audit files, and
the lead audit partner visited the Group’s
operations in the US and Canada, in order
to develop an understanding of the Group,
the operating environment and the
financial reporting process.
External audit plan
In developing the external audit plan for
2024, PwC performed a risk assessment to
identify the risks of material misstatement
to the Consolidated financial statements.
This considered the nature, magnitude and
likelihood of each risk identified and the
relevant controls in place, in order to
identify the audit risks. The key audit
matters are referred to in the independent
auditor’s report on pages 152 to 160 and
formed the basis of the plan.
In determining the scope of coverage,
consideration was given to management
reporting, the Group’s legal entity
structure, the financial results for the year
ended 31 December 2023, and the
forecast for 2024. The audit plan was
presented to the Committee in July 2024,
with updates communicated in December
2024 and February 2025. The details of
the coverage and agreed scope are set
outin the independent auditor’s report
onpage 153.
The procedures to be performed at a
Group level and the planned components
were also reviewed. Materiality was
agreed at approximately 2.5% of Adjusted
EBITDA (based on a three-year average).
Following discussion and challenge, the
Committee concluded that the proposed
plan was sufficiently comprehensive for
the purpose of the audit of the
Consolidated financial statements and
approved the proposed fee.
Effectiveness of external audit
The Committee is dedicated to ensuring
ahigh-quality audit is performed and,
aspart of the tender process carried out
in2021 recommended that PwC be
appointed due to the strength of its team,
providing the skills, experience and
independence to ensure rigour and
challenge in the audit. The Committee
reviewed the effectiveness and quality
ofthe external auditor during the year
anddoes so annually. In so doing, the
Committee considers the quality of the
external audit reports presented to the
Committee, the performance both in and
outside of Committee meetings and how
they interact with and challenge
management.
In addition to this, the Committee feels it
isimportant to understand management’s
opinion of audit quality and effectiveness
and a feedback questionnaire on the
external auditor is completed annually
bymanagement and presented to the
Committee in the April meeting. This was
undertaken during 2024 in respect of
Deloitte for their final year audit and will
beconducted in 2025 for PwC.
The Committee’s review of external
auditor performance in relation to the
2023 audit (which was completed during
2024) primarily considered the
independence and objectivity of Deloitte,
its professional competence and past
performance. The Committee also
considered the robustness of the audit
process including, in particular, the level
ofrigour and challenge given to critical
management judgements and significant
estimates, and the professional scepticism
being applied. Thistook account of the
reports provided to the Committee, the
related discussions with the external
auditor around areas of highest audit risk,
and the basis for the auditor’s conclusions
on those areas.
The Committee ensured that PwC were
aware of the findings from this review and
that this was reflected in their planning
forthe 2024 audit process, along with the
review’s consideration and communication
of independence and objectivity.
The Committee has been satisfied with
the level of challenge applied by PwC,
andits consideration and presentation
ofpossible alternative approaches. This
included a particular focus on the annual
impairment review process, the
presentation and valuation of derivatives
and the accounting for the sale of Opus
Energy meters and related customer
contracts, along with their respective
presentation and disclosure.
The annual review of effectiveness in
April2024 also incorporated feedback
from members of the finance and wider
management teams. The Committee
sought their views on matters including
the quality of audit work and engagement
whilst planning and executing the audit,
both at a Group and business unit level.
The feedback process undertaken with
Deloitte highlighted areas where work
could be undertaken earlier in the process
and certain specialists could be
incorporated into the audit process more
efficiently and effectively.
The Committee considered that an
important aspect of supporting a high
quality audit for the 2024 financial year
was a planned and well executed
transition of PwC into role.
The transition phase during 2024 allowed
PwC to bring in their specialist teams at
anearly stage in order to effectively plan
and scope their involvement. Following
the transition phase there has continued
to beregular meetings between specialists
and relevant members of management,
and greater focus on completing audit
procedures ahead of the year-end date.
The Committee acknowledged the benefit
of conducting audit procedures earlier and
the interaction of specialist teams brought
to the overall quality of the audit.
In addition to completing an annual review,
the Committee considers the
effectiveness of the external auditor over
the course of the year and discusses this
at each meeting, including sessions where
the auditor is not present. This ongoing
review incorporates any relevant external
information, such as the FRC’s annual
Audit Quality Inspection and Supervision
Report, which was published in July 2024
and included an assessment of PwC and
other large audit firms.
Drax Group plc Annual report and accounts 2024
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Based on its review, the Committee is
satisfied that the external auditor and
itsaudit is effective. The Committee
agreed that the external auditor’s work
demonstrated an ongoing commitment
toaudit quality, that the audit process was
robust, and that PwC had shown strong
levels of technical knowledge and
appropriate professional scepticism in its
work, and that the transition in audit firms
has not adversely impacted audit quality.
Independence of external audit
The Group has an Auditor Independence
Policy (AIP) that defines procedures and
guidance under which the Company’s
relationship with its external auditor is
governed. The AIP also facilitates the
Committee being able to satisfy itself that
there are no factors that may, or may be
seen to, impinge upon the independence,
objectivity and effectiveness of the
external audit process. The Committee
reviews the AIP annually and last did so in
December 2024. As part of this annual
review, the Committee considers areas of
development in best practice and guidance.
The main features of the current AIP
(which is available at drax.com) are:
– A requirement to review the quality,
costeffectiveness, independence and
objectivity of the external auditor
– A requirement to rotate the lead Audit
Partner every five years, and processes
governing the employment of former
external auditor employees
– A policy governing the engagement
ofthe auditor to conduct non-audit
activities, which is expected to occur
only in certain circumstances and is
keptunder review at each meeting
ofthe Committee
The external auditor also reports to the
Committee on its own processes and
procedures to ensure independence,
objectivity and compliance with the
relevant standards.
The audit for the financial year ended
31December 2024 is the first year in
which Matthew Hall has been the lead
Audit Partner.
The amounts paid to the external auditor
during each of the financial years ended
31 December 2024 and 2023 for audit and
non-audit services are set out above, and
in note 2.3 to the Consolidated financial
statements (page 180).
As noted opposite, the external auditor
should not provide non-audit services
where it might impair its independence
orobjectivity. Therefore, any engagement
for the provision of non-audit services
requires prior approval from the Audit
Committee or Committee Chair.
Agreement to allow the external auditor
toperform additional non-audit services
istaken only after considering two key
factors. Namely, that the non-audit
services policy has been fully applied,
andthat any engagements are in the best
interests of the Group and its key
stakeholders.
The other services provided in the year
byPwC, amounting to £10,000, relate to a
subscription to Viewpoint, PwC’s generic
accounting guidance portal.
As a result of the transition from Deloitte
to PwC during 2024, the fees set out in
the table above for the year ended 31
December reflect the fees paid to PwC
in2024 and the fees paid to Deloitte in
2023 for each firm’s audit and non-audit
services. Included in the total audit fees
for 2024 is £445,000 relating to the
transition phase of the audit, of which
£260,000 was undertaken and invoiced
in2023. In addition to the amounts in the
table above, in 2023 PwC provided ESG
assurance services amounting to
£395,000.
In all cases, the Committee was satisfied
that the work was best handled by the
external auditor because of its knowledge
of the Group, and that the services
provided did not give rise to threats to
independence, given the nature of the
work and level of fees payable. The
Committee was also satisfied that the
overall levels of audit and non-audit fees
were not of a material level relative to the
income of PwC or Deloitte as a whole, and
that the level of non-audit fees was below
the 70% cap, based on the average audit
fee for the preceding three years.
Auditor appointment
The Group has fully complied with the
provisions of The Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Committee Responsibilities)
Order 2014. The Committee discussed the
performance and independence of the
external auditor at its meeting in February
2025 and recommended to the Board that
a resolution to re-appoint PwC as the
Group’s external auditor should be put to
shareholders at the AGM in May 2025.
Internal audit
The Group has adopted a fully outsourced
model for internal audit. KPMG has acted
as the Group’s main internal auditor since
2020, supported by a team within the
Group which acts as an interface with
thewider business. The internal auditor
presents an annual plan to the Committee
for approval, typically at the December
meeting. This proposed programme of
work is based on the assessment of the
internal auditor, considering input from
interviews with key internal stakeholders
across finance, risk and the wider
leadership team.
The Committee considers and where
acceptable approves a plan. In so doing
theCommittee may request amendments.
Such changes may also be sought at
subsequent meetings, ensuring that
priority is given tothe areas of highest risk
for the Group taking into consideration any
new or emerging risks, whilst maintaining
appropriate coverage of all other key risks,
including those we foresee as emerging
risks of the future. Fees are agreed on an
audit-by-audit basis depending on the
scope and any requirement for specialist
input, whilst being managed within an
overall annual budget.
During 2024, the Committee agreed that
the internal audit plan should be expanded
to incorporate risks associated with Health,
Safety and Environment (HSE) which
previously had been managed via a
separate programme of internal audit work
undertaken by an alternative third-party.
Schedule of fees paid to PricewaterhouseCoopers LLP (2023: Deloitte LLP)
Year ended
31 December
2024
£000
Year ended
31 December
2023
£000
Audit fees:
Statutory audit of Drax Group 2 ,153.0 1,500.0
Statutory audit of the Company’s subsidiaries 225.0 40.0
Total audit fees: 2,378.0 1,540.0
Interim review 167.0 140.0
Assurance services provided
to non-material affiliates
70.0 18.3
Other services 10.0 47. 0
ESG assurance services 205.0 –
Corporate refinancing fees – 130.0
Total non-audit fees: 452.0 335.3
Total auditor’s remuneration 2,830.0 1,875.3
Audit Committee report continued
Drax Group plc Annual report and accounts 2024
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The Committee agreed that the
consolidation of this work under KPMG’s
plan allows for consistency in assessing
the Group’s systems of risk management
and internal control, and better
comparability of any resulting findings.
Where relevant, additional external parties
with specialist HSE knowledge in local
geographical jurisdictions will be engaged
to provide HSE assurance.
The Committee receives reports at each
meeting regarding the internal audit
reviews completed since its last meeting,
and progress against the overall annual
plan. Key topics reviewed by the internal
auditor during 2024 included Supply Chain
Resilience, Accounts Payable, Commodity
Trading, HSE and Compliance. These
reviews each provided an assessment of
the robustness and efficacy of prevailing
practices, and recommendations to the
Committee and management on how
tofurther improve the systems of risk
management and internal control.
Findings included suggested
enhancements to the stress testing
ofadverse market, credit and liquidity
scenarios to consider the possible
correlation or causation of such risks
andtheir potential cumulative effect.
Therecommendations, and suggested
timelines, were agreed between
management and the internal auditor
before being presented to Committee.
As part of its review, the Committee
considered the significance of findings
and discussed whether the proposed
actions and the timeline for addressing
them was appropriate.
All proposed actions and target dates were
subsequently approved by the Committee.
Where appropriate, the Committee
requests supporting analysis from
management assessing the root cause
ofany weaknesses.
In conjunction with reports from the
internal auditor on reviews completed
during the period, the Committee also
receives reports from management
detailing progress on implementing
recommendations from previous reviews,
tracking this against the original agreed
implementation dates. This allows the
Committee to effectively monitor
management’s responses to
recommended actions.
Having reviewed these reports, and
received assurance from the internal
auditor around the effectiveness of the
overall tracking process, the Committee
was satisfied that actions were being
implemented on a timely basis.
The Chair of the Committee, independent
of management, maintains direct contact
with the internal auditor, allowing open
dialogue and feedback. The Chair normally
meets with the internal auditor in advance
of each meeting to review their work and
discuss material matters.
Effectiveness of internal audit
The Committee reviewed the overall
effectiveness of the approach to internal
audit, and in particular the effectiveness
ofthe internal auditor, at its meeting in
December 2024. This review considered
the improvements made in response to
the previous effectiveness review
completed in November 2023.
Changes implemented during 2024
include undertaking the field work phase
of internal audits on-site with the
respective Drax teams where appropriate,
and ensuring key stakeholders receive
clear and regular communication as to
thestatus and progress of internal audit
reviews. The internal auditor also provided
its feedback on interactions and
engagement with management, having
updated the Committee on this at each
meeting during the year.
Based on its review, the Committee is
satisfied that the approach to internal
audit remains effective, and that the
Group’s primary internal auditor continues
to provide the requisite quality, experience,
and expertise in both its work and
reporting to the Committee.
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Role of the Remuneration Committee
The principal responsibilities of the Remuneration Committee
(the Committee) are to:
– Develop the Directors’ Remuneration Policy (the Policy)
– Keep under review the implementation of the Policy to
ensure that it operates as intended
– Determine the remuneration strategy and framework for
theExecutive Directors and Executive Committee members,
ensuring that executive remuneration is aligned to the
Group’s purpose, values and strategy
– Determine, within that framework, the individual
remuneration packages for the Executive Directors and
Executive Committee members
– Approve the design of annual and long-term incentive
arrangements for Executive Directors and senior
management, including agreeing targets and assessing the
performance delivered against those targets, and payments
under such arrangements
– Determine and agree the general terms and conditions
ofservice and the specific terms for any individual within
theremit of the Committee, either upon recruitment or
termination
– Oversee any major changes in colleague remuneration
throughout the Group, ensuring there is consistency with
theculture and values of Drax
Committee members
– Nicola Hodson (Chair)
– Andrea Bertone
– Kim Keating
– Erika Peterman
– Rob Shuter
Attending by invitation
CEO, Chief People Officer, Group Reward Director, David
Nussbaum (Senior Independent Director) and external
remuneration advisers. The Group Company Secretary
istheSecretary to the Committee.
Number of meetings held in 2024: Three
The table below shows the scheduled meetings of the Committee
within the ordinary annual cycle of the Committee’s activities. In
addition, Nicola regularly attended planning meetings to consider
key agenda items.
Attendance in 2024
Committee member
Date appointed
a member
No. of
scheduled
meetings
No. of
meetings
attended
% of
meetings
attended
John Baxter
(1)
17 April 2019 2 2 100%
Andrea Bertone 24 August 2023 3 3 100%
Nicola Hodson 12 January 2018 3 3 100%
Kim Keating 21 October 2021 3 3 100%
Erika Peterman
(2)
1 July 2024 1 1 100%
Rob Shuter
(3)
11 June 2024 2 2 100%
Vanessa Simms
(4)
19 June 2018 1 1 100%
(1) John Baxter stepped down as a member of the Committee on 1 July 2024.
(2) Erika Peterman joined the Committee on 1 July 2024.
(3) Rob Shuter was appointed to the Board and Committee on 11 June 2024.
(4) Vanessa Simms stepped down from the Board on 18 June 2024.
This Report has been prepared in accordance with Schedule 8
ofthe Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008, as amended (the Regulations),
and the provisions of the UK Corporate Governance Code (the
Code). It also meets the requirements of the UK Listing
Authority’s Listing Rules. Relevant sections of the Report have
been audited as required by the Regulations and the full Report
will be subject to an advisory vote by shareholders at the AGM
tobe held on 1 May 2025.
Terms of reference
The Committee regularly reviews its Terms of Reference,
as does the Board. The most recent review was in
December 2024. The Terms of Reference are available
on the Company website at drax.com/governance
Remuneration Committee report
The Group delivered strong financial
performance in 2024 and made important
progress on delivering its key strategic
objectives. The remuneration outcomes
forthe Executive Directors and senior
management appropriately reflect this.
Nicola Hodson
Chair
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Key Remuneration Committee activities in 2024
In 2024, the Committee considered and made decisions about the following key matters:
Our workforce Executives and senior management Committee governance
– Received updates on broader
remuneration matters relating
tothe wider workforce
– Reviewed the application of the
increases from the annual pay
review effective 1 January 2024
– Approved the outcome of the
2023Group Scorecard and in turn
the outturn of the 2023 Group
Bonus Plan paid in March 2024
– Adopted the 2024 Group Scorecard
for the purpose of determining the
2024 Group Bonus Plan
– Adopted the 2025 Group Scorecard
and the 2025 Elimini Scorecard for
the purpose of determining the
2025 annual bonus plans
– Approved the operation of the
2025Sharesave Share Plan for
UKcolleagues and continuation
ofthe ESPP for North American
colleagues
– Considered and approved the
remuneration of Executive Directors
and Executive Committee members
– Approved Executive Director and
Executive Committee member annual
bonus awards for 2023
– Approved the grant of the 2024
Deferred Share Plan (DSP) awards for
Executive Directors
– Approved the grant of the 2024
Long-Term Incentive Plan (LTIP)
awards
– Assessed and approved the vesting
ofthe 2021 LTIP awards
– Considered and approved the
arrangements concerned with the
retirement of the CFO prior to
announcement that he would be
retiring as CFO and a director
– Considered and approved the
Committee’s Annual Report on
Remuneration for 2023
– Reflected on feedback received
fromshareholders on remuneration
resolutions presented to the
2024AGM
– Reviewed the fees paid to Korn Ferry
and Deloitte, as the Committee’s
remuneration advisers in 2024,
together with fees paid by the Group
to Korn Ferry and Deloitte for other
HR matters
– Approved the Committee’s Terms
ofReference
Principles of the
UKCorporate
Governance Code
P
Remuneration policies and
practices and alignment to
long-term strategy
Q
Executive remuneration
R
Independent judgement and
discretion and remuneration
outcomes
The Remuneration Committee comprises five independent Non-Executive Directors.
TheCommittee Chair was considered independent on appointment as Chair and has relevant
experience of serving as a member of a remuneration committee.
Shareholders approved the current Policy at the 2023 AGM.
No Directors are involved in making decisions regarding their own remuneration.
Remuneration principles
Drax Group plc Annual report and accounts 2024
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Annual Statement
toShareholders
Dear shareholders,
On behalf of the Committee, I am pleased
to present the Directors’ Remuneration
Report for the 2024 financial year. At the
2024 AGM, shareholders approved the
Annual Report on Remuneration for
2023with over 97% of those votes cast
infavour. Back in April 2023, our
shareholders had approved the Directors’
Remuneration Policy 2023-2025 with 97%
in favour. The Committee and I are grateful
to our shareholders for their engagement
on remuneration matters and their
ongoing support.
As noted elsewhere in this Annual Report,
the Group continued to deliver strong
financial performance. In addition, the
Group made important progress on the
Group’s key strategic objectives.
TheCommittee firmly believes that the
remuneration outcomes must be fair, and
appropriate in the context of business
performance. The remuneration outcomes
for 2024 have been assessed in line with
these principles and the Committee is
comfortable that the Policy operated as
intended in 2024.
Review of decisions made for 2024
Annual assessment of performance
The Committee determines the
remuneration of the Executive Directors,
members of the Executive Committee,
andwider workforce against the
objectives and priorities of the Group.
Forthe 2024 Group Scorecard we
assessed performance against a
combination of financial, strategic, safety,
and ESG metrics linked tothe Drax
corporate strategy.
The Generation and Commercial
businesses performed in line with
expectations in 2024. In a more
challenging operating environment for
Pellet Production, our integrated global
biomass supply chain has also delivered
robust performance. There is a detailed
review of the achievement against all
performance metrics in the 2024 Group
Scorecard on pages 133 to 135.
The final 2024 Group Scorecard score was
1.39 and this score results in 69.5% ofthe
maximum annual bonus being paid to the
Executive Directors.
The Committee determined that the
overall performance outcome of the 2024
Group Scorecard represented a fair
reflection of the business performance
during 2024. The Committee also assessed
whether thelevel of pay-out is
commensurate with the experience of
both shareholders and colleagues over this
period and concluded that this is the case.
The Committee also considered the
payment of £25 million made to Ofgem’s
voluntary redress fund in 2024, following
completion of an investigation by Ofgem in
August 2024. In so doing, the Committee
gave consideration to the conclusions
from Ofgem’s investigation that it did not
find any evidence that the Group’s
biomass is not sustainable or that Drax has
been issued with ROCs incorrectly. The
Committee took into account that the
payment to the voluntary redress fund had
been included in the outcome of the
financial metrics in the 2024 Group
Scorecard, including EBITDA. The
Committee Chair also engaged with our
brokers to help understand the views of
wider stakeholders in assessing the matter.
On the basis of the above, the Committee
determined that no adjustments to the
formulaic outcome were required.
In accordance with the Directors’
Remuneration Policy, 40% of the overall
bonus award for Executive Directors will
be deferred into shares and 60% will be
paid in cash in March 2025.
Long-term assessment of performance
Vesting of awards granted in 2022 under
the Long-Term Incentive Plan (LTIP) was
determined based on performance against
two measures over the three-year period
from 1 January 2022 to 31 December
2024. The measures were Total
Shareholder Return (TSR), relative to the
constituents of the FTSE 350, and
Cumulative Adjusted Earnings Per Share
(EPS). Each accounted for 50% of the
award respectively. TSR over the three-
year period was above the upper quartile
(a rank of 52 out of the FTSE 350). The
EPS outcome was 333.1p, which was
13.8% ahead of the maximum target of
292.7p. The TSR and EPS performance
resulted in 100% vesting of the award.
The Committee determined that the
vesting outcome was appropriate in the
context of performance by the Group over
the three-year performance period. As
part of assessing the extent to which the
performance targets were met, the
Committee considered the impact of the
share buyback programmes undertaken
during 2023 and 2024. The Committee
concluded that, even if the impact of the
share buyback programme was removed,
EPS performance would still have
exceeded the maximum EPS target.
TheCommittee determined not to apply
discretion to adjust the overall vesting.
Given the averaging periods over which
TSR has been calculated, this equates to
areturn of 42.2% based on the six-month
averaging period prior to the start and end
of the performance period. The Committee
believe these returns, and the associated
performance vesting of the 2022 LTIP
achieved, is reflective of the very strong
shareholder returns over the period.
Committee changes
On 18 June 2024, Vanessa Simms stood
down from the Board. Rob Shuter was
appointed as an independent Non-
Executive Director on 11 June 2024 and
from that date became a member of the
Committee. Erika Peterman joined the
Committee on 1 July 2024 replacing John
Baxter who stepped down after serving
five years. I would like to thank both
Johnand Vanessa for their valuable
contribution to the Committee.
Retirement of Andy Skelton
On 4 December 2024, we announced
thatAndy Skelton intends to retire as
Chief Financial Officer. He will remain in
role until a successor is appointed. The
intention is that he will remain employed
for a period after that appointment to
support a smooth transition. He may
receive a payment in lieu of notice in
respect of any remaining portion of his
notice period.
Andy will remain eligible for an annual
bonus award for the year his employment
is terminated. This will be based on
performance against the Group Scorecard
and will be pro-rated for the portion of the
performance year in active employment.
Furthermore 40% of any award will
continue to be deferred. He will be treated
as a ‘good leaver’ for the purposes of the
Deferred Share Plan (DSP) and LTIP
awards. All unvested DSP awards will vest
in line with normal timescales. Unvested
LTIP awards will be pro-rated based on the
proportion of the relevant vesting period
employed and remain subject to the
original performance conditions and time
Remuneration Committee report continued
Drax Group plc Annual report and accounts 2024
128
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horizons including thepost-vesting
holding period. He will receive a 2025 LTIP
award. Following his departure, Andy will
continue to comply with the post-cession
shareholding requirement of200% of base
salary for two years. Fulldetails will be
reported in the 2025Annual Report.
Application of Remuneration Policy
Base pay review
Base pay increases as part of the 2024
annual pay review process took effect
from 1 January 2024. Will Gardiner and
Andy Skelton received an increase of 4%
which was below the average increase
forthe UK wider workforce (5%).
For the 2025 pay review (increases
effective 1 January 2025), 3.5% was the
average increase for the wider workforce.
This was applicable for all countries where
Drax has colleagues.
Will Gardiner received an increase of 5%
which was marginally above the average
increase of the wider workforce but still
consistent with the pay review
methodology that applies across the
Group. Whilst the pay review budget was
3.5%, under this methodology individual
increases could be higher or lower
depending on market level and the
individual’s competence, experience and
performance in role. Will Gardiner has
been CEO for seven years and under his
leadership, Drax has made strong progress
on its strategic aims. Furthermore, during
that time the complexity of the business
and international presence has increased
significantly. The Committee undertook a
review of benchmarking for the Executive
Directors and considered it appropriate to
give him an increase that would move him
closer to the median of companies of a
similar size to Drax in the FTSE 250.
Andy Skelton received an increase of 3.5%.
Pension
For 2024, the pension contribution rates
of Will Gardiner and Andy Skelton were
10% of base salary, which was aligned
with the rate for new joiners to the UK
wider workforce. No Executive Director
was a member of adefined benefit
pension scheme. There are no changes
intended to be made to pension for 2025.
Annual bonus
The 2025 Group Scorecard will apply to
allcolleagues, except those in our new
Elimini business, including the Executive
Directors. Most of the Group Scorecard
will be subject to thedelivery of
challenging financial targets (55%). This
includes 40% based on Group Adjusted
EBITDA and 15% on Net Cash flow. The
remaining 45% is subject tothe delivery
ofa range of strategic, safety and ESG
targets. There is more information on
thetargets for performance metrics on
page 142.
Long-Term Incentive Plan
It is intended that the 2025 LTIP grant
ismade in accordance with the normal
timetable, in March 2025. There are no
changes proposed to the existing LTIP
structure. For the TSR element,
performance will continue to be assessed
against the constituents of the FTSE 350,
with threshold vesting (25% of maximum)
for performance in line with the median
and maximum vesting for performance in
line with the upper quartile. The targets
for the EPS element are on page 143.
Workforce engagement
We believe engagement with our
colleagues is extremely important in
informing the decisions of the Committee,
and in communicating how the Committee
reaches decisions. There are several ways
we engage with our colleagues.
During 2024, there were two MyVoice
Forum meetings between the respective
Forum Chairs and Will Gardiner and
Andrea Bertone. At these meetings, a
variety of matters were discussed
including recognition.
As noted in last year’s report, a key theme
from My Voice Forum meetings was the
need to improve recognition of the
contribution of colleagues, beyond our
existing reward programmes, and to help
everyone feel they are a valued member on
a winning team, with a worthwhile mission.
In response, we launched a new global
recognition platform – My Recognition.
The My Voice Forum Chairs played an
important role in helping the HR team
withthe scope and the functional testing
of the platform. My Recognition empowers
colleagues to recognise and appreciate
their peers and enables Drax to recognise
and award continued service and
commitment to the business.
In April 2024, Drax won a GEO (Global
Equity Organisation) industry award for
Best In Financial Education for our
Sharesave programme. Our My Voice
Forum members played an important
rolein thissuccess, providing feedback
onthe financial education programme
andhelping to share and communicate it.
Following the introduction of a new
engagement survey platform in 2023,
inJuly 2024 we replaced the annual
engagement survey with shorter, more
regular, engagement surveys to better
understand how colleagues experience
lifeat Drax. The survey platform enables
colleagues to provide their comments on
topics which matter to them, providing
deep insight into the sentiment and
experience of colleagues across the
organisation.
In July and October 2024, the business
conducted two surveys to help provide
key metrics. These include our DEI score,
which measures colleague perception and
experience on how well Drax is performing
in creating an environment where
everyone feels included. This is also our
People metric for the Group Scorecard.
Our people are a key asset of the business,
and we are focused on creating a diverse
and inclusive working environment, where
people can be themselves and where their
contribution matters.
Throughout 2024, asin previous years,
colleagues continued to have the
opportunity to put questions to Will
Gardiner on any topic, with his responses
made available to all colleagues each week.
Shareholder engagement
As Chair of the Remuneration Committee,
I find engagement with shareholders to
behugely valuable. This includes formal
engagement as part of a Policy review
andthrough answering questions on
remuneration at the AGM, or informal
engagement throughout the year.
In 2025, the Committee will complete a
fullreview of the current Policy. This will
involve meeting a number of stakeholders
to get their valuable feedback on the
current Policy together with areas for
change covering the years ahead. As
partof the engagement we expect to see
feedback from institutional shareholders
and proxy advisory firms. A new policy
willbe put to shareholders at the AGM
held in 2026.
Summary
The Committee recognises the strong
financial and operational performance of
the Group in 2024. Our colleagues across
the business have contributed to that
performance. We believe the 2024
remuneration outcomes for the Executive
Directors and Executive Committee
members fairly reflect performance,
provide a fair and consistent approach to
remuneration across the Group, and are
appropriate to the shareholder experience.
I hope that having read this report you
willvote in support ofthe Directors’
Remuneration Report for2024 at the
AGMon 1 May 2025. More details on
allresolutions to beput to shareholders
atthe AGM can befound on the Drax
website at drax.com.
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Implementation of the Policy for 2024
Below is a summary of the Directors’ Remuneration Policy (Policy) which was approved by shareholders at the AGM on 26 April 2023
and became effective from that date. Also outlined below is a summary of the implementation of the Policy in 2024. The Directors’
Remuneration Policy is available on the Drax corporate website at drax.com/about-us/corporate-governance/compliance-and-policies.
Element Key features of the Policy Implementation of the Policy in 2024
Will Gardiner (CEO)
000s
Andy Skelton (CFO)
000s
Base salary – The Committee targets market level,
as determined by reference to
appropriate comparator companies
with consideration for factors such
assector, size and international
presence
– An Executive Director in post at the
start of the Policy period, and who
remains in the same role throughout
it, would normally receive an increase
in line with the average annual
percentage increase applied to the
workforce in their location of
employment
– The base pay increases in January
2024 were made as part of the annual
pay review process which resulted
inExecutive Directors receiving an
increase in base pay of 4.0%. This
was lower than the average increase
of 5.0% for the wider workforce.
£690 £439
Pension and
other benefits
– An Executive Director is entitled to
acontribution to the Group’s defined
contribution pension plan, a cash
payment in lieu of pension, or a
combination of pension contribution
and cash in lieu of pension
– Pension contribution rates for
Executive Directors are aligned to the
rates for new joiners to the UK wider
workforce
– Other benefits provided as
appropriate
– The employer pension contribution
rate for Will Gardiner and Andy
Skelton in 2024 was 10% of base
salary, which is aligned with the
ratefor new joiners to the UK
widerworkforce
– Other benefits received include a
carbenefit, life assurance, income
protection, the opportunity to
participate in all-employee share
plans, and private medical cover
£92 £60
Annual bonus – The maximum opportunity is 175%
ofbase salary for Will Gardiner and
150% for Andy Skelton
– Majority weighting of the bonus
award is measured on financial
metrics and the remaining on
strategic metrics
– 40% of the total bonus outcome will
be deferred into shares which are
subject to a three-year vesting period
– Clawback and malus provisions apply
– The 2024 annual bonus outcome as a
percentage of maximum opportunity
was 69.5%
– In line with the Policy, for the
Executive Directors, 40% of the
overall bonus award will be deferred
into shares for three years
£839 £457
Long-term
incentive plan
(LTIP)
– For awards made under the LTIP,
themaximum award level is 200%
ofbase salary for Will Gardiner
and175% for Andy Skelton
– Vesting is subject to long-term
performance conditions, measured
over a three-year performance
periodShares must be retained for
afurther two years from the date
ofvesting and clawback and malus
provisions apply
– The 2024 LTIP award is measured
over a three-year performance period
to 31 December 2026, against TSR
relative to constitutes of the FTSE
350, and Cumulative Adjusted EPS
– The 2022 LTIP is scheduled to vest
on 18 March 2025 at 100% of
theaward
£1,243 £692
Shareholding
requirements
– The requirement is 250% of base
salary for Will Gardiner and 200%
forother Executive Directors
– A post-cessation shareholding
requirement, equal to the
employment shareholding
requirement, applies for a two-year
period after cessation. Only shares
for awards granted after the 2020
AGM are included
– Will Gardiner and Andy Skelton
haveboth met their shareholding
requirements, with a shareholding
at31 December 2024, equivalent
to1,285% and 930% of base salary
respectively. This includes shares
which Will Gardiner and Andy Skelton
have bought in the open market
>250% of
base pay
requirement
>200% of
base pay
requirement
Remuneration Committee report continued
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Alignment of Remuneration of Executive Directors and wider workforce
Many aspects of the remuneration for Executive Directors are also applicable to the wider workforce, such as the basis of the annual
bonus award through the Group Scorecard, pension, and benefits entitlements. Below is a summary of the remuneration arrangements
broken down by the colleague grouping. In this table as indicated in the key below, specific areas of remuneration which are not
highlighted represent remuneration which is fully aligned across all colleagues, whilst those highlighted in blue are not aligned.
Remuneration element Executive Directors
(1)
Executive Leadership and
Senior Management
(2)
Wider workforce
(3)
Base salary Approach To target the appropriate market rate, as determined by comparisons with appropriate companies.
Increases Keep pay for colleagues consistent with market rate and reviewed in line with inflation; base salary increases for
Executive Directors will generally be in line with those for the UK workforce.
Pension New hires All UK colleagues have the option to participate in the Company’s defined contribution pension plan, with Company
contribution rate for new hires of up to 10% of base salary. Some colleagues choose to take a cash payment in lieu of their
pension, or a combination of pension contribution and cash in lieu of a contribution. All colleagues outside of the UK have
the option to participate in a retirement savings plan with a contribution from the Company.
Benefits Health and
wellbeing
All colleagues, with the exception of those in Japan, receive medical cover, and access to an annual private health
assessment or a local equivalent arrangement.
Risk and
protection
All colleagues have Company-funded life assurance and income protection, or a local equivalent arrangement, unless
they are covered under alternative collective bargaining arrangements.
Car benefit £12,000 Not applicable. Some colleagues
have a car as job requirement.
Not applicable. Some colleagues
have a car as job requirement.
Bonus Eligibility Drax colleagues are eligible to take part in the annual bonus programme, unless precluded by alternative arrangements
with their respective trade union group or acquisition agreement. The bonus plan is designed to reward the delivery of
targets and objectives directly linked to the financial and strategic performance of the Group set each year and detailed in
a Scorecard.
Metrics Bonus awards are conditional on achieving thresholds set in the Scorecard, which combines financial and strategic
metrics. These metrics are the same for all Drax colleagues, except for those in our new Elimini business.
Deferral 40% of the total bonus outcome will
bedeferred into shares in the form of
nil cost options or conditional awards
under a Deferred Share Plan.
Theperiod over which shares are
deferred is normally three years.
Vesting is subject to continued service
or “good leaver” termination provisions.
Not applicable, no deferral. Not applicable, no deferral.
Long-term
incentive
plan (LTIP)
Eligibility Discretionary annual grant of shares,
under the LTIP.
Discretionary annual grant of shares,
under the LTIP.
One Drax Awards are a discretionary
grant of share awards made to certain
employees in recognition of their
performance and to aid retention of
key talent below senior management.
Metrics For awards made under the LTIP,
vesting is subject to long-term
performance conditions, and typically
measured over a three-year
performance period.
For awards made under the LTIP,
vesting is subject to long-term
performance conditions, and typically
measured over a three-year
performance period.
The vesting is not subject to meeting
performance conditions.
Shareholding
requirement
Requirements of 250% and 200% of
salary for the CEO and CFO
respectively. A post-cessation
shareholding requirement, equal to the
employment shareholding requirement,
applies for a two-year period after
cessation.
Not applicable. Not applicable.
All-colleague plans All UK colleagues have the option to buy shares in Drax at a discounted price (after a three-year or five-year saving period
elapses) under the Sharesave plan. Eligible colleagues across US and Canada are able to participate in the Employee
Stock Purchase Plan (ESPP).
Notes:
(1) The Executive Directors are the CEO and CFO.
(2) Executive Leadership and Senior Management includes all colleagues in the three most senior job grades, excluding the CEO and CFO.
(3) Wider workforce includes all colleagues in job grades below the three most senior job grades.
Key
Aligned across workforce Unique to a specific colleague group
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Corporate Governance Code
In developing the existing Policy, the Committee considered a number of factors, including the provisions of the existing UK Corporate
Governance Code:
Our remuneration policy is aligned with the provisions of the 2018 Corporate Governance Code
Clarity
– Alignment between the delivery of
strategic goals and remuneration
outcomes
– Remuneration which rewards growth in
shareholder value over the medium to
longer term
– Performance related elements, relevant
for the Group as a whole, creating
alignment across the wider workforce in
delivering financial, operational and
strategic imperatives, including ESG
Simplicity
– Annual bonus: a simple Scorecard
structure focusing on a limited number
of financial and strategic metrics,
including safety and ESG metrics,
whichprovides clarity, focus and ease
of understanding
– The vesting of prevailing LTIP awards
are conditional, in part, on cumulative
adjusted EPS, which reflects the
capability to deliver stable earnings, and
TSR, which ensures strong alignment
with the shareholder experience
Risk
– A significant proportion of remuneration
is linked to the longer-term performance
of the Group
– A significant shareholding requirement
for Executive Directors during and
post-employment
– Malus and clawback provisions mitigate
behavioural risks by enabling payments
to be reduced or reclaimed in specific
circumstances. This applies to the
Executive Directors, members ofthe
Executive Committee and other senior
management for the purpose of LTIP
awards
Predictability
– Transparent performance measures and
targets make clear the possible range
ofremuneration outcomes and these
potential outcomes are illustrated in
thePolicy
Proportionality
– Performance measures are linked
toDrax’s strategy and aligned with
long-term creation of value for
shareholders
– Stretching targets ensure that
payments are only made for strong
corporate performance
– The Committee has discretion to
override formulaic outcomes to ensure
that remuneration appropriately
reflects overall performance, the
interests of stakeholders and
shareholder experience
Alignment to culture
– In 2024, the annual bonus metrics
forallemployees, including Executive
Directors, were the same so that all
participating colleagues are focused
collectively on, and rewarded for, the
delivery of financial and strategic goals
and Drax’s purpose. In 2025 most
employees will still participate in the
Group Scorecard and there is a separate
scorecard for the Elimini business
– The annual bonus contains metrics
related to safety, the environment and
people which underpin Drax’s values
and business strategy
Remuneration Committee report continued
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Annual Report on Remuneration
The relevant sections of this Report have been audited as required by the Regulations.
Single total figure of remuneration – Executive Directors (audited information)
The table below sets out the single figure of remuneration and the breakdown for each Executive Director for the financial year
to31December 2024, together with comparative earnings for the financial year to 31 December 2023.
Director Year
Salary
(£000)
Benefits
(1)
(£000)
Bonus
(2)
(£000)
Long-Term
Incentives
(3)
(£000)
Pension
(£000)
Other
(4)
(£000)
Total
Remuneration
(£000)
Total
Fixed Pay
(£000)
Total
Variable Pay
(£000)
Will Gardiner 2024 690 23 839 1,243 69 0 2,864 782 2,082
2023 663 19 812 1,442 66 0 3,002 749 2,254
Andy Skelton 2024 439 16 457 692 44 0 1,648 499 1,149
2023 422 16 443 822 42 0 1,745 480 1,265
Notes:
(1) Benefits include car allowance, private medical insurance, life assurance and permanent health insurance. From September 2024, Will Gardiner received health insurance
for coverage outside of the UK which acknowledges the proportion of time worked outside of the UK.
(2) Bonus is the value of the award from the 2023 and 2024 annual bonus plans. It includes the value of bonus deferred and paid in shares after three years subject only to
continuous service. 40% of the overall bonus for 2023 and 2024 was deferred.
(3) The 2024 numbers represent the indicative value of the 2022 LTIP award which should vest on 18 March 2025, together with the dividend equivalent shares in relation
to those vested shares. The value of the award is calculated based on the average share price over the last quarter of 2024, which was £6.445. The 2023 numbers (for
the2021 LTIP award which vested in April 2024) are restated to reflect the actual share price on vesting of £4.891 on 1 April 2024. This had been calculated in the 2023
Annual Report on Remuneration based on the average share price over the last quarter of 2023 which was £4.144. As a result the Total Remuneration and Total Variable
Pay for 2023 have been updated.
(4) Other includes the value of Sharesave awards granted. Note no Sharesave awards were made in 2023 or 2024 as both Will Gardiner and Andy Skelton had maximum
contributions under an existing contract.
Annual bonus outcome
A summary of the Committee’s assessment in respect of the 2024 Group Scorecard is set out in the following table:
Plan Targets Scoring
Key
Performance
Indicator Measure Weighting
Threshold (low target)
(0% of max earned)
Target
(50% of max earned)
Stretch (high target)
(100% of max earned) Outturn
Score
(out
of 2)
Financial
Group Adjusted
EBITDA (£m)
40% 877.5 975.0 1,072.5 1,064.2 1.91
Net Cashflow (£m) 15% 175 275 375 310.8 1.36
Strategic
UK BECCS 5%
Partially Achieved Achieved Strongly Achieved Between Partially
Achieved & Achieved
0.50
Global BECCS 5%
Partially Achieved Achieved Strongly Achieved Achieved
1.00
Cruachan Expansion 5%
Partially Achieved Achieved Strongly Achieved Achieved
1.00
Pellet Production (mt) 5% 3.878 4 .192 4.506 4.000mt 0.39
Pellet Sales to Third Parties 5%
Low Target High On Target
1.00
HSE &
ESG
HSE: Total Recordable
IncidentRate (TRIR)
5%
0.35 0.25 0 .15 0.24 1.10
HSE: Near Miss & Hazard
Incidents Rate (NMHIR)
130 155 180 167.56 1.50
Carbon Reduction 5%
Partially Achieved Achieved Strongly Achieved Between Achieved &
Strongly Achieved
1.31
Social (DEI Score) 5% 7.9 8 .1 8.3 8.0 0.50
Compliance 5%
Partially Achieved Achieved Strongly Achieved Between Achieved &
Strongly Achieved
1.40
100%
2024 Bonus Outturn:
Overall bonus outcome:
1.39
(69.5% of maximum)
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The targets for the 2024 Group Scorecard metrics aligned with the Group’s strategy and the 2024 business plan. They were reviewed
regularly by the Board as part of their ongoing oversight of business and executive performance. No adjustment to the performance
targets were made during 2024. Below is a summary of the Scorecard targets and commentary on how the Group performed on each.
The Committee completed an in-depth review of the score for each of the metrics to ensure that the result was appropriate
individually and in aggregate. The Committee believes that the outcome reflected the strong financial, strategic, HSE and ESG
performance of the Group, as well as wider employee and shareholder experiences. No discretion was exercised by the Committee in
determining the final 2024 Scorecard outcome.
Financial
– Group Adjusted EBITDA – This was the principal financial
metric, combining the performance of each business to give a
Group outcome. The outturn for this metric for 2024 was
£1,064.2 million, close to the High Target (score of 1.91).
– Net Cashflow – This was the secondary financial metric,
combining the performance of each business to give a Group
outcome (this replaced Leverage which in scorecards of prior
years was the secondary financial metric) and is adjusted for
the cash flows relating to acquisitions and disposals,
refinancing activities and share buybacks. The outturn for this
metric for 2024 was £310.8 million, which was above the Target
(score of 1.36). The Target for this metric was set on a very
stretching basis (£100 million more than the 2024 business
plan). It was exceeded due to strong EBITDA performance (net
of tax), reduced debt service costs and lower CAPEX spend.
Progress on Strategic Objectives
– Progress on key projects is of critical importance for Drax
indelivering the Group’s strategy. There were three projects
included for 2024. The choice of projects in 2024, and
assessment of performance on them, was subject to the
Committee’s scrutiny and approval.
– UK BECCS – The first project focused on advancing our UK
BECCS strategy. In 2024, material progress was made across
all critical path activities of our UK BECCS strategy. It is also
noted that 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 – please
refer to page 17 for more information on that (score of 0.50)
– Global BECCS – The second project focused on advancing
our ambitions for the deployment of new build BECCS across
sites in North America. In September 2024, we launched
Elimini, our new US-based carbon removals company, further
supporting our strategic aim of being a global leader in carbon
removals. Another key focus for our Global BECCS strategy
in2024 was progressing our site selection activity in the US
(score of 1.00).
– Cruachan Expansion – The final project focused on advancing
the expansion of the Cruachan (pumped storage) power
station. Much of the key activity in 2024 focused on the
necessary preparations for FEED and underground
investigation work. Furthermore in December, Drax completed
the acquisition of land around Loch Awe (score of1.00).
– Pellet Production – The production of sustainable pellets is
essential for the generation of power at Drax Power Station
and also to serve our customers with pellets globally, primarily
in Asia. In 2024, 4.000Mt of pellets were produced, relative to
atarget of 4.192Mt. This was an increase in production volume
from the previous year but was marginally below target. This
was largely due to higher unplanned downtime in some of our
Southern Plants (score of 0.39).
– Pellet Sales to Third Parties – Drax aims to double sales of
biomass to third parties to 4Mt per year by 2030 through
developing market presence in Asia and Europe. In 2024,
newcommercial agreements were entered into with new
andexisting third parties (score of 1.00).
HSE
– Safety – The assessment of our safety performance focused
on one leading and one lagging indicator. The first was TRIR,
measured at a Group level, and with the target built up from
business area targets. It measured the performance of both
employees and contractors, including both operating assets,
business and construction sites. At the end of 2024, Drax
hadaTRIR of 0.24, relative to a target of0.25 (score of 1.10).
Thesecond focus was near miss and hazard identification
reporting rate (NMHIR) provided by colleagues measured
across all operations and locations, and included
environmental, safety and process safety observations. The
report of near misses and hazard identification are an integral
part of an effective managed health and safety system and a
positive culture of reporting canreduce the likelihood of actual
incidents taking place. At the end of 2024, Drax had a NMHIR
of 167.56, relative to a target of 155 (score of 1.50).
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ESG
The Board and the Committee believe a material element of the
Scorecard must incorporate the realisation of goals addressing
environmental, safety, people and compliance targets. These
should reflect not only strategic goals but also inform the right
behaviours as well as aligning with our TCFD commitments.
– Carbon Reduction – The assessment of our carbon reduction
aims was focused on three elements. The first was to replace
diesel fuel used in Drax trains running from Immingham to Drax
Power Station. The target was to have 50% of train journeys
toDrax Power Station running on hydro-treated vegetable oil
(HVO) by the end of 2024. All rail journeys from April were
running on HVO which was 69% of all the rail journeys made
in2024. The second was to exploit opportunities to reduce the
energy intensity of pellet manufacturing, through a range of
energy optimising initiatives such as flattening the peak and
average energy demands to reduce both energy consumption
as well as overall energy costs and consequently Drax’s scope
2 emissions from pellet manufacturing. The target was to
achieve a 4% reduction in consumption across all pellet plants
in North America by the end of 2024 and 4.8% was achieved.
The third target was a retained target from the 2023 Group
Scorecard, representing the second half of the original project
to run down the Opus gas sales book and offboard a proportion
of the remaining gas customers. In September 2024, most of
the Opus business was sold to EDF, with contracts for the
remaining gas customers retained until the end of the existing
contracts. As at that date, 325 GWh of customer volume
against a target of 186 GWh had been offboarded and
therefore even if the sale had not happened the target would
have been exceeded. A final score of 1.31, which reflects all
three elements, was achieved for the carbon reduction metric.
– Social (DEI Score) – The assessment of our people aims was
measured against an independent rating intended to provide
anunderstanding of the extent to which colleagues considered
Drax to provide a culture of inclusivity. The rating is derived
through a subset of the quarterly all-employee survey. Drax’s
average score of these subset of questions for every survey
runin 2024 was 8.0, relative to a target score of 8.1 (a score of
0.50). The target score was based on the industry benchmark
which the Committee knew was a significant stretch in one
year. We are pleased with the progress Drax is making on
building a culture of inclusivity across the Group but we
recognise there is a lot more we need to do.
– Compliance – The assessment of our compliance focused on
four pillars of which management believe progress has been
made across all of them including developing the Group’s
Compliance Action Plan and incorporating key sustainability
metrics for reporting to stakeholders (score of 1.40).
Bonus earned for 2024 (audited information)
The table below sets out the bonuses earned for the 2024 financial year and the split between cash and deferred elements.
Director
Max bonus opportunity
(as % base salary)
Total bonus outcome
(as % of maximum)
Total bonus outcome
(as % base salary)
Total bonus outcome
(£000)
Amount paid
in cash
(£000)
Amount deferred in
shares
(£000)
Will Gardiner 175% 69.50% 121.63% 839 503 336
Andy Skelton 150% 69.50% 104.25% 457 274 183
40% of the total bonus award for 2024 will be deferred into shares for a period of three years and the remaining 60% will be paid in
cash in March 2025. The deferral element will in ordinary circumstances vest in March 2028, subject to the Executive Director being
employed by Drax at that time. If the Executive Director leaves, other than as a “good leaver”, the deferred element will be forfeited.
LTIP incentive outcomes (audited information)
The vesting outcome for awards granted in 2022 under the LTIP, which were subject to performance conditions over the three-year
period from 1 January 2022 to 31 December 2024, and scheduled to vest on 18 March 2025, is provided in the tables below.
Performance Condition Weighting
Performance for
threshold vesting
(25% vesting)
Performance for
maximum vesting
(100% vesting)
Actual
performance
Relative TSR vs FTSE 350 constituents 50% Median Upper Quartile 42.2%
(above Upper Quartile)
Cumulative Adjusted EPS 50% 239.5p 292.7p 333.1p
The Committee considered the Group’s overall performance for 2024 and felt no discretion to adjust the 2022 LTIP outcome was
required. The share buyback programmes which operated in 2023 and 2024 were not envisaged when the targets for the 2022 LTIP
grant were set and it did have a modest benefit to the EPS outturn by decreasing the number of shares in issue. The Committee took
this into consideration as part of the performance assessment and decided discretion to adjust the EPS target or outturn position was
not required. It is noted that Drax’s EPS performance over the three year period would have exceeded the maximum EPS target even
ifthe share buyback programmes had not taken place. The table below provides the awards due to vest based on this vesting result.
Director
Awards granted
(as % of base salary)
Number of
awards granted
Number of
awards vesting
Number of
dividend shares
earned
Number of
shares due to vest
Total value
(£000)
(1)
Will Gardiner 200% 174,119 174,119 18,774 192,893 1,243
Andy Skelton 175% 96,907 96,907 10,448 107,355 692
Note:
(1) Represents the value of the 2022 LTIP award which should vest on 18 March 2025, together with the dividend shares in relation to those vested shares. The value of the
award is calculated based on the average share price over the last quarter of 2024, which was £6.445. As the share price has fallen over the vesting period, there is no
value attributable to share price appreciation. (Share price on grant was £7.007). The value of dividend shares earned on the awards vesting for Will Gardiner is £121k and
for Andy Skelton is £67k based on the average share price over the final quarter of 2024.
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LTIP awards granted in 2024 (audited information)
The table below shows the conditional awards granted under the LTIP to Executive Directors on 15 March 2024.
Director
Award granted
(as % of salary) Number of shares granted
Face value of awards granted
(£000)
(1)
Will Gardiner 200% 292,225 1,380
Andy Skelton 175% 162,649 768
Note:
(1) The number of shares awarded was based on the average share price in the three-day period prior to grant, which was £4.721. In accordance with the LTIP rules,
dividend shares are awarded at the time and in the event that awards actually vest. No dividend shares are awarded where the initial awards lapse.
The performance conditions that apply to the LTIP awards granted in 2024 are set out below.
Performance Condition Weighting
Performance for
threshold vesting
(25% vesting)
Performance for
maximum vesting
(100% vesting)
Relative TSR vs FTSE 350 constituents 50% Median Upper Quartile
Cumulative Adjusted EPS 50% 286.7p 350.4p
Straight-line vesting occurs between performance levels for both conditions. Performance for both conditions is measured over three
financial years from 1 January 2024 to 31 December 2026.
DSP awards granted in 2024 (audited information)
The table below shows the deferred conditional share awards granted under the Deferred Share Plan (DSP) to Executive Directors
on15 March 2024 in respect of bonus earned for performance in the financial year ending 31 December 2023. These shares will
veston 15 March 2027.
Director
Value of deferred bonus
(£000) Number of shares granted
(1)
Will Gardiner 325 68,818
Andy Skelton 177 37,523
Note:
(1) The number of shares awarded was based on the average share price in the three-day period prior to grant, which was £4.721. In accordance with the DSP rules,
dividends in respect of the deferred shares are reinvested in additional shares, which vest when the deferred shares vest.
Sharesave options granted in 2024 (audited information)
No grants of Sharesave options were made to Will Gardiner or Andy Skelton in 2024. Both have ongoing Sharesave contracts to the
maximum permitted monthly savings.
Pension entitlements for defined contribution schemes (audited information)
Executive Directors are entitled to receive a contribution to the Group’s defined contribution pension plan, cash in lieu of pension
contributions or a mixture of these. The employer contributions for Will Gardiner and Andy Skelton in 2024 were 10% of base salary,
which is aligned with the rate of contributions provided to new joiners to the UK wider workforce. Will Gardiner’s employer
contributions were delivered as cash in lieu of pension. Part of Andy Skelton’s pension benefit was delivered as contributions tothe
Group defined contribution pension plan (£10,000) and the remaining part as cash in lieu (£33,875). Neither Executive Director was
amember of a defined benefit pension scheme.
Payments to former Directors (audited information)
There were no payments to former Directors.
Payments for loss of office (audited information)
There were no payments to Directors with respect to loss of office.
Recovery provisions
As outlined in the Policy, the Committee is able to operate ‘malus’ and/or ‘clawback’ provisions in exceptional circumstances.
TheCommittee is comfortable that malus and clawback provisions are effective and appropriate taking into account the nature of
thebusiness and its business cycle. The Committee can confirm that malus and/or clawback have not been operated during the year.
Statement of Directors’ shareholding and share interests (audited information)
The shareholding guidelines under the current Directors’ Remuneration Policy require Executive Directors who receive shares by virtue
of share plan awards, or who receive deferred bonus share awards under the DSP, to retain 50% of the shares received net (i.e., after
income tax and National Insurance contributions) until the value of shares held is equal to at least 250% of salary for the CEO and
200% of salary for other Executive Directors. Only shares that are not subject to performance conditions count towards the
shareholding requirement (shares owned by the Director and unvested awards subject to service only – DSP awards – on a net
oftaxbasis). As noted on page 130, both Executive Directors satisfy this requirement.
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Directors’ interests in shares (audited information)
The table below shows the shareholdings of the Directors, and their connected persons, as at 31 December 2024. The value is based
on the mid-market quotation on 31 December 2024 of £6.478. There was no movement in share interests between 31 December 2024
and the last practicable date for recording changes prior to the date of publication.
Director
Number of
beneficially
owned
(1)
Number of
LTIP awards
(2)(3)
Number of
DSP awards
(3) (4)
Number of
SAYE options
(5)
Shareholding
requirement
as a % of salary
Shareholding
as a % of salary
at 31December
2024
(6)
Shareholding
requirement
met at
31December
2024
Executive Directors
Will Gardiner 1,368,581 69 2,16 4 180,410 23,603 250% 1,285% Yes
Andy Skelton 630,077 385,254 98,987 23,603 200% 930% Yes
Non-Executive Directors
Andrea Bertone – – – – – – –
John Baxter 17,500 – – – – – –
Nicola Hodson – – – – – – –
Kim Keating – – – – – – –
David Nussbaum – – – – – – –
Erika Peterman – – – – – – –
Vanessa Simms
(7)
– – – – – – –
Rob Shuter
(8)
80,000 – – – – – –
Notes:
(1) The figures include 518,732 shares subject to a post-vesting holding period for Will Gardiner and 295,371 shares subject to a post-vesting holding period for Andy
Skelton.
(2) LTIP awards are conditional share awards subject to ongoing performance conditions.
(3) Shares representing dividend equivalents are added on vesting.
(4) A proportion of annual bonus is deferred into shares which are not subject to further performance conditions.
(5) The 2020 five-year SAYE option is due to mature on 1 June 2025 with an option price of £1.271.
(6) The calculation for Will Gardiner includes 1,272,964 shares owned, plus 95,617 unvested DSP shares on a net of tax basis. The calculation for Andy Skelton includes
577,614 shares owned, plus 52,463 unvested DSP shares on a net of tax basis.
(7) Vanessa Simms stepped down as a Director on 18 June 2024.
(8) Rob Shuter was appointed as a Director on 11 June 2024.
Service agreements or contracts for services
The following table shows, for each Director of the Company as at the date this Annual Report and Accounts is published, or those
who served as a Director of the Company at any time during the year ended 31 December 2024, the start date and term of the service
agreement or contract for services, and details of the notice periods. New service agreements were agreed during 2024 for Nicola
Hodson in January and for Kim Keating and Erika Peterman in October for extension of their term in office. In addition, Rob Shuter,
who was appointed to the Board in June 2024 wasissued with a new service agreement at that time.
Director
Date appointed as a Director
and member of the Board
Contract start date/
renewal date
Permitted contract
term (years)
Notice period by the
Company (months)
Notice period by the
Director (months)
Will Gardiner 16 November 2015 16 November 2015 Indefinite term 12 12
Andy Skelton 2 January 2019 2 January 2019 Indefinite term 12 12
Andrea Bertone 24 August 2023 24 August 2023 3 years 6 6
John Baxter 17 April 2019 17 April 2022 3 years 1 1
Nicola Hodson 12 January 2018 12 January 2024 3 years 1 1
Kim Keating 21 October 2021 21 October 2024 3 years 1 1
David Nussbaum 1 August 2017 1 August 2023 3 years 1 1
Erika Peterman 21 October 2021 21 October 2024 3 years 1 1
Vanessa Simms
(1)
19 June 2018 19 June 2021 3 years 1 1
Rob Shuter
(2)
11 June 2024 11 June 2024 3 years 6 6
Notes:
(1) Vanessa Simms stepped down as a Director on 18 June 2024.
(2) Rob Shuter joined the Board on 11 June 2024.
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Relative importance of spend on pay
The table below illustrates the relative importance of spend on pay compared to distributions to shareholders. At the AGM on 1 May
2025, the Board will recommend to shareholders that a resolution is passed to approve payment of a final dividend for the year ended
31 December 2024. The cost with respect to dividends for 2024 in the table below relates to the interim dividend, which was paid in
October 2024, and the final dividend to be paid in May 2025, subject to approval by shareholders at the AGM.
£337. 5m
£301.7m
Remuneration – 2024
Remuneration – 2023
£97.0 m
£89.4m
Dividends – 2024
Dividends – 2023
0 £50m £100m £150m £350m£300m£200m £250m
Drax 10-year Total Shareholder Return performance to 31 December 2024
The graph below shows how the value of £100 invested in both Drax and the FTSE 350 Index (Index) on 31 December 2014 has
changed. This Index has been chosen as a suitable broad comparator against which Drax’s shareholders may judge their relative
returns given that Drax is a member of the Index. The graph reflects the TSR for Drax and the Index referred to on a cumulative basis
over the period from 31 December 2014 to 31 December 2024.
0
50
100
150
200
250
300
Dec 24Dec 23Dec 22Dec 21Dec 20Dec 19Dec 18Dec 17Dec 16Dec 15Dec 14
Drax FTSE 350
CEO’s pay – last 10 financial years
Year 2015 2016 2017 2018 2019 2020 2021 2022 2023
(2)
2024
Group CEOs total single figure
(£000)
(1)
1,248 1,581 1,236 1,885 1,121 2,013 3,226 5,540 3,002 2,864
Bonus % of maximum awarded 46.00% 88.00% 53.00% 53.00% 45.00% 45.00% 80.50% 87.50% 70.00% 69.50%
LTIP award % of maximum
vesting
21.66% 15.43% 0.00% 57.63% 18.00% 57. 20% 7 7. 28% 100.00% 100.00% 100.00%
Notes:
(1) Dorothy Thompson stood down as CEO on 31 December 2017 and was replaced by Will Gardiner. The information reported from 2015 to 2017 relates to the
remuneration Dorothy Thompson earned over this period; the information reported from 2018 to 2024 relates to the remuneration Will Gardiner earned over this period.
(2) The 2023 Group CEO total single figure, which includes LTIP, has been restated to reflect the actual share price on vesting of £4.891 on 1 April 2024.
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Percentage change in Directors’ remuneration compared with the wider employee population
The tables below shows how the percentage change in the Directors’ salary/fees, benefits and bonus between 2020 and 2024,
compared to the percentage change in the average of each of those components of pay for a group of employees. There are several
employer entities but no employees who are specifically employed by Drax Group plc. As a result, the Committee has selected all Group
employees below Executive Director level based in the UK, as the majority of employees are based in the UK and this provides the most
appropriate comparison.
Salary/fees (percentage increase)
2020 2021 2022 2023 2024
Will Gardiner 3.0% 2.0% 10.7% 4.0% 4.0%
Andy Skelton 3.0% 2.0% 8 .1% 4.0% 4.0%
Andrea Bertone
(1)
– – – – –
John Baxter 0.0% 2.0% 4.5% 4 .1% 4.0%
Nicola Hodson
(2)
0.0% 2.0% 4.5% 6.5% 3.3%
Kim Keating – – 4.5% 4 .1% 4.0%
David Nussbaum
(2)
0.0% 2.0% 4.5% 6.5% 3.3%
Erika Peterman – – 4.5% 4 .1% 4.0%
Vanessa Simms
(2)
0.0% 2.0% 4.5% 6.5% 3.3%
Rob Shuter
(3)
– – – – –
Average for UK employees 3.0% 2.0% 4.5% 8.0% 5.0%
Taxable benefits (percentage increase)
2020 2021 2022 2023 2024
Will Gardiner
(4)
0.0% 0.0% 0.0% 0.0% 19.5%
Andy Skelton 0.0% 0.0% 0.0% 0.0% 0.0%
Andrea Bertone – – – – –
John Baxter – – – – –
Nicola Hodson – – – – –
Kim Keating – – – N/A
(5)
–
David Nussbaum – – – – –
Erika Peterman – – – N/A
(5)
–
Vanessa Simms – – – – –
Rob Shuter – – – – –
Average for UK employees 0.0% 0.0% 0.0% 0.0% 0.0%
Bonus (percentage increase)
(2)
2020 2021 2022 2023 2024
(6)
Will Gardiner 19.2% 82.9% 20.3% -15.9% 3.3%
Andy Skelton 9.4% 82.9% 17.5% -15.9% 3.3%
Andrea Bertone – – – – –
John Baxter – – – – –
Nicola Hodson – – – – –
Kim Keating – – – – –
David Nussbaum – – – – –
Erika Peterman – – – – –
Vanessa Simms – – – – –
Rob Shuter – – – – –
Average for UK employees 0.0% 78.9% 8.7% -13.6% 4.2%
Notes:
(1) In January 2024, Andrea Bertone assumed the role of Chair having joined the Board as a NED in August 2023. Prior to her appointment as Chair her annual base fee
was£61,000, and on appointment to the role of Chair, her salary was increased to the annual base fee rate of £288,340.
(2) There were no changes to the Committee Chair or Senior Independent Director additional fees in 2024 therefore the increase for Nicola Hodson, David Nussbaum
andVanessa Simms was lower overall than the other NEDs.
(3) Rob Shuter joined the Board on 11 June 2024 and therefore the percentage change in fees has not been provided for previous years.
(4) Effective 1 September 2024, Will Gardiner received health insurance for coverage outside of the UK.
(5) N/A refers to a nil value in the previous year, meaning that the year-on-year change cannot be calculated. Both Kim Keating and Erika Peterman received a travel
allowance from April 2023 following approval of the new Directors’ Remuneration Policy by shareholders at the 2023 AGM.
(6) The bonus Scorecard outcome for 2024 (1.39) is slightly lower than it was for 2023 (1.40). For the 2024 pay review, WillGardiner and Andy Skelton received a smaller
increase than the wider UK wider workforce which has resulted in a difference in the overall bonus % change.
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CEO pay ratio
The table below sets out the CEO pay ratio for 2024, along with the comparative ratios since 2019. The pay ratios have been calculated
using actual earnings for the CEO and UK employees. The CEO total single figure remuneration is given on page 133 of this report.
Financial Year Methodology
25th Percentile
Pay Ratio (P25)
50th Percentile
Pay Ratio (P50)
75th Percentile
Pay Ratio (P75)
2024 Option A 62:1 38:1 29:1
2023 Option A 76:1 46:1 30:1
2022 Option A 114:1 79:1 57:1
2021 Option A 84:1 52:1 34:1
2020 Option A 65:1 38:1 25:1
2019 Option A 42:1 25:1 16:1
The methodology used for calculating all pay ratios was the same. For 2024, the total remuneration of all UK employees of the Group
on 31 December 2024 has been calculated on a full-time (and full-year) equivalent basis using the single figure methodology and
reflects their actual earnings for 2024. The only exception is for employees with Defined Benefit (DB) pensions, where the employer
contribution to the respective schemes has been used in the calculation (rather than the single figure methodology) to reduce the
administrative complexity. This is likely to undervalue the DB pension value. No adjustments, other than to achieve full-time and
full-year equivalent rates, were made and no components of remuneration have been omitted. Of the three options permitted to
calculate the percentiles, the Committee has chosen option A (the calculation of the total pay and benefits for 2024 for all UK
employees on an FTE basis), as we believe it is the most robust and most statistically accurate method of the options permitted.
Setout in the table below is the base salary and the total pay and benefits for each of the identified employees in respect of 2024.
Element 25th Percentile (P25) 50th Percentile (P50) 75th Percentile (P75)
Base Salary £36,400 £51,207 £69,283
Total Pay and Benefits £46,292 £75,409 £99,772
Base salaries of all employees, including Executive Directors, are set with reference to a range of factors including market practice,
experience and performance in role. The CEO has a larger portion of his pay based on the performance of the business than the
individuals at P25, P50 and P75. The Committee believes that our senior executives should have a significant portion of their pay
directly linked to the performance of the business but recognise that this does mean the pay ratios will fluctuate each year depending
on business performance and associated outcomes of incentive plans.
The pay ratio reports a narrower gap between actual earnings of the CEO and UK employees (than compared to 2023 CEO pay ratios).
This is primarily due to the impact of the LTIP award vesting. Whilst both awards vested in full, the outcome of the 2021 LTIP (which is
included in the 2023 CEO Pay Ratio) benefitted from share price appreciation. The 2022 LTIP which is due to vest in March has not,
and this has resulted in a lower reported figure for the total CEO remuneration for 2024.
The Group is comprised of different business units and teams with different levels of pay, including call centre staff, support staff
andengineers. The Committee reviews information about employee pay, reward and progression policies of the Group and (given
therelative differences in responsibilities of the roles, the pay relativities between grades within the organisation, and the positioning
of pay versus the wider market) is comfortable that the median pay ratio is consistent with these policies.
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Single total figure of remuneration – Non-Executive Directors (audited information)
The fees for the Chair and Non-Executive Directors were reviewed at the start of 2024 and were subsequently increased. A 4%
increase to the base fee was applied for both the Chair and Non-Executive Directors, effective from 1 January 2024. The additional
fees for chairing a Committee were not increased. The increases applied were less than those for the UK wider workforce of 5%. For
completeness, the table below sets out the single figure of remuneration and breakdown for each Non-Executive Director for 2024
together with comparative figures for 2023. The figures are rounded up to the nearest £1,000.
Director Year
Base fee
(£000)
Travel
allowance
(£000)
Additional fee for
Senior Independent
Director
(£000)
Additional fee for
chairing a Committee
(£000)
Total
(£000)
Andrea Bertone
(1)
2024 289 24 – – 312
2023 22 8 – – 30
John Baxter 2024 64 – – – 64
2023 61 – – – 61
Nicola Hodson 2024 64 – – 13 77
2023 61 – – 13 74
Kim Keating
(2)
2024 64 12 – – 75
2023 61 8 – – 69
David Nussbaum 2024 64 – 13 – 77
2023 61 – 13 – 74
Erika Peterman
(3)
2024 64 12 – – 76
2023 61 7 – – 69
Vanessa Simms
(4)
2024 30 – – 6 36
2023 61 – – 13 74
Rob Shuter
(5)
2024 36 – – 8 43
2023 – – – – –
Notes:
(1) Andrea Bertone joined the Board as a Non-Executive Director on 24 August 2023 and from this date received the Non-Executive Director base fee. Her fees for 2023 are
pro-rated. Upon appointment to Chair on 1 January 2024, her base fee increased to that of the Chair’s base fee. As Andrea is based in the US, her fee was paid in US
dollars. Her base fee was in line with the fee structure in the Policy and was converted into US dollars based on the exchange rate £1=$1.37. From her start date, Andrea
received an annual travel allowance of USD 30,000 which was pro-rata for 2023.
(2) Kim Keating is based in Canada and her fee was paid in Canadian dollars. Her base fee was in line with the fee structure in the Policy and was converted into Canadian
dollars based on the exchange rate £1=C$1.72. Effective April 2023, Kim received an annual travel allowance of CAD 20,000.
(3) Erika Peterman is based in the US and her fee was paid in US dollars. Her base fee was in line with the fee structure in the Policy and was converted into US dollars based
on the exchange rate £1=$1.37. Effective April 2023, Erika received an annual travel allowance of USD 15,000.
(4) Vanessa Simms stood down as a Director in June 2024 and received a pro-rated base fee and additional fee for chairing the Audit Committee up until her date of
departure.
(5) Rob Shuter joined the Board as a Non-Executive Director in June 2024 and received a pro-rated base fee and additional fee for chairing the Audit Committee.
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Statement of Implementation of the Remuneration Policy in 2025
This section sets out the proposed implementation of the Directors’ Remuneration Policy in 2025. No deviations from the procedure
for the implementation of the Policy are proposed.
Base salary
Below are the base salaries of the Executive Directors which took effect from 1 January 2025. There are no further planned increases
for 2025. The explanation for their base salary increase are provided on page 129.
Base salary as at
1 January 2024
(000)
Base salary as at
1January 2025
(000)
Percentage
increase
Will Gardiner £690 £724 5.0%
Andy Skelton £439 £454 3.5%
Benefits and pension
There are no changes intended to the benefits provided to the Executive Directors. The employer contributions for Will Gardiner and
Andy Skelton will remain at 10% of base salary which is aligned with the rate of new joiners to the UK wider workforce.
Annual bonus
The targets for the 2025 bonus scorecards were approved by the Committee in December 2024. The bonus awards for most
colleagues across the Group in 2025, including the two Executive Directors, will be subject to the performance against the 2025
GroupScorecard. The delivery of financial performance again makes up the majority weighting of the 2025 Group Scorecard (55%).
Consistent with 2024, the delivery of our Group EBITDA budget is the primary financial KPI and Net cash flow is retained as the
secondary financial KPI as cash generation is an important priority in 2025.
The delivery of critical strategic milestones is essential to Drax making progress on each of our core strategic objectives and they have
a 25% weighting. For 2025, the key strategic milestones reflect progress on our FlexGen business model, progress on our Pellets
business model, progress on securing the future of Drax Power Station and growth of the Elimini business.
Safety and ESG performance have been a key part of the annual bonus plan since 2022 and will have a 20% weighting in the 2025
Group Scorecard. Safety performance will continue to be assessed against one leading indicator and one lagging indicator. The leading
indicator is the Near Miss and Hazard Identification Rate (NMHIR) which is measured based on the number of environmental, safety
and process safety observations across all operations and locations. The lagging indicator is Total Recordable Incident Rate (TRIR),
measured at a Group level with the overall target built up based on local business area targets.
ESG will be represented by three performance measures. The first is a carbon reduction measure comprising three distinct projects
covering our operational business areas. The delivery of these projects by the end of 2025 will support a reduction in our carbon
footprint across Scopes 1, 2 and 3. This performance measure isthe Environmental dimension of ESG. The second focuses on
improving diversity, equity and inclusion (DEI) and this will take the form of a DEI target, derived from an all-employee opinion survey
administered by Workday Peakon. The DEI target is the Social dimension of ESG and also aligns with our People Positive element ofthe
Group’s strategy. Compliance is the Governance dimension of ESG, which is integral to the success of our business and that the Board
regards as a core part of our licence to operate.
Finally, underpinning the bonus plan is a modifier which can be applied to reduce the overall formulaic bonus outcome, if the
Committee considers it appropriate. The Committee has discretion to apply the modifier if any of the following events were to occur:
amajor breach in safety; a major environmental, community or biomass sourcing event; or a major compliance breach or failure.
The performance metrics, targets and outturns of the 2025 Group Scorecard will be disclosed in the 2025 Annual Report on
Remuneration.
Remuneration Committee report continued
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LTIP
The Committee will grant LTIP awards to Executive Directors of 200% of salary for the CEO and 175% of salary for the CFO.
For the TSR element, performance will be assessed versus the constituents of the FTSE 350 with threshold vesting (25% of maximum)
for performance in line with the median and maximum vesting for performance in line with upper quartile. TSR performance will be
measured over the period 1 January 2025 to 31 December 2027.
For the EPS element, targets for the 2025 grant have been agreed by the Committee at the meeting in February. The targets were
considered similarly challenging to those set in prior years having had regard to current commercial circumstances. The EPS target
was set after considering the Company’s internal forecasts, market expectations and sector peers. The EPS target is “Adjusted EPS”,
derived from Adjusted Results as reported in the Company’s audited financial statements. Instances where such adjustments might
apply include acquisition and restructuring costs, asset obsolescence charges and certain remeasurements on derivative contracts.
EPS performance will be measured over the period 1 January 2025 to 31 December 2027 and vesting will be in accordance with the
following schedule. Note, vesting between the threshold and maximum will be on a straight-line basis.
Performance Target
% of Award Vesting
(of EPS performance condition)
Below threshold <252.5p 0%
Threshold 252.5p 25%
Maximum 308.7p 100%
With regards to targets set in 2024 for each of the performance related incentives, the Committee retains discretion to restate or
make adjustment to those targets in appropriate circumstances (such as material acquisitions, divestments, changes in capital
structure or capital returns to shareholders). This would take account of the importance of such performance targets fulfilling their
original intent ensuring that they are not more or less challenging than intended when set, and considering the impact of relevant
events in the performance period. Any amendments would be disclosed in the Remuneration Report at the relevant time.
Non-Executive Directors’ fees
In recent years Drax has changed significantly with enhanced international presence, including the appointment of a number of
NorthAmerica-based Board members, and increased complexity through diversification of the business. NEDs are also be expected to
commit more time to the role so that they can contribute to the success of the Group both at Board meetings and throughout the year.
To meet these challenges the business requires a high-quality, globally diverse Board. Consequently the fees of the NEDs need to be
set at a level that can attract talent with relevant skills and experience to lead the business.
During 2024, an independent review was undertaken by Deloitte where existing fees were benchmarked against other UK-listed
companies with significant global operations. The benchmarking showed that Drax’s existing fees were at the lower quartile of this
peer group. Over the last five years, as Drax has seen a significant increase in the complexity and international presence of the
business whilst the NED base fee has increased on average by 2.9% per annum. The Chair and Executive Directors therefore agreed
that Drax’s fees for NEDs (excluding the Chair) should be increased to make them competitive and to recognise the increased time
commitment of the role.
The fees that apply from 1 January 2025 are detailed in the table below. This includes a one-off adjustment to the base fee to a more
competitive level. The additional fees for chairing Committees and for the Senior Independent Director have been increased, and a
supplemental fee for Committee membership has been added from 2025, recognising the additional time commitment of these
responsibilities. To recognise the additional time incurred by NEDs based overseas in attending Board meetings in the UK, the travel
allowance introduced in 2023 has been increased. Erika Peterman, based in the US, will receive US$25,000 per annum. Kim Keating,
based in Canada, will receive C$36,000 per annum. The quantum of the travel allowance for Andrea Bertone will increase to
US$35,000 per annum. In addition, for 2025 a travel allowance will be introduced for UK based NEDs for Board meetings that take
place outside of the UK (£4,000 per meeting).
The base fee for the Chair increased by 3.5%, effective 1 January 2025, in line with the average increase of the wider workforce as
part of the 2025 annual pay review process.
Director
Fees at
1 January 2024
(£)
Fees at
1January 2025
(£)
Chair
(1)
288,340 298,500
Non-Executive Director base fee
(1)
63,440 90,000
Supplemental fee for Committee membership – 10,000
Senior Independent Director 12,750 25,000
Audit Committee Chair 12,750 25,000
Remuneration Committee Chair 12,750 25,000
Nomination Committee Chair
(2)
12,750 25,000
Notes:
(1) The 2025 fees for the Chair and the two Non-Executive Directors based outside of the UK will continue to be paid in their respective local currency.
(2) No fee was paid for chairing this sub-committee as the Chair is also the Nomination Committee Chair.
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Shareholder voting
The table below shows the voting outcome at the 2024 AGM on the 2023 Annual Report on Remuneration. The votes cast represent
74.81% of the issued share capital. In addition, shareholders holding 656,575 shares withheld their votes.
Voting on the 2023 Annual Report on Remuneration For Against
Number of votes 281,741,119 7,558,586
Proportion of votes 97.39% 2.61%
The table below shows the voting outcome for the Directors’ Remuneration Policy at the 2023 AGM. In addition, shareholders holding
563,770 shares withheld their votes.
Voting on the 2023–2025 Directors’ Remuneration Policy For Against
Number of votes 287,599,357 7,97 8, 42 0
Proportion of votes 97.3 0% 2.70%
Adviser to the Committee
In October 2024, Deloitte were appointed by the Committee as the independent remuneration adviser and continued in this capacity
for the remainder of 2024, replacing Korn Ferry who were the adviser to the Committee fromMay 2022 to September 2024. Both Korn
Ferry and Deloitte were paid in fees in 2024 in relation to advising the Committee andon broader HR matters. Korn Ferry were paid
£73,417.50 excluding VAT and Deloitte were paid £11,000 excluding VAT, during 2024 for the period of time they were adviser in
respect of advice given to the Committee determined on a time and material basis.
Both Deloitte and Korn Ferry are members of the Remuneration Consultants Group and are signatory to its Code of Conduct. The
Committee is satisfied that the advice it received from both Deloitte and Korn Ferry was, and remains, objective and independent.
Deloitte has no other connection with the Company other than stated here, or individual Directors, and Deloitte have confirmed
thatthere are no conflicts of interest, as have Korn Ferry for the period of 2024 where they were adviser to the Committee.
This report was reviewed and approved by the Remuneration Committee.
Nicola Hodson
Chair of the Remuneration Committee
26 February 2025
Remuneration Committee report continued
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This report contains information which the Company is obliged to disclose and which cannot be found in the strategic, financial,
sustainability or corporate governance reports of this document.
The Directors present their Annual Report on the affairs of the Group, together with the audited Consolidated financial statements
and Auditor’s report forthe year ended 31 December 2024. The Directors’ report required under the Companies Act 2006 is comprised
of this report, theCorporate Governance Report and the Audit, Nomination and Remuneration Committee reports.
Information about the use of financial instruments by the Company and its subsidiaries is given in note 7.1 to the consolidated financial
statements on page 239.
Directors
The following Directors held office during the year:
Andrea Bertone Kim Keating
Will Gardiner David Nussbaum
Andy Skelton Erika Peterman
John Baxter Rob Shuter (appointed 11 June 2024)
Nicola Hodson Vanessa Simms (until 18 June 2024)
The appointment and replacement of Directors is governed by the Company’s Articles of Association (Articles), the UK Corporate
Governance Code, the Companies Act 2006 and related legislation. See Articles 77 to 86 of the Company’s Articles, available on
theCompany’s website at www.drax.com/about-us/corporate-governance/compliance-and-policies/.
Annual General Meeting (AGM)
The AGM will be held at 10am on Thursday 1 May 2025 at 200 Aldersgate, St. Paul’s, London EC1A 4HD. A separate document
contains the notice convening the AGM and includes an explanation of the business to be conducted at the meeting.
Dividends
An interim dividend of 10.4 pence per share was paid on 25 October 2024 (2023: 9.2 pence), to shareholders on the register on
20September 2024.
The Directors propose a final dividend of 15.6 pence per share (2023: 13.9 pence), which will, subject to approval by shareholders
attheAGM, be paid on 16 May 2025, to shareholders on the register on 25 April 2025.
Details of past dividends can be found on the Company’s website at www.drax.com/investors/shareholder-information/dividends/.
Share capital
Drax Group plc has a Premium Listing on the London Stock Exchange and currently trades as part of the FTSE 250 Index, under
thesymbol DRX and with the ISIN number GB00B1VNSX38.
The Company has only one class of equity shares, being ordinary shares of 11
16
⁄29 pence each, with each ordinary share having
onevote. Shares held in treasury do not carry voting rights.
Details of movements in the Company’s issued share capital can be found in note 4.4 to the consolidated financial statements
onpage222.
Shares in issue
At 1 January 2024 424,923,406
Issued in period 2,8 47,36 0
At 31 December 2024 427,770,766
Treasury shares at 31 December 2024 57,844,972
Total voting rights at 31 December 2024 369,925,794
Issued between 1 January and 26 February 2025 39,572
At 26 February 2025 427,810,338
Treasury shares at 26 February 2025 63,333,162
Total voting rights at 26 February 2025 36 4,477,176
Directors’ report
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Authority to purchase own shares
At the AGM held on 25 April 2024, shareholders authorised the Company to make market purchases of up to 10% of the issued
ordinary share capital. At the 2025 AGM, shareholders will be asked to renew the authority to make market purchases of up to 10%
ofthe issued ordinary share capital. More details on resolution 19 can be found in the Notice of Meeting. During 2024, the Company
purchased a total of 17,757,775 ordinary shares between 7 August 2024 and 31 December 2024 as part of the Company’s £300 million
share buyback programme.
Interests in voting rights
Information provided to the Company in accordance with the Financial Conduct Authority’s Disclosure and Transparency Rules (DTR)
is published in a timely manner on the London Stock Exchange’s Regulatory News Service – a Regulatory Information Service – and
onthe Company’s website.
As at 26 February 2025, the following information had been received in accordance with DTR5 from holders of notifiable interests in
the voting rights of the Company. The information provided below was correct at the date of notification. However, investors are only
obliged to notify the Company when a notifiable threshold is crossed and therefore it should be noted that the holdings below may
have changed but without crossing a threshold.
Date last
notification
made
Number of
voting rights
directly held
Number of
voting rights
indirectly held
Number of
voting rights
in qualifying
financial
instruments
Total number
of voting
rights held
% of the issued
share capital
held
(1)
Invesco Limited 22 Oct 2020 – 38,578,024 – 38,578,024 9.71%
Schroders plc 24 Sept 2024 – 18,741,922 – 18,741,922 4.90%
Orbis Holdings Limited 08 Jan 2024 – 19,274,15 4 – 19,274,15 4 5.01%
Notes:
(1) As at the date of the last notification made to the Company by the investor, in compliance with DTR.
Rights and obligations attaching to shares
The rights attaching to the Company’s Ordinary Shares are set out in the Articles, available on the Company’s website at www.drax.
com/about-us/corporate-governance/compliance-and-policies/. The Articles may only be changed by shareholders by special
resolution.
Attention should be given to the following sections within the Articles, covering the rights and obligations attaching to shares:
– Variation of rights – which covers the rights attached to any class of shares that may be varied with the written consent of the
holders of not less than three-quarters in nominal value of the issued shares of the relevant class (excluding any shares of that class
held as treasury shares), or with the sanction of a special resolution passed at a separate General Meeting of the holders of shares
ofthe class duly convened and held in accordance with the Companies Act.
– Transfer of shares – provides detail of how transfers of shares may be undertaken. It also sets out the Directors’ rights of refusal
toeffect a transfer and the action that Directors must take following such refusal. It should be noted that a shareholder does not
need to obtain the approval of the Company, or of other holders of shares in the Company, for a transfer of shares to take place.
– Voting, deadlines and proxies – these sections of the Articles deal with voting on a show of hands and on a poll. They also cover the
appointment of a proxy or corporate representative. In respect of appointment of a proxy or corporate representative, the Articles
provide for the submission of proxy forms not less than 48 hours (or such shorter time as the Board may determine) before the time
appointed for the holding of the meeting. It has been the Company’s practice since incorporation to hold a poll on every resolution
atAnnual General Meetings and General Meetings.
Disabled employees
The Company gives full consideration to applications for employment by disabled persons, bearing in mind the aptitudes of the
applicant concerned. In the event of employees becoming disabled, every effort is made to ensure that their employment with the
Group continues, and that appropriate training is arranged. It is the policy of the Group that the training, career development and
promotion of disabled persons should, so far as possible, be identical to that of other employees.
Colleague engagement
Engaging with our colleagues is critical to creating a supportive, diverse, and inclusive culture where colleagues feel they belong and
can contribute to delivering our purpose, strategy, and long-term success. Details of how the Company has engaged with employees
during the year can be found in the Stakeholder Engagement section on page 97. In addition, details of how the Board has considered
the interests of employees in key decision making can be found in the section 172 statement on page 96.
Directors’ report continued
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Political donations
Drax is a politically neutral organisation and, as further explained below, did not make any political donations or incur any political
expenditure (within the ordinary meaning of those words) in 2024. The Company regularly engages with regulators and policymakers
(including those associated with political parties and governments) to listen and contribute to discussions on a wide range of matters.
Such engagement is an important part of our strategy and contributing to initiatives enabling the UK in its goal of reaching net zero
by2050. Further information on how we engage with stakeholders can be found on pages 96 to 102, and our Political Engagement
Policy can be found on the Company’s website at: www.drax.com/about-us/corporate-governance/compliance-and-policies/drax-
political engagement-policy/. Due to the broad definition of political donations under the Companies Act 2006 (the Act), and as a
matter of good governance and transparency, we have provided information on areas of expenditure incurred as a result of this
engagement which may be regarded as falling within the scope of the Act.
During the year ended 31 December 2024, Drax exhibited at, sponsored, and held events at, conferences organised by political parties,
spending a total of £20,817 (2023: £67,274). This included, the buying of attendance passes to the Labour Annual Party Conference
(£8,694), Conservative Party conference (£6,995), and Liberal Democrat Annual Party Conference (£2,140). It also included passes to
the Labour Annual Business Conference (£2,388) and passes to the Scottish Labour Conference (£600). These events allow Drax to
present its views on a non-partisan basis to politicians from across the political spectrum and non-political stakeholders such as NGOs
and other listed and non-listed companies. These payments do not indicate support for any political party. Overall, the recipients were
the Conservative Party (£6,995), the Labour Party (£11,682), and the Liberal Democrats (£2,140).
At the 2025 AGM, Drax will be seeking renewal from shareholders of the existing authority approved at the 2024 AGM. More details
are contained in the Notice of Meeting.
Other significant agreements
– A £450 million Sustainability-linked Loan Facility Agreement dated 19 August 2024 between, amongst others, Drax Corporate
Limited and Banco Santander S.A., London Branch (as facility agent) (the Facility Agreement).
– An indenture dated 4 November 2020 between, amongst others, Drax Finco plc and BNY Mellon Corporate Trustee Services
Limited (as Trustee) governing €144 million 2.625% senior secured notes due 2025.
– An Indenture dated 2 May 2024 between, amongst others, Drax Finco plc and BNY Mellon Corporate Trustee Services Limited
(asTrustee) governing €350 million 5.875% senior secured notes due 2029 (the 2020 Indenture and, together with the 2024
Indenture, the Indentures).
– A £375 million term loan facilities agreement dated 24 July 2019 between, amongst others, Drax Corporate Limited and Banco
Santander S.A., London Branch (as facility agent) as amended and restated on 20 September 2021 (the 2019 Private Placement)
and as further amended on 16 December 2024.
– A £98 million and €126.5 million term loan facilities agreement dated 18 August 2020, amongst others, Drax Corporate Limited
andBanco Santander S.A., London Branch (as facility agent) as amended and restated on 21 September 2021 (the 2020 Private
Placement) and as further amended on 16 December 2024.
– A loan facilities agreement dated 12 July 2021 between, amongst others, Pinnacle Renewable Energy Inc, Drax Corporate Limited,
and Royal Bank of Canada (as facility agent) which includes a C$200 million term loan facility (2021 Facility Agreement) as further
amended on 31 October 2023 and as further amended and restated on 22 December 2023.
– A £100 million and €185 million Sustainability-linked term loan facilities agreement dated 22 February 2024 between, amongst
others, Drax Corporate Limited and Lloyds Bank Plc (as facility agent) as amended and restated on 4 November 2024. (2024
Sustainability-linked facility agreement).
– A £125 million term loan facilities agreement dated 3 April 2024 between, amongst others, Drax Corporate Limited and Banco
Santander S.A., London Branch (as facility agent) (2024 £125m facility agreement).
– A £50 million term loan facilities agreement dated 19 August 2024 between, amongst others, Drax Corporate Limited and MUFG
Bank, Ltd (as facility agent) (2024 £50m facility agreement).
– Drax Energy Solutions has entered into a master receivables and transfer and servicing agreement (“Drax Energy Solutions MRTSA”),
under which Drax Energy Solutions as seller and servicer, sells trade receivables (on a non-recourse basis) to Ester Finance Titrisation
as purchaser, with Crédit Agricole Corporate and Investment Bank as the arranger and calculation agent and Eurotitrisation as the
programme agent. The Drax Energy Solutions MRTSA was originally entered into on 23 June 2016, and was amended and restated
on 18 February 2022 to, inter alia, extend the maturity to 2027 and increase the quantum to £300 million. The Group agreed a
further increase to the £300 million limit, to £400 million, for the period November 2022 to January 2024. Alongside the increased
limit, the term of this facility was extended during the year to March 2025 and thereafter the size of the facility reduces to
£300 million until the facility matures in January 2027. Utilization of the facility was £400 million at 31 December 2024.
Under the Indentures, a change of control (a Notes Change of Control) occurs if any person other than Drax Group plc becomes the
ultimate beneficial owner of more than 50% of the voting rights of Drax Group plc’s direct subsidiary, Drax Group Holdings Limited
(unless replaced by a successor parent company), or else if all or substantially all of the assets of Drax Group Holdings Limited are
disposed of outside of the Group. No later than 60 days after any change of control, Drax Group Holdings Limited must offer to
purchase any outstanding notes at 101% of the principal amount of such notes plus accrued interest and other unpaid amounts.
Drax Group plc Annual report and accounts 2024
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Under the Facility Agreement, the 2019 Private Placement, the 2020 Private Placement, the 2021 Facility Agreement, 2024
Sustainability-linked facility agreement, 2024 £125m facility agreement and 2024 £50m facility agreement, a change of control occurs
if any person or group of persons acting in concert gains control of Drax Group plc or if Drax Group plc no longer holds directly 100%
of the issued share capital of Drax Group Holdings Limited (subject to carve-outs for the interposition of an intermediate holding
company) or else if a Notes Change of Control occurs. Following a change of control, if any lender requires, it may by giving notice
tothe relevant Group entity within 30 days of receiving notice from such Group entity that a change of control has occurred, cancel
itscommitments and require the repayment of its share of any outstanding amounts within three business days of such cancellation
notice being given.
Under the Drax Energy Solutions MRTSA, a change of control occurs in respect of Drax Energy Solutions Limited or Drax Group
Holdings Limited if (i) Drax Group plc or any member of the Drax Group separately or together in any combination are not the direct or
indirect legal and beneficial owners of more than 50% of the voting rights and share capital of Drax Energy Solutions Limited or Drax
Group Holdings Limited, or (ii) any event whereby Drax Group plc would cease to be a listed company. Following a change of control
Ester Finance Titrisation may serve notice and terminate the Servicing Mandate of Drax Energy Solutions. Such termination notice
would become effective on the earlier of (a) the date on which a Substitute Servicer is appointed or b) the date falling six months
following notification to all Debtors. Further information in respect of the Group’s financial risk management programme (including
commodity risk, foreign currency risk, interest rate risk, inflation risk, liquidity risk, and credit risk) appears in note 7 to the
Consolidated financial statements on page 239.
Directors’ interests and indemnity arrangements
Other than a service contract between the Executive Directors and a Group company, no Director had a material interest at any time
during the year in any significant contract with the Company or any of its subsidiary undertakings. There are no agreements between
the Group and its Directors providing for compensation for loss of office or employment because of a takeover bid. The Company has
appropriate indemnity insurance cover in place in respect of legal action against Directors of the Company and its subsidiaries.
Strategic report
The Strategic report on pages 1 to 85 contains disclosures in relation to workforce engagement, stakeholder engagement, diversity,
Greenhouse Gas emissions, streamlined energy and carbon reporting requirements (SECR), future development and research
activities.
Post balance sheet events
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. See page 17 for more information.
Auditors and the disclosure of information to the auditor
So far as each person serving as a Director at the date of approving this report is aware, there is no relevant audit information, being
information needed by the auditor in connection with preparing the report, of which the auditor is unaware. Having made enquiries
offellow directors, each Director has taken all steps that they ought to have taken as a Director to ascertain any relevant audit
information and to establish that the auditor is aware of that information. This information is given and should be interpreted in
accordance with the provisions of Section 418 of the Companies Act.
Deloitte LLP, who performed the role of external auditor continuously since the Company’s listing in 2005, stepped down as the
external auditor upon completion of their work for the financial year ending 31 December 2023. Following a tender process in 2021,
PricewaterhouseCoopers LLP (PwC) were appointed as the new external auditor. Resolutions will be proposed at the 2025 AGM (i)
forthe re-appointment of PwC as the auditor of the Group, and (ii) authorising the Directors to determine the auditor’s remuneration.
TheAudit Committee reviews the appointment of the auditor, the auditor’s effectiveness and its relationship with the Group, including
the level of audit and non-audit fees paid to the auditor. Further details on the work of the auditor and the Audit Committee are set out
in the Audit Committee report on pages 112 to 125.
Disclosures required under Listing Rule 6.6.4
The information required to be disclosed in accordance with Listing Rule 6.6.4 of the Financial Conduct Authority’s Listing Rules can
be located in the following pages of this Annual Report and Accounts:
Section Information to be included Location
1 Statement of the amount of interest capitalised Note 2.5 on page 187
2, 4 – 14 Not applicable
The Directors’ report was approved by the Board on 26 February 2025 and is signed on its behalf by:
Brett Gladden
Group Company Secretary
Registered office: Drax Power Station, Selby, North Yorkshire, YO8 8PH
Registered in England and Wales Number 5562053
Directors’ report continued
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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
Directors’ responsibilities statement
Drax Group plc Annual report and accounts 2024
149
Governance
Contents
Contents
Financial statements
152 Independent Auditor’s report to the members
of Drax Group plc
161 Financial statements
Section 1
Consolidated financial statements
167 Consolidated income statement
168 Consolidated statement of comprehensive income
169 Consolidated balance sheet
170 Consolidated statement of changes in equity
171 Consolidated cash flow statement
Section 2
Financial performance
172 2.1 Segmental reporting
175 2.2 Revenue
180 2.3 Operating and administrative expenses
181 2.4 Impairment review of fixed assets and goodwill
187 2.5 Net finance costs
187 2.6 Current and deferred tax
191 2.7 Alternative performance measures
197 2.8 Earnings per share
197 2.9 Dividends
198 2.10 Retained profits
198 2.11 Share buyback programme
198 2.12 Post balance sheet event
Section 3
Operating assets and working capital
199 3.1 Property, plant and equipment
203 3.2 Leases
205 3.3 Renewable certificate assets
206 3.4 Inventories
207 3.5 Trade and other receivables and contract assets
210 3.6 Contract costs
211 3.7 Trade and other payables and contract liabilities
213 3.8 Climate change
Section 4
Financing and capital structure
216 4.1 Cash and cash equivalents
216 4.2 Borrowings
220 4.3 Notes to the Consolidated cash flow statement
222 4.4 Equity and reserves
223 4.5 Non-controlling interests
Section 5
Other assets and liabilities
225 5.1 Business combinations
225 5.2 Goodwill and intangible assets
228 5.3 Provisions
Section 6
People costs
230 6.1 Colleagues including Executive Directors and employees
230 6.2 Share-based payments
234 6.3 Retirement benefit obligations
Section 7
Risk management
239 7.1 Financial instruments and their fair values
243 7.2 Financial risk management
260 7.3 Hedge reserve
261 7.4 Cost of hedging reserve
262 7.5 Offsetting financial assets and financial liabilities
262 7.6 Contingencies
263 7.7 Commitments
Section 8
Reference information
264 8.1 General information
264 8.2 Adoption of new and revised accounting standards
265 8.3 Related party transactions
266 8.4 Restatements
Drax Group plc
267 Company financial statements
269 Notes to the Company financial statements
Financial
statements
Financial statements
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150
Contents
Drax Group plc Annual report and accounts 2024
151
Financial statements
Contents
Report on the audit of the financial statements
Opinion
In our opinion:
– Drax Group plc’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at 31 December 2024 and of the Group’s profit and the Group’s
cash flows for the year then ended;
– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards
as applied in accordance with the provisions of the Companies Act 2006;
– the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable
law); and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual report and accounts (the “Annual Report”), which comprise: the
consolidated and Company balance sheets as at 31 December 2024; the consolidated income statement, the consolidated statement
of comprehensive income, the consolidated and Company statements of changes in equity and the consolidated cash flow statement
for the year then ended; and the notes to the financial statements, comprising material accounting policy information and other
explanatory information.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided.
Other than those disclosed in the Audit Committee Report, we have provided no non-audit services to the Company or its controlled
undertakings in the period under audit.
Our audit approach
Context
The Drax Group produces biomass in North America, generates renewable energy in the UK and sells renewable power to corporate
customers in the UK. The Group is headquartered in the UK. The year ended 31 December 2024 is our first year as external auditors
ofthe Group and the Company.
Through our audit transition, we performed specific procedures over opening balances by reviewing the predecessor auditors’ working
papers and undertaking an assessment of risk. We also performed process walkthroughs to understand and evaluate the key financial
processes and controls across the Group, we independently evaluated the Group’s accounting policies, and we assessed key areas of
estimation and judgement that impact the Group and Company financial statements.
As we undertook each phase of this first year audit, we regularly reconsidered our risk assessment to reflect audit findings, including
our assessment of the Group’s control environment, and the impact on our planned audit approach. We considered the following areas
to be of most significance in our audit of the financial statements and therefore we have included these as key audit matters:
– Recoverability of goodwill in the Pellet Operations (Group), reflecting challenges in the historic performance of this business;
– Recoverability of Property, Plant and Equipment in respect of Drax Power Station (Group), reflecting reduced expected future cash
flows predominantly as a result of uncertainty surrounding the future tariffs for the power station beyond the end of the current
tariff arrangements in 2027;
– Valuation and presentation of derivative financial instruments (Group), reflecting accounting judgements and estimates relevant
tothese balances and manual accounting processes and controls; and
– Recoverability of the carrying value of investments in subsidiary undertakings (Company), reflecting the relative significance
oftheinvestment value to the Company financial statements.
Independent Auditor’s report to the members of Drax Group plc
Financial statements
Drax Group plc Annual report and accounts 2024
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Contents
Overview
Audit scope
– We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, the industry
in which the Group operates, and our assessment of audit risk.
– We identified seven components within the Group which, in our view, required an audit of their complete financial information,
either due to their size or risk characteristics. We also audited material consolidation journals.
– This covered approximately 97% of the Group’s revenue and approximately 91% of the Group’s Adjusted EBITDA. These coverages
are based on absolute values.
– Audit procedures were also carried out over specific balances of a further ten components, either due to their size or risk
characteristics. This provided coverage of substantially all of the Group’s net assets, revenues, and Group Adjusted EBITDA.
– The Company has one reporting component which was subject to a full scope audit for the purposes of the Company financial
statements.
Key audit matters
– Recoverability of goodwill in the Pellet Operations business (Group)
– Recoverability of Property, Plant and Equipment in respect of Drax Power Station (Group)
– Valuation and presentation of derivative financial instruments (Group)
– Recoverability of the carrying value of investments in subsidiary undertakings (Company)
Materiality
– Overall Group materiality: £23.3m based on approximately 2.5% of the last three years’ average Adjusted EBITDA.
– Overall Company materiality: £10.9m based on approximately 1% of total assets.
– Performance materiality: £17.5m (Group) and £8.2m (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financialstatements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results
ofour procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter How our audit addressed the key audit matter
Recoverability of goodwill in the Pellet Operations (Group)
At 31 December 2024, the Group reported goodwill of £175.6m
(2023: £177.0m) related to the Pellet Operations (see note 2.4).
Asan indefinite life asset, the Group is required to perform an
impairment test over goodwill at least annually, or more
frequently if indicators of impairment are identified.
Management’s annual impairment test did not result in an
impairment charge being recognised.
The recoverable amount of goodwill is determined as the higher
of fair value less cost of disposal and value in use. The Group
assessed the recoverable amount by reference to value in use.
This involves significant estimation due to the inherent
uncertainty in forecasting future cash flows including factors
such as future sales and material prices, supply volumes, inflation,
and the impact of climate risks on these estimates, as well as
determining the appropriate discount rate used in the value in use
calculation. This was identified as an area of increased audit risk
reflecting challenges in the historic performance of this business
and the estimation uncertainty in value in use models.
To address this key audit matter, the following audit procedures
were performed:
– Assessment of methodology: We evaluated the appropriateness
of the Group’s value in use methodology in accordance with
IAS36 and tested the integrity and mathematical accuracy
ofthe model.
– Testing of assumptions: We tested key assumptions in the cash
flow forecasts, including estimated growth in EBITDA, principally
driven by sales prices, volume growth, and reduced cost of
production, as well as, inflation and discount rates. Our work
wassupported by our valuation experts to assess the calculation
of the discount rate and to compare this against external data
sources.
– Sensitivity analysis: We assessed management’s sensitivity
analysis as well as performing our own sensitivities to evaluate
the impact of reasonably possible changes in key assumptions
on the recoverable amount of goodwill.
– Historical accuracy: We compared past cash flow forecasts to
actual results to assess the historical accuracy of management’s
forecasting.
– Disclosure review: We reviewed the disclosures in note 2.4
ofthe financial statements to ensure they appropriately describe
the key assumptions and areas of estimation uncertainty related
to goodwill, as well as the disclosure of management’s
sensitivities in accordance with IFRS requirements.
These procedures provided sufficient appropriate audit evidence
to conclude that the carrying value of goodwill in the Pellet
Operations CGU at 31 December 2024 is not materially misstated,
and the related disclosures were appropriate.

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Financial statements
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Key audit matter How our audit addressed the key audit matter
Recoverability of Property, Plant and Equipment in respect of Drax Power Station (Group)
At 31 December 2024, the Group reported property, plant, and
equipment valued at £1,018.5m (2023: £974.1m) related to Drax
Power Station (see key sources of estimation uncertainty). The
Group is required to evaluate whether there are any indicators of
impairment of non-current assets at the balance sheet date, and
if any indicators are identified an impairment test is performed to
evaluate if there is an impairment in value. Indicators of
impairment were identified by management in respect of Drax
Power Station due to future uncertainty over future cash flows
when the current renewable support mechanism for the Power
Station expires in 2027 and therefore an impairment test was
performed. No impairment charge was recognised for this asset.
Assessing whether or not impairment indicators exist requires
management to exercise judgement. Where an indicator is
identified, as was the case for Drax Power Station, the
recoverable amount of the asset is determined as the higher
offair value less cost of disposal and value in use. The Group
assessed the recoverable amount by reference to value in use.
This involves significant estimation due to the inherent
uncertainty in forecasting future cash flows including
assumptions such as future support mechanisms, energy prices,
capital expenditure (including maintenance costs), inflation, as
well as determining the appropriate discount rate used in the
value in use calculation. Future cashflows are also impacted
byuncertainties related to climate change, including future
Government policy with respect to Biomass Generation. This
wasidentified as an area of increased audit risk reflecting the
impairment trigger identified by management and the estimation
uncertainty in value in use models.
To address this key audit matter, we performed the following
auditprocedures:
– Assessment of impairment indicators: We evaluated
management’s assessment by reference to our own evaluation
of the UK energy market, consideration of UK Government
energy policy (including announcements made by the UK
Government), and through the involvement of our own internal
energy experts.
– Assessment of methodology: We evaluated the appropriateness
of the Group’s value in use methodology in accordance with IAS
36 and tested the integrity and mathematical accuracy of the
model.
– Testing of assumptions: We tested key assumptions used in the
cash flow forecasts, including future support mechanisms,
energy prices, capital expenditure (including maintenance costs),
and the discount rate. Our work was supported by our valuation
and energy experts to assess the calculation of the discount rate
and evaluate future energy price curves, including the evaluation
of these against external data sources.
– Sensitivity analysis: We assessed management’s sensitivity
analysis as well as performing our own sensitivities to evaluate
the impact of reasonably possible changes in key assumptions
on the recoverable amount of Drax Power Station within
property, plant, and equipment.
– Historical accuracy: We compared past cash flow forecasts to
actual results to assess the historical accuracy of management’s
forecasts.
– Disclosure review: We reviewed the disclosures included in the
key sources of estimation uncertainty and notes 2.4 and 3.1 to
the financial statements, to ensure they appropriately describe
the key assumptions and areas of estimation uncertainty related
to the carrying value of property, plant and equipment within
Drax Power Station, as well as the disclosure of management’s
sensitivities in accordance with IFRS requirements.
These procedures provided sufficient appropriate audit evidence
to conclude that the carrying value of Drax Power Station as at
31December 2024 is not materially misstated, and we found
therelated disclosures to be appropriate.
Independent Auditor’s report to the members of Drax Group plc continued
Financial statements
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Contents
Key audit matter How our audit addressed the key audit matter
Valuation and presentation of derivative financial instruments (Group)
As at 31 December 2024, the Group reported derivative assets
and liabilities valued at £257.3m (2023: £622.0m) and £333.3m
(2023: £538.2m) respectively (see note 7.1).
The Group uses various derivative instruments, including
commodity contracts and cross-currency and interest rate swaps
to manage financial risks such as foreign exchange, interest rate
and commodity price fluctuations. In accordance with the
requirements of IFRS these derivative financial instruments are
required to be reported at fair value at each balance sheet date.
The valuation of the derivatives can be complex, requiring the
selection of appropriate valuation methodologies and
assumptions. Key assumptions include future market prices,
credit risk factors, the time value of money, and spread
adjustments. The Group relies heavily on a manual process using
Excel spreadsheets to perform the mark-to-market calculation of
derivatives to determine the fair value, and this manual process
increases the risk of errors, particularly given the significant
volume of derivative contracts.
The presentation of assets and liabilities in respect of derivatives
in the balance sheet, as well as the presentation of power sale
and purchase contracts in the income statement can involve
judgement. During the current year management identified an
error in the presentation of certain sleeved electricity trades
within the income statement which resulted in a restatement of
revenues and cost of sales. In the prior year, management
identified an error in the balance sheet presentation of certain
derivative assets and liabilities which also resulted in a
restatement of the 2022 balance sheet presentation. As well as
the judgement required to determine the appropriate financial
statement presentation, the processes to identify contracts and
balances which should be presented on a net basis in the income
statement and balance sheet respectively are manual using excel
spreadsheets and this further increases the risk of error.
To address this key audit matter, we performed the following
auditprocedures:
– Process assessment: We assessed the Group’s processes and
methodology for performing mark-to-market calculations. This
included a review of the controls in place to mitigate the risk of
errors inherent in manual data handling.
– Data integrity testing: We tested the integrity of data inputs
included within the Excel spreadsheets used by management.
– Spreadsheet testing: We tested formulas and logic applied in
thespreadsheets used to perform mark-to-market calculations.
– Re-performance and verification: We re-performed a sample of
the mark-to-market calculations independently, and verified a
sample of key inputs to third-party sources and traced details
back to contracts.
– Credit risk and fair value analysis: We evaluated the application
of credit risk data and calculations used in the valuation of
derivative contracts, including swaps. Our work in this area was
supported by our internal treasury specialists.
– Net presentation review: We independently evaluated the
accounting policies for different types of commodity contracts,
which included consideration of the presentation of revenues
and cost of sales in the income statement and assets and
liabilities in the balance sheet. Our work included tracing relevant
terms for a sample of contracts to the underlying agreements
toensure the appropriate presentation and disclosure in the
financial statements. We assessed the prior year restatement
torevenue and cost of sales based on the findings of our
independent evaluation, subsequent discussions with
management and with the support of our commodity and
accounting technical specialists.
– Testing of netting adjustments: We obtained management’s
calculation for netting adjustments within the income statement
and the balance sheet. We tested the appropriateness of these
adjustments by reference to the nature of the contracts and the
specific contract terms.
– Disclosure review: We reviewed the disclosures related to
derivative valuations and financial risk management in the
financial statements to ensure they provide clear and
comprehensive information about the judgments and
assumptions used. These disclosures can be found in the Critical
accounting judgements section and notes 7.1, 7.2 and 7.5 to the
financial statements.
These procedures provided sufficient appropriate audit evidence
to conclude that the valuation and presentation of derivative
financial instruments is not materially misstated, and we found
therelated disclosures to be appropriate.
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Key audit matter How our audit addressed the key audit matter
Recoverability of the carrying value of investments in subsidiary undertakings (Company)
As at 31 December 2024, the Company reported investments in
subsidiary undertakings of £769.4m (2023: £755.4m) (see note 5).
Management are required to evaluate whether there are any
indicators of impairment of investments at the balance sheet
date, and if any indicators are identified an impairment test is
performed to evaluate if there is an impairment in value. No
indicators of impairment were identified and therefore no
impairment was recorded in respect of the carrying value of
investments in subsidiary undertakings.
The assessment of impairment indicators involves significant
judgment. It requires management to assess the performance
ofsubsidiary undertakings, as well as evaluating other relevant
factors including, but not limited to, market conditions, regulatory
changes, impact of climate change, market capitalisation of the
Group, and operational performance.
To address this key audit matter, we performed the following
auditprocedures:
– Assessment of management’s paper: We obtained and read
management’s assessment of impairment indicators, and
confirmed that the considerations set out in their paper
supported the conclusion that there were no indicators
ofimpairment.
– Evaluation of potential impairment triggers: We evaluated
management’s considerations set out within theirpaper to
ensure that the facts they had considered were consistent with
our understanding of the Group, and that all relevant factors we
would expect to be considered were reflected in their
considerations. Our work was informed based on our knowledge
and understanding of the Group obtained during the course of
our audit, as well as our consideration ofwider impacts on the
industry in which the Group operates, forexample climate
change.
– Evaluation of other evidence: We also independently assessed
the risk of impairment by comparing the carrying value of the
investments in subsidiary undertakings to the market
capitalisation of the Group to confirm that the investment
carrying value did not exceed the market capitalisation as at
31December 2024.
– Disclosure review: We reviewed the disclosures included within
note 5 of the Company accounts and assessed these to confirm
that they were consistent with Management’s impairment
trigger assessment and our audit work in this area.
Based on the audit work performed we found that the assessment
of the recoverability of the carrying value of investments in
subsidiary undertakings and the related disclosures in the financial
statement were appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry
in which they operate.
The Group has four key segments – Pellet Production, Biomass Generation, Flexible Generation and Energy Solutions, as well as
certain centralised functions, and these segments are comprised of a number of individual reporting components. The Group’s
financial statements are a consolidation of these reporting components and consolidation journals.
In determining our overall scope for the Group audit, we first obtained a comprehensive understanding of the Group and its
environment, including the evaluation of group-wide controls, assessed risks of material misstatement at the Group level, and
evaluated the relative size and complexity of individual components to the Group audit and the reportable segments.
The reporting components vary in size, and we identified seven reporting components that required an audit of their complete
financial information due to their individual risk and/or size characteristics.
We performed further audit procedures on specific financial statement balances that were identified due to their size and/or risk
profile at a further ten components. We also audited material consolidation journals.
The work over the two Pellet Production components in North America was performed by a PwC component team in Canada,
underthe supervision and direction of the Group audit team. The involvement of the Group audit team included attending component
clearance meetings, review of their supporting working papers, together with the additional procedures performed at group level,
toobtain the evidence required for our opinion on the financial statements as a whole. All audit work over the remaining components
andconsolidation journals was performed by the Group audit team.
The Group team also conducted risk based analytical procedures over one further component to identify and respond to any residual
risk of material misstatement in the consolidated financial statements.
The Company has one reporting component which was subject to a full scope audit for the purposes of the Company financial
statements.
The impact of climate risk on our audit
We made enquiries with management to understand the processes they adopted to assess the impact of climate risk on the Group’s
financial statements and disclosures made within the Annual Report.
The key areas of the financial statements where management evaluated that climate risk could have a significant impact are set out
innote 3.8.
Independent Auditor’s report to the members of Drax Group plc continued
Financial statements
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We assessed management’s evaluation of the areas most impacted by climate risk in the financial statements and concluded that
management’s evaluation was appropriate. The most significant climate related risk we identified related to government policies and
regulations in respect of biomass energy generation. This risk was incorporated into our audit work over impairment of non-current
assets (including challenging assumptions within management’s cash flow forecasts to ensure these appropriately reflected climate
related risks); and evaluating the useful economic life of property, plant and equipment. We also read other disclosures included within
the Annual Report and Accounts, including the Sustainable Development section, the Group’s TCFD disclosures and the Viability
statement to ensure that these were fair, balanced and understandable in the context of how climate risks may impact the Group in
the future, and that they complied with relevant laws and regulations with respect to disclosure requirements by listed companies.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall
materiality
£23.3m. £10.9m.
How we
determined it
Approximately 2.5% of the last three years’ average
Adjusted EBITDA
Approximately 1% of total assets
Rationale for
benchmark
applied
We have selected Adjusted EBITDA as our benchmark for
materiality because it is a key performance measure
disclosed to users of the financial statements which
features prominently in the Annual Report and other
shareholder communications. Adjusted EBITDA is also a
key metric used in determining executive remuneration,
accounting for 40% of the annual bonus outcome. To
account for volatility due to recent fluctuations in energy
prices, we have used a three year average of Adjusted
EBITDA as our benchmark.
We believe that total assets is the primary measure used by
the shareholders in assessing the performance of a holding
Company, and is a generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was £1m to £21m. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% of overall materiality, amounting to £17.5m for the Group financial statements and
£8.2m for the Company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1.2m (Group audit)
and £0.5m (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of
accounting included:
– Obtaining management’s assessment and related cash flow and covenant forecast model that support their conclusions with
respect to the going concern basis of preparation of the financial statements;
– Assessing the integrity and testing the mathematical accuracy of management’s forecast model;
– Evaluating the historical accuracy of the budgeting process to assess the reliability of forecasts;
– Evaluating management’s base case forecast and severe but plausible downside scenario, challenging the appropriateness of the
underlying assumptions, including corroborating these to appropriate sources of audit evidence, verifying the opening cash position
within the forecast, and confirming the level of committed borrowing facilities available to the Group;
– Assessing the appropriateness of management’s severe but plausible downside scenario by reference to our knowledge obtained
ofthe Group during our audit and consideration of wider industry and macro-economic factors;
– Reviewing the terms of the Revolving Credit Facility (“RCF”) and other borrowing and working capital arrangements to assess the
terms of the available facilities, including covenant requirements;
– Evaluating management’s analysis of both liquidity and covenant compliance to ensure that no breaches in covenants are
anticipated over the assessment period, to confirm that the Group maintains sufficient liquidity headroom, and testing the
calculation of covenant forecasts to confirm these are accurate;
– Reviewing management accounts for the financial period from the year end to the end of January 2025 to confirm that
performance in January 2025 is in line with forecasts used in the going concern assessment; and
– Reading the disclosures made in respect of going concern included in the financial statements to ensure that these are consistent
with management’s going concern assessment and the findings from our going concern procedures.
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Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern
foraperiod of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and
theCompany’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to
addor draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered
itappropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
ofthisreport.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
ofthis other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’
report for the year ended 31 December 2024 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit,
wedid not identify any material misstatements in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Annual Report on Remuneration to be audited has been properly prepared in accordance withthe
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are
described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks
andan explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern
basisof accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability
tocontinue to do so over a period of at least twelve months from the date of approval of the financial statements;
– The directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers
andwhy the period is appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
Independent Auditor’s report to the members of Drax Group plc continued
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Our review of the directors’ statement regarding the longer-term viability of the Group and Company was substantially less in scope
than an audit and only consisted of making enquiries and considering the directors’ process supporting their statement; checking
thatthe statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the
statement is consistent with the financial statements and our knowledge and understanding of the Group and Company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
– The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides
the information necessary for the members to assess the Group’s and Company’s position, performance, business model and
strategy;
– The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
– The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are
also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue
asa going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
highlevel of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
ourprocedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to the Listing Rules, OFGEM regulations applicable to energy generators and energy suppliers in the UK, Forestry
regulations applicable to the pellets business in the US and Canada, and environmental and health and safety regulations applicable
inthe UK, US and Canada, and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the
Companies Act 2006 and tax legislation in the UK, US and Canada. We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks
were related to the overstatement of Adjusted EBITDA through posting manual journal entries to manipulate financial performance,
orthe exercise of management bias in material accounting judgements and estimates, including the accounting for significant one-off
or unusual transactions. The Group engagement team shared this risk assessment with the component auditors so that they could
include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group engagement
team and/or component auditors included:
– Discussions with management, including Group General Counsel, Group Regulation and Compliance Director and Vice President
ofGlobal biomass and sustainability operations to understand and evaluate known or suspected instances of non-compliance with
laws and regulations or fraud;
– Read correspondence with OFGEM in respect of the outcome of material regulatory investigations;
– Understood and evaluated management’s controls designed to prevent and detect non-compliance with laws and regulations
andfraud;
– Reviewed board minutes and internal audit reports throughout the year and subsequent to the year end, up to the date of our
auditopinion;
– Identified and tested unusual journal entries which increased reported Adjusted EBITDA, and could represent a heightened risk
ofmanipulation of the financial performance of the business, to ensure the journal entries are appropriate;
– Tested period end adjustments, with specific focus on any adjustments that increase reported Adjusted EBITDA; and
– Assessed material accounting judgements and estimates including those applicable to significant one-off or unusual transactions
that could increase reported Adjusted EBITDA to ensure that these are appropriate and do not indicate any evidence of
management bias.
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There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
asfraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
Wewill often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not obtained all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– the Company financial statements and the part of the Annual Report on Directors’ Remuneration to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 25 April 2024 to audit the financial
statements for the year ended 31 December 2024 and subsequent financial periods. This is therefore our first year of uninterrupted
engagement.
Other matter
The Company is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to include these financial
statements in an annual financial report prepared under the structured digital format required by DTR 4.1.15R – 4.1.18R and filed on
theNational Storage Mechanism of the Financial Conduct Authority. This auditors’ report provides no assurance over whether the
structured digital format annual financial report has been prepared in accordance with those requirements.
Matthew Hall (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
26 February 2025
Independent Auditor’s report to the members of Drax Group plc continued
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Introduction
The Consolidated financial statements
provide detailed information about the
financial performance (Consolidated
income statement and Consolidated
statement of comprehensive income),
financial position (Consolidated balance
sheet), reserves (Consolidated statement
of changes in equity), and cash flows
(Consolidated cash flow statement) of
Drax Group plc (the Company) together
with all entities controlled by the Company
(collectively, the Group).
The notes to the Consolidated financial
statements provide additional information
on the items in the Consolidated income
statement, Consolidated statement of
comprehensive income, Consolidated
balance sheet, Consolidated statement
of changes in equity and Consolidated
cash flow statement. The notes include
explanations of the information presented.
In general, the additional information in
the notes to the Consolidated financial
statements is required by law,
International Financial Reporting
Standards (IFRS) or other regulations to
facilitate increased understanding of the
primary statements set out on pages 167
to 171, as well as voluntary information
which management believes users of
the accounts may find useful, in line
with the principles of IFRS.
Basis of preparation
The Consolidated financial statements
have been prepared in accordance with
the United Kingdom adopted International
Accounting Standards (IAS) in conformity
with the requirements of the Companies
Act 2006.
The Consolidated financial statements
have been prepared on the historical
cost basis, except for certain assets and
liabilities that are measured at fair value
(principally derivative financial
instruments) and the assets and liabilities
of the Group’s defined benefit pension
scheme (measured at fair value and using
the projected unit credit method
respectively).
The Consolidated financial statements
are presented in pounds sterling, the
functional currency of the Company
and the Group’s presentational currency,
rounded to the nearest million to one
decimal place unless stated otherwise.
Foreign currency transactions
Each entity in the Group determines its
own functional currency and items
included in the results of each entity are
measured using that functional currency.
Transactions in currencies other than an
entity’s functional currency are initially
recorded in the transaction currency and
translated into the entity’s functional
currency at the average monthly
exchange rate to the extent that this
approximates the exchange rate prevailing
at the date of the transaction. If the
average monthly exchange rate is not
a reasonable approximation of the
cumulative effect of the rates prevailing
on the transaction dates, income and
expenditure are translated at the rates
prevailing at the date of the transaction.
At each reporting date, monetary assets
and liabilities that are denominated in
foreign currencies are translated at the
exchange rates prevailing at that date.
Non-monetary items measured at
historical cost are translated at the date of
the transaction using the average monthly
exchange rate to the extent that this
approximates the exchange rate prevailing
on the date the transaction occurred.
Non-monetary items that are measured
at fair value are translated at the exchange
rate at the date when the fair value was
determined. Foreign exchange gains and
losses arising on such translations are
recognised in the Consolidated income
statement within foreign exchange gains
or losses. Foreign exchange gains or
losses on qualifying cash flow hedges
are recognised in other comprehensive
income (OCI) within the Consolidated
statement of comprehensive income, and
deferred within equity to the extent the
hedges are effective, until the hedged
item occurs.
Foreign operations
The assets and liabilities of foreign
operations with a functional currency
other than sterling are translated into
sterling using the exchange rates
prevailing at the reporting date. The
income and expenditure of such
operations are translated into sterling
using the average monthly exchange rate
to the extent that this approximates the
exchange rates prevailing at the date of
the transactions. If the average monthly
exchange rate is not a reasonable
approximation of the cumulative effect
of the rates prevailing on the transaction
dates, income and expenditure are
translated at the rates prevailing at the
date of the transaction. Foreign exchange
gains and losses resulting from the
retranslation of the foreign operation’s
net assets, and its results for the year, are
recognised in OCI within the Consolidated
statement of comprehensive income.
Climate change
The impact of climate change has been
considered throughout the preparation
of the Annual report and accounts. In
particular, and in compliance with the
FCA Listing Rules 9.8.6(8), the Task Force
on Climate-related Financial Disclosures
(TCFD) section of the Strategic report
contains information on the four
recommendations and 11 recommended
disclosures of the TCFD. Consideration
in respect of the Consolidated financial
statements focused on:
– Critical accounting judgements and
key sources of estimation uncertainty
– Impairment of assets
– Going concern and viability
– Useful economic lives of fixed assets
– Present value of decommissioning
provisions
– Fair value of contingent consideration
– Defined benefit pension scheme
– Renewable certificates
– Sustainable financing
– Deferred tax assets
Further information on these
considerations can be found in note 3.8
to the Consolidated financial statements.
Going concern
The Group’s business activities, along
with future developments that may
affect its financial performance, financial
position and cash flows, are discussed
on pages 1 to 85 of this Annual report and
accounts. The current market conditions
and financial performance of the Group
are considered in the Financial review
starting on page 18.
In assessing going concern the Directors
have considered the period up to
31 March 2026, which reflects a period of
at least 12 months from the date of signing
the Consolidated financial statements, as
this period extends beyond the Group’s
debt repayment of the remaining
€143.8 million bond maturing in November
2025 and C$200.0 million and
€70.0 million of loan facilities maturing in
January 2026. There are no further debt
maturities following these repayments
until 2027. See note 4.2 for further details
on the Group’s borrowings. The Directors
have also considered any significant
events, including any committed outflows
beyond this period, in forming their
conclusion.
The going concern assessment primarily
focuses on cash flow forecasts, available
liquidity and continued compliance with
banking covenants over the period
assessed. The cash flow forecasts used to
assess going concern are modelled for the
impact of severe but plausible scenarios,
consistent with the viability assessment
detailed on pages 84 and 85. The
scenarios modelled included a decrease
in power prices and an increase in biomass
costs. At 31 December 2024, the Group
had cash and committed facilities of
£806.0 million (see note 2.7) and
borrowings of £1,176.7 million (see note
4.2). Under all scenarios modelled, the
Group maintained sufficient liquidity and
continued to remain in compliance with its
covenants. The Directors have therefore
Financial statements
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Financial statements continued
concluded that they have a reasonable
expectation that the Group will continue
to meet its liabilities as they fall due for a
period of at least 12 months from the date
of signing these Consolidated financial
statements and have adopted the going
concern basis in preparing these
Consolidated financial statements.
See the Viability statement on pages 84
and 85 for details of the Directors’
assessment that they have a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the next five
years based on forecasts and projections
that take into account reasonably possible
changes in trading performance and other
key assumptions.
Basis of consolidation
These Consolidated financial statements
incorporate the financial results of the
Company and of all its subsidiaries made
up to 31 December each year. Subsidiaries
are entities controlled by the Group.
The Group controls an entity when it is
exposed to, or has rights to, variable
returns from its involvement with the
entity and has the ability to affect those
returns through its power over the entity.
Subsidiaries are fully consolidated from
the date on which the Group obtains
control to the date control ceases.
Accounting policies of subsidiaries have
been aligned where necessary to ensure
consistency with the policies adopted by
the Group.
All intra-group assets and liabilities, equity,
income, expenses, unrealised profits and
cash flows relating to transactions
between the members of the Group are
eliminated on consolidation. Unrealised
losses are also eliminated unless the
transaction provides evidence of an
impairment of the transferred asset.
Non-controlling interests in subsidiaries
are identified separately from the Group’s
equity. The interests of non-controlling
shareholders that are current ownership
interests, entitling their holders to a
proportionate share of net assets upon
liquidation, may initially be measured
at fair value or at the non-controlling
interests’ proportionate share of the fair
value of the acquiree’s identifiable net
assets. Subsequent to acquisition, the
carrying amount of non-controlling
interests is the amount of those interests
at initial recognition plus the non-
controlling interests’ share of subsequent
changes in equity.
Profit or loss and each component of OCI
are attributed to the owners of the parent
company and to the non-controlling
interests even if this results in the
non-controlling interests having a deficit
balance.
See note 4.5 for the accounting policy and
further details on the Group’s accounting
for non-controlling interests.
Joint arrangements are contractual
arrangements where two or more parties
have joint control over the arrangement.
Joint arrangements are classified as either a
joint operation or a joint venture based upon
an analysis of the rights and obligations of
the parties in the normal course of business.
If the parties to the joint arrangement have
direct rights to the assets, and direct
obligations for the liabilities, relating to the
arrangement, then it is a joint operation.
If the parties to the joint arrangement have
rights to the net assets of the arrangement,
then it is a joint venture.
The Group currently has one joint
operation and no joint ventures. The
Group recognises its direct right to assets,
liabilities, revenue and expenses of the
joint operation, as well as its share of any
jointly entitled assets, liabilities, income
and expenditure.
Associates are those entities in which the
Group has significant influence, but not
control or joint control, over the financial
and operating policies. This is generally the
case where the Group holds between 20%
and 50% of the voting rights of an entity.
Associates are accounted for using the
equity method. Investments in associates
are initially recognised at cost, which
includes transaction costs. Goodwill is
not separately recognised in relation
to associates. Subsequent to initial
recognition, the carrying amount of
investments in associates is adjusted to
recognise the Group’s share of after-tax
profit or loss and each component of OCI
of equity-accounted associates that are
recognised in the Consolidated income
statement and Consolidated statement
of comprehensive income respectively.
Dividends received or receivable from
associates are recognised as a reduction
in the carrying amount of the investment.
If the carrying amount of an associate
reaches £nil, the Group only recognises
its share of losses from the associate to
the extent it has incurred obligations or
made payments on behalf of the associate.
Unrealised gains on transactions between
the Group and its associates are eliminated
against the investment to the extent
of the Group’s percentage ownership in
these entities. Unrealised losses are also
eliminated unless the transaction provides
evidence of impairment. Accounting
policies of equity-accounted associates
have been aligned where necessary to
ensure consistency with the policies
adopted by the Group.
Associates are tested for impairment
whenever there are any indicators of
impairment. An impairment loss is
recognised to the extent that the carrying
amount of the investment exceeds its
recoverable amount. Impairment losses
on associates are recognised within
impairment of non-current assets in
the Consolidated income statement.
Accounting policies
The material accounting policies for the
measurement of an individual item in the
Consolidated financial statements are
described in the note to the Consolidated
financial statements relating to the item
concerned (see contents on page 150).
The accounting policies adopted in the
preparation of the Consolidated financial
statements are consistent with those
followed in the preparation of the Group’s
Consolidated financial statements for the
year ended 31 December 2023, except
for the adoption of new standards and
amendments effective as of 1 January
2024. The Group has not early-adopted
any standard, interpretation or
amendment that has been issued but
is not yet effective.
A full listing of new standards,
interpretations and pronouncements
under IFRS applicable to these
Consolidated financial statements is
presented in note 8.2. The application
of these new requirements has not had
a material effect on the Consolidated
financial statements.
Judgements and estimates
The preparation of these Consolidated
financial statements requires judgement
to be made in selecting and applying
the Group’s accounting policies. It also
requires the use of estimates and
assumptions that affect the reported
amounts of assets, liabilities, income
and expenditure. Actual results may
subsequently differ from these estimates.
Estimates and underlying assumptions
are reviewed on an ongoing basis, with
revisions recognised in the period in which
the estimates are revised and in any future
periods affected.
In accordance with IAS 1, the judgements
which have the most significant effect
on the amounts recognised in the
Consolidated financial statements, and
the key estimates and assumptions that
have a significant risk of causing a material
adjustment to the carrying amounts
of assets and liabilities within the next
financial year, are set out below. Further
detail, including sensitivity analyses
where appropriate for the key estimates
and assumptions, is included in the
related notes.
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Capitalisation of development
project costs
As the Group executes its strategy,
significant investment is likely to be
required in large development projects,
including bioenergy with carbon capture
and storage in the UK (UK BECCS), the
Longview pellet plant development project
(Longview) and the expansion of
Cruachan. In accounting for this
expenditure, judgements are required to
determine whether these costs meet the
criteria to be capitalised, or whether they
should be expensed as incurred. The
capitalisation of costs under IAS 16 and
IAS 38 is based around the expectation
that it is probable that economic benefit
will flow to the Group as a result of the
costs incurred to bring the asset into
working condition. This judgement can
be complex as it is dependent on several
qualitative factors, including technological
feasibility, economic feasibility and
availability of finance. These factors can
change over time and so any judgements
are continually reassessed.
At 31 December 2024, the Group had
capitalised a total of £47.2 million relating
to the UK BECCS development project,
including £4.4 million in 2024. The
economic feasibility of the project is
dependent on the implementation of an
effective negative emissions policy and
investment framework. Technical
feasibility is dependent on infrastructure
development for transmission and storage
of CO
2
. Had it been judged that the criteria
for capitalisation had not yet been met,
these costs would have been expensed as
incurred. At 31 December 2024, the Group
had capitalised a total of £121.3 million
relating to Longview, including
£63.6 million in 2024. Construction of
the project is currently paused due to
the requirement to apply for an updated
air discharge permit. Final completion of
the project is dependent upon receiving
the permit, whether the project is still
economically viable as a result of any
updated plant design requirements to
enable the site to operate within the
permit limits, and whether there is
appropriate demand and pricing for the
pellets it will produce. This is under
consideration, but management currently
expects to complete the project.
Should expectations around
the qualitative factors noted above
change in the future, then the amounts
capitalised may need to be impaired.
For further details on UK BECCS see the
“Development of BECCS at Drax Power
Station in the UK” opportunity in the
Climate-related opportunities section
on page 65. The Group has not yet
capitalised any costs in relation to the
expansion of Cruachan or any BECCS
projects outside of the UK, as it has been
judged that the recognition criteria have
not yet been met.
Offsetting of financial assets and
financial liabilities
IAS 32 requires financial assets and
financial liabilities to be offset and the
net amount presented in the Consolidated
balance sheet when the Group currently
has both the legally enforceable right to
offset the recognised amounts, and the
intention to settle on a net basis. The
offsetting requirements and relevant
guidance is based on the principle of
reflecting the entity’s expected future
cash flows and there is judgement as to
whether the offsetting criteria should be
applied to derivative financial instruments
that will be settled through physical
delivery of a non-financial asset.
Judgement is also required around the
appropriate unit of account where there
are a number of both physical deliveries
and cash flows that collectively settle
financial instruments, and how the
offsetting requirements should be applied
to each of these settlements, either
individually or at a contract level. The
Group has determined the offsetting
criteria should be applied to physically
settled derivatives and has applied the
offsetting criteria at a contract level rather
than a cash flow level.
If the Group had not applied offsetting
on physically settled derivative contracts
in the current year then a number of
derivative balances that are currently
presented net in the Consolidated balance
sheet would have been presented gross
resulting in an additional £71.2 million of
derivative assets and liabilities. See note
7.5 for further details on the Group’s
offsetting of all financial assets and
financial liabilities.
Gross presentation of power purchase
and sale contracts
The Group enters contracts to sell power.
The Group fulfils these sales contracts
through the output of its generation
assets, but the Group may also fulfil these
sales contracts by purchasing power from
third parties.
The Group presents sales of power
within the revenue line and purchases
of power within the cost of sales line in
the Consolidated income statement.
This reflects the fact that the sale and
purchase contracts are entered into at
separate times, are independent contracts
and are not entered into in contemplation
of one another. The Group’s Biomass
Generation and Flexible Generation
businesses enter sales contracts to sell
their generation output. If the Group
subsequently chooses to fulfil a sales
contract through purchasing power from
Critical accounting judgements
The critical judgements made in the
process of applying the Group’s
accounting policies during the year that
have the most significant effect on the
amounts recognised in the Consolidated
financial statements are set out below.
Accounting for biomass purchase
and sale contracts
The Group buys and sells biomass for
operational requirements in its Pellet
Production and Biomass Generation
segments. The Group’s risk management
policies also permit some flexibility in
activity to optimise the overall portfolio
position and potentially release value in
certain circumstances. As such, at each
reporting date the Group undertakes an
assessment of whether contracts it holds
to buy and sell biomass are within the
scope of IFRS 9. If the contracts were
deemed to be within the scope of IFRS 9,
this could result in these contracts being
recognised at fair value as derivative
financial instruments from inception.
The Group assessed both biomass
purchase and sale contracts and
concluded that the nature of these
contracts means they cannot be readily
net settled in cash or other financial
instruments and, as a result, they remain
outside of the scope of IFRS 9. The Group
concluded this due to the contractual
terms having no net settlement provisions
and the highly illiquid nature of the
biomass market meaning biomass cannot
be readily converted into cash. The lack
of an active spot market means market
participants cannot readily seek to make
trading profits from short-term price
fluctuations as prices and contracts are
negotiated bilaterally with no active
market price and no guarantee there will
be a willing buyer or seller to trade with.
Accordingly, biomass contracts are not
recognised as derivative assets or liabilities
in the Consolidated balance sheet prior to
delivery, consistent with the accounting
in prior years.
The Group has 15.0 million tonnes of
contracted biomass purchases; therefore,
had the Group concluded biomass
purchase contracts were within the scope
of IFRS 9, for every £1 per tonne that the
weighted average market price is higher
or lower than the weighted average
contracted price, there would be a
resulting £15.0 million fair value gain
or loss respectively to be recognised
on these contracts. The Group continues
to assess developments in the biomass
market on an ongoing basis to identify
any impact on this assessment.
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Financial statements continued
of approximately £18.1 million. If the
assumed end of station life of 2039 were
to decrease by 12 years to 2027, in line
with the end of the current renewable
schemes, the impact on the annual
depreciation charge for the year would
be an increase of approximately
£183.8 million.
See note 3.1 on page 199
Pension liabilities
The Group records a net surplus or liability
in its Consolidated balance sheet for the
fair value of assets held by the defined
benefit pension scheme, less its obligation
to provide benefits under the scheme.
The actuarial valuations of the scheme’s
liabilities are performed annually by a
third-party actuary and contain
assumptions regarding interest rates,
inflation, future salary and pension
increases, mortality, and other factors,
all of which are subject to future change.
Three of the key estimates within the
valuation are the discount rate, inflation
rate, and life expectancy. Sensitivities in
the valuation are presented in note 6.3.
The value of the pension surplus
recognised by the Group at 31 December
2024 is £24.7 million.
See note 6.3 on page 234
Alternative performance measures
(APMs)
The Group uses APMs throughout the
Annual report and accounts that are not
defined within IFRS but provide additional
information about the Group’s financial
performance and position that is used by
the Board to evaluate the Group’s
performance. These measures have been
defined internally and may therefore not
be comparable to similar 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
by IFRS. Such measures should not be
viewed in isolation or as an alternative
to the equivalent IFRS measure.
Each year management confirms the
judgements made regarding the Group’s
definition of APMs, including exceptional
items and certain remeasurements and
Net debt. The assessment as to whether
a transaction or group of transactions
should or should not be classified as
an exceptional item or a certain
remeasurement can have a significant
impact on the Adjusted results of the
Group. Deciding which items to include or
exclude from an APM’s definition can have
a significant impact on the APM presented.
An internal policy governs the judgements
made by management and in all instances,
a third party, that does not change the
substance of the original sales contract
or the Group’s obligations under the sales
contract.
The Group believes gross presentation
of power sales and purchase contracts
reflects the substance of the Group’s
operations as a generation business and
not a trading business. Had the Group
presented external purchases of power
net within external revenue this would
have reduced external revenue by
£1,072.9 million with a corresponding
decrease in external cost of sales.
See note 2.2 on page 175
Key sources of estimation
uncertainty
The following are the key sources of
estimation uncertainty that carry a
significant risk of resulting in a material
adjustment to the carrying values of
assets and liabilities within the next
financial year. These are the items where
actual outcomes in the next 12 months
could vary materially from the estimates
made in determining the reported amount
of an asset or liability within the
Consolidated financial statements.
Impairment
An impairment review is conducted
annually on cash-generating units (CGUs)
or group of CGUs, with associated
goodwill or intangible assets with an
indefinite life, and as required for other
assets and CGUs where an indicator of
possible impairment exists.
In 2024, an impairment assessment has
been completed on six of the Group’s
CGUs. Five of these CGUs have been
assessed as they have allocated goodwill
(Drax Energy Solutions, Pellet Operations,
Lanark, Galloway and Cruachan). No CGUs
have intangibles with an indefinite life. In
addition, the Drax Power Station CGU was
assessed due to indicators of potential
impairment being present.
The assessment of future cash flows
that underpin the impairment reviews are
based on management’s best estimate and
include a number of assumptions (see note
2.4 for further details of these key
assumptions).
Drax Power Station was identified as the
only CGU where a reasonably possible
change in certain assumptions could lead
to a material adjustment to its carrying
value as at 31 December 2024.
The assessment for the Drax Power
Station CGU at 31 December 2024 is
sensitive to reasonably possible changes
to the key inputs to the valuation model.
The Drax Power Station CGU has a
carrying value at 31 December 2024 of
£1,071.3 million. Reasonably possible
assumptions include assuming operations
cease at the end of the current
renewables schemes in March 2027 as a
result of not concluding a final low-carbon
dispatchable Contracts for Difference
(CfD) agreement (see note 2.12) combined
with a £15/MWh decrease in power prices
on unhedged volumes, a 10% increase in
the forced outage rate and an increase in
the pre-tax discount rate from 16.8% to
48.5% (equivalent to an increase in the
post-tax discount rate from 6.8% to 8.0%).
These reasonably possible changes in the
key inputs to the value in use model would
lead to an impairment of £515.5 million.
If reasonably possible assumptions were
included to assume operations were to
cease in March 2031 at the end of the
proposed low-carbon dispatchable CfD
agreement (see note 2.12), combined with
a £15/MWh decrease in power prices on
unhedged volumes, a 10% increase in the
forced outage rate and an increase in the
pre-tax discount rate from 16.8% to 29.8%
(equivalent to an increase in the post-tax
discount rate from 6.8% to 8.0%), then
these reasonably possible changes in the
key inputs to the value in use model would
lead to an impairment of £321.4 million.
See note 2.4 on page 181
Property, plant and equipment
Property, plant and equipment at Drax
Power Station is depreciated on a
straight-line basis over its useful economic
life (UEL). UELs are estimated based on
past experience, anticipated future
replacement cycles, considering future
expected developments in the energy
market, and other available evidence and
are reviewed at least annually.
Given the continued focus on climate
change, renewable sources of energy
and transitioning to a net zero economy,
the power generation industry is going
through a period of transformation, which
can impact on the UELs of assets. As the
UK Government’s net zero strategy
continues to evolve and become clearer,
particularly in relation to UK BECCS, the
Group will continue to assess any potential
impact of these developments on UELs in
relation to Drax Power Station. The net
book value of fixed assets being
depreciated at Drax Power Station as at
31 December 2024 is £1,018.5 million and
depreciation on these assets in the year,
based on the UELs disclosed in note 3.1,
was £89.4 million. If the UEL of assets that
are limited to the current assumed end of
station life of 2039 were to increase by
10 years, the impact on the depreciation
charge for the year would be a reduction
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Net debt
The Group defines Net debt as borrowings
and lease liabilities less cash and cash
equivalents. Borrowings denominated in
foreign currencies to which the Group
has entered into hedging arrangements
associated with this currency exposure
are translated at the hedged rate for the
purposes of calculating Net debt. This is
to take into account the effect of financial
instruments entered into to hedge
movements in, for example, foreign
exchange rates in relation to debt principal
repayments. Borrowings that have no
hedging instruments attributed to them
are translated at the closing rate.
Borrowings includes external financial
debt, such as loan notes, term loans and
amounts drawn in cash under revolving
credit facilities (RCFs) (see note 4.2).
Borrowings does not include other
financial liabilities such as pension
obligations (see note 6.3), trade and other
payables (see note 3.7), 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 4.3). The Group
does not include balances related
to supply chain financing in borrowings
and therefore 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
(see note 3.7).
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 any cash collateral receipts from
counterparties or cash collateral posted
to counterparties.
Prior to 2024, the Group’s definition of
Net debt did not include lease liabilities.
The exclusion of lease liabilities from the
calculation of Net debt was consistent
with the Group’s covenant reporting
requirements at the time. In 2024, the
Group has drawn new borrowings that
include lease liabilities in their covenant
reporting requirements. The Group has
updated its definition of Net debt to
include lease liabilities, to be consistent
with the covenant requirements of the
newly drawn borrowings. This is deemed
to provide more useful information to
users of the Consolidated financial
statements as the Group’s definition of
Net debt is consistent with the way debt
is assessed by the Group’s lenders of
newly drawn borrowings and going
forward on any future borrowings drawn.
market prices over the life of the
derivative. The Group regards all of its
forward contracting activity to represent
economic hedges and, therefore, the
contracted price at delivery or maturity is
relevant to the Group and its performance,
rather than how the contracted price
compares to the prevailing market price,
as the Group is not seeking to make
trading profits on these contracts through
market price movements.
The impact of excluding these fair value
remeasurements is to reflect commodity
sales and purchases at contracted prices
(the price paid or received in respect of
delivery of the commodity in question)
in Adjusted results in the period the
transaction takes place, and also to take
into account the impact of associated
financial derivative contracts (such as
forward foreign currency purchases)
in Adjusted results on maturity, being
the period these contracts are intending
to hedge.
Further information on exceptional items
and certain remeasurements in the
current and comparative periods is
included in note 2.7.
Adjusted EBITDA
Adjusted EBITDA is a 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 trading performance period-on-
period. It is also a key metric used by the
investor community to assess the
performance of the Group’s operations.
The Group defines Adjusted EBITDA as
earnings before interest, tax, depreciation,
amortisation, other gains or losses and
impairment of non-current assets,
excluding the impact of exceptional items
and certain remeasurements (defined
above). Adjusted EBITDA excludes any
earnings from associates and Adjusted
EBITDA directly attributable to non-
controlling interests.
Adjusted basic earnings per share
Adjusted basic earnings per share
(Adjusted basic EPS) is Adjusted profit
attributable to the owners of the parent
company divided by the weighted average
number of ordinary shares outstanding
during the period. Repurchased shares
held in the treasury shares reserve are
not included in the weighted average
calculation of shares. This is the same
denominator used when calculating Total
basic earnings per share (Total basic EPS).
This metric is used in discussions with the
investor community.
these judgements are approved by the
Audit Committee as set out on page 117.
Defined below are the key APMs used by
the Board to assess financial performance.
The APMs glossary table on page 277
provides details of all APMs used, including
the APM’s closest IFRS equivalent, the
reason why the APM is used by the Group
and a definition of how each APM is
calculated.
Adjusted results
The Group’s financial performance for the
period, measured in accordance with IFRS,
is shown in the Total results column on
the face of the Consolidated income
statement. Exceptional items and certain
remeasurements are deducted from the
Total results in arriving at the Adjusted
results for the year. 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.
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. For a transaction to be considered
exceptional, management considers the
nature of the transaction, the frequency
of similar events, any related precedent,
and commercial context. The application
guidance for this policy includes de
minimis thresholds for classifying items as
exceptional. Presentation of a transaction
as exceptional is approved by the Audit
Committee in accordance with an
agreed policy.
The policy is reviewed by the Audit
Committee biennially, with the last review
taking place in April 2023. This review did
not result in any significant changes to
the policy.
Certain remeasurements comprise fair
value gains and losses on derivative
contracts to the extent those contracts do
not qualify for hedge accounting (or hedge
accounting is not effective) which, under
IFRS, are recorded in revenue, cost of
sales, interest payable and similar charges
or foreign exchange gains or losses.
Management believes adjusting for fair
value gains and losses recognised on
derivative contracts provides readers
of the Consolidated financial statements
with useful information, as this removes
the volatility caused by movements in
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Financial statements continued
The table below shows Net debt calculated using both the current and prior year definition and a reconciliation between the two metrics:

| As at 31 December |
| 2024 | 2023
| £m | £m
Net debt excluding lease liabilities (previous definition) | 875.7 | 1,083.9
Lease liabilities attributable to owners of the parent company | 116.0 | 135.8
Net debt (including lease liabilities – current definition) | 991.7 | 1,219.7

Net debt is a key metric used by debt rating agencies and the investor community as a measure of liquidity and the ability of the Group
to manage its financial obligations.
See note 2.7 on page 191
Net debt to Adjusted EBITDA
This metric is the ratio of Net debt to Adjusted EBITDA, expressed as a multiple. The Group has a long-term target for Net debt to
Adjusted EBITDA of around 2.0 times.
The Net debt to Adjusted EBITDA ratio gives an indication of the size of the Group’s Net debt in relation to its trading performance and
is a key metric used by the investor community to assess the performance of the Group’s operations.
As explained above, the Group updated its definition of Net debt. The table below shows the ratio of Net debt to Adjusted EBITDA
calculated using both the current and prior year definitions of Net debt.

| As at 31 December |
| 2024 | 2023
Net debt excluding lease liabilities (previous definition) (£m) | 875.7 | 1,083.9
Net debt (including lease liabilities – current definition) (£m) | 991.7 | 1,219.7
Adjusted EBITDA (£m) | 1,064.2 | 1,009.2
Net debt excluding lease liabilities (previous definition) to Adjusted EBITDA ratio | 0.8 | 1.1
Net debt (including lease liabilities – current definition) to Adjusted EBITDA ratio | 0.9 | 1.2

See note 2.7 on page 191
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Section 1: Consolidated financial statements
Consolidated income statement

|  | Year ended 31December 2024 |  |  |  | Year ended 31December 2023 |
|  | Exceptional |  |  | Exceptional |
|  |  | items and |  | Restated (1) | items and | Restated (1)
|  | Adjusted | certain | Total | Adjusted | certain | Total
|  | results (2) | remeasurements | results | results (2) | remeasurements | results
| Notes | £m | £m | £m | £m | £m | £m
Revenue | 2.2 | 6 , 0 81. 2 | 8 1.3 | 6 ,1 6 2 . 5 | 7, 4 5 0 . 3 | 282.9 | 7, 7 3 3 . 2
Cost of sales |  | (4, 1 30. 1) | 4 .9 | (4 ,12 5 . 2) | (5,492 .3) | (8 2 .7) | (5, 575.0)
Electricity Generator Levy |  | (1 6 0 . 8) | – | (16 0 . 8) | (2 0 4 .6) | – | (2 0 4 .6)
Gross profit |  | 1, 790.3 | 86.2 | 1, 8 76. 5 | 1 ,75 3 .4 | 20 0.2 | 1,95 3.6
Operating and administrative expenses | 2.3 | (6 9 8 . 5) | (2 2 .1) | (720 .6) | (7 11 .7) | – | (7 11 .7)
Impairment losses on financial assets |  | (2 7. 3) | (12 . 7) | (4 0 . 0) | (32. 5) | – | (32. 5)
Depreciation | 3 .1 | (2 24. 8) | – | (2 24 . 8) | (1 95 . 6) | – | (19 5 . 6)
Amortisation | 5.2 | (1 7. 0) | – | (1 7. 0) | (2 9. 4) | – | (2 9. 4)
Impairment of non-current assets | 2.4 | (11.8) | (2 . 6) | (1 4 . 4) | (1. 7) | (6 9 .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 |  | 80 0.2 | 50.0 | 850.2 | 7 81. 6 | 12 6 . 6 | 908.2
Foreign exchange (losses)/gains | 2.5 | (9. 4) | – | (9.4) | (1 4 . 3) | 4 .9 | (9. 4)
Interest payable and similar charges | 2.5 | (1 0 6 . 9) | (0 .6) | (1 0 7. 5) | (115 . 2) | (0 . 3) | (1 1 5.5)
Interest receivable and similar gains | 2.5 | 2 0 .1 | – | 2 0 .1 | 1 3 .1 | – | 1 3 .1
Profit before tax |  | 704. 0 | 49. 4 | 753. 4 | 6 65.2 | 131 . 2 | 796.4
Tax: |  |  |  |  |  |  |
– Before effect of changes in tax rate | 2.6 | (213 . 0) | (14 . 9) | (227 .9) | (19 5 . 2) | (3 7. 3) | (2 32 .5)
– Effect of changes in tax rate | 2.6 | – | – | – | (0 .6) | (2.4) | (3. 0)
Total tax charge |  | (2 13. 0) | (14 . 9) | (227 .9) | (19 5 . 8) | (39 .7) | (2 35.5)
Profit for the period |  | 491. 0 | 3 4.5 | 525. 5 | 4 69. 4 | 91.5 | 5 60 .9
Attributable to: |  |  |  |  |  |  |
Owners of the parent company |  | 4 92 .1 | 34.5 | 526 .6 | 4 70 .7 | 91. 5 | 562. 2
Non-controlling interests | 4.5 | (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 | 2.8 | 12 8 . 4 |  | 1 3 7. 5 | 11 9 . 6 |  | 14 2. 8
– Diluted | 2.8 | 126 . 0 |  | 13 4 . 8 | 11 6 . 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. See further details of this restatement in the Net presentation of sleeved electricity trades section in note 8.4.
(2) Adjusted results are stated after adjusting for exceptional items and certain remeasurements. See note 2.7 for further details.
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Section 1: Consolidated financial statements continued
Consolidated statement of comprehensive income

|  |  | Year ended 31 December
|  |  | Restated (1)
|  | 2024 | 2023
| Notes | £m | £m
Profit for the period |  | 525. 5 | 5 60 .9
Items that will not be subsequently reclassified to profit or loss: |  |  |
Remeasurement of defined benefit pension scheme | 6.3 | 5. 5 | (28 . 8)
Deferred tax on remeasurement of defined benefit pension scheme | 2.6 | (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 | 4.4 | (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) | (2 5. 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 | 2.6 | (1 . 7) | (1. 9)
Net fair value (losses)/gains on cash flow hedges | 7.3 | (4 9. 0) | 26 6.5
Net (losses)/gains on cash flow hedges reclassified to profit or loss | 7.3 | (2 42 . 9) | 2 5 6 .1
Deferred tax on cash flow hedges | 2.6 | 73. 0 | (1 30. 7)
Other comprehensive (expense)/income |  | (2 1 7. 0) | 3 65.6
Total comprehensive income for the year |  | 308 .5 | 926.5
Attributable to: |  |  |
Owners of the parent company |  | 31 0 . 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 be subsequently reclassified to profit
or loss” to “items that may be subsequently 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. See the Other comprehensive income presentation section in note 8.4 for further details of
this restatement.
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Consolidated balance sheet

|  | As at 31 December |
|  | 2024 | 2023
| Notes | £m | £m
Assets |  |  |
Non-current assets |  |  |
Goodwill | 5.2 | 4 1 5 .1 | 416 .7
Intangible assets | 5.2 | 6 8 .1 | 81. 5
Property, plant and equipment | 3.1 | 2,8 02.0 | 2,69 8. 8
Right-of-use assets | 3.2 | 10 0 .9 | 12 2 . 2
Investments |  | 3.6 | 8 .9
Retirement benefit surplus | 6.3 | 24 .7 | 18 . 4
Deferred tax assets | 2.6 | 4 8.6 | 52.9
Derivative financial instruments | 7.1 | 81.7 | 293 .6
|  | 3, 5 4 4 .7 | 3, 693. 0
Current assets |  |  |
Inventories | 3.4 | 302 .0 | 328 .4
Renewable certificate assets | 3.3 | 54 0.0 | 2 92.2
Trade and other receivables and contract assets | 3.5 | 47 0. 3 | 976 .9
Derivative financial instruments | 7.1 | 17 5. 6 | 36 8.4
Cash and cash equivalents | 4.1 | 35 6 .0 | 37 9.5
|  | 1, 8 43. 9 | 2 ,3 45 .4
Liabilities |  |  |
Current liabilities |  |  |
Trade and other payables and contract liabilities | 3.7 | (1 , 2 8 9 .1) | (1 ,539.6)
Lease liabilities | 3.2 | (26 . 0) | (2 5 .1)
Current tax liabilities |  | (9. 6) | (20.6)
Borrowings | 4.2 | (11 9 . 0) | (2 6 4 . 2)
Provisions | 5.3 | (2 0 . 2) | (6 . 6)
Derivative financial instruments | 7.1 | ( 7 1 .1) | (2 31. 6)
|  | (1, 5 35 . 0) | (2 , 0 8 7. 7)
Net current assets |  | 30 8 .9 | 2 5 7. 7
Non-current liabilities |  |  |
Borrowings | 4.2 | (1 , 0 5 7. 7 ) | (1 ,1 6 1 .1)
Lease liabilities | 3.2 | (9 0. 5) | (11 0 .7)
Provisions | 5.3 | (7 5.7) | (72.2)
Deferred tax liabilities | 2.6 | (28 0 .4) | ( 3 1 7 .1)
Derivative financial instruments | 7.1 | (26 2 . 2) | (3 0 6. 6)
|  | (1, 76 6 . 5) | (1 , 9 6 7. 7)
Net assets |  | 2 , 0 8 7.1 | 1,9 83. 0
Shareholders’ equity |  |  |
Issued equity | 4.4 | 4 9.4 | 4 9 .1
Share premium | 4.4 | 4 43 . 8 | 4 41. 2
Hedge reserve | 7.3 | (7. 9) | 2 0 7. 4
Cost of hedging reserve | 7.4 | 6.9 | 18 .7
Other reserves | 4.4 | 4 67. 0 | 588.2
Retained profits | 2.10 | 1 ,1 1 8 .1 | 666.4
Total equity attributable to owners of the parent company |  | 2 , 0 7 7. 3 | 1,971.0
Non-controlling interests | 4.5 | 9. 8 | 12. 0
Total shareholders’ equity |  | 2 , 0 8 7.1 | 1,9 83. 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
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169
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Section 1: Consolidated financial statements continued
Consolidated statement of changes in equity

|  |  |  |  |  |  | Non- |
| Issued | Share | Hedge | Cost of | Other | Retained | controlling |
| equity | premium | reserve | hedging | reserves | profits | interests | Total
| £m | £m | £m | £m | £m | £m | £m | £m
At 1 January 2023 | 4 7. 9 | 43 3.3 | (15 2 . 0) | 4 0 .1 | 74 7. 7 | 193. 8 | 13 . 4 | 1, 324 . 2
Profit/(loss) for the year | – | – | – | – | – | 562.2 | (1. 3) | 56 0.9
Other comprehensive income/(expense) | – | – | 39 1.9 | 5. 6 | (1 0 . 3) | (21. 2) | (0 . 4) | 365. 6
Total comprehensive income/(expense) |  |  |  |  |  |  |  |
fortheyear | – | – | 39 1.9 | 5. 6 | (1 0 . 3) | 5 41. 0 | (1. 7) | 926 .5
Equity dividends paid (note 2.9) | – | – | – | – | – | (8 6 .3) | – | (8 6 .3)
Issue of share capital (note 4.4) | 1. 2 | 7. 9 | – | – | – | – | – | 9 .1
Contributions from non-controlling interests | – | – | – | – | – | – | 0.3 | 0.3
Repurchase of own shares (note 2.11) | – | – | – | – | (1 4 9. 2) | – | – | (14 9 . 2)
Total transactions with the owners in their capacity as owner | 1. 2 | 7. 9 | – | – | (1 4 9. 2) | (8 6 .3) | 0.3 | (2 2 6 .1)
Movements on cash flow hedges released |  |  |  |  |  |  |  |
directly from equity (note 7.3) | – | – | (43 . 4) | – | – | – | – | (43 . 4)
Deferred tax on cash flow hedges released |  |  |  |  |  |  |  |
directly from equity (notes 2.6 and 7.3) | – | – | 10 .9 | – | – | – | – | 10 .9
Movements on cost of hedging released directly |  |  |  |  |  |  |  |
from equity (note 7.4) | – | – | – | (36 . 0) | – | – | – | (3 6 . 0)
Deferred tax on cost of hedging released directly |  |  |  |  |  |  |  |
from equity (notes 2.6 and 7.4) | – | – | – | 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 (note 2.6) | – | – | – | – | – | 4.5 | – | 4 .5
At 1 January 2024 | 4 9 .1 | 4 41 . 2 | 207 .4 | 1 8 .7 | 588.2 | 666.4 | 12 . 0 | 1,9 8 3. 0
Profit/(loss) for the year | – | – | – | – | – | 52 6. 6 | (1 .1) | 525. 5
Other comprehensive (expense)/income | – | – | (21 8 .9) | 5 .1 | (6 . 6) | 4.2 | (0 .8) | (2 1 7. 0)
Total comprehensive (expense)/income for theyear | – | – | (21 8 .9) | 5 .1 | (6 . 6) | 530.8 | (1. 9) | 30 8.5
Equity dividends paid (note 2.9) | – | – | – | – | – | (93.5) | – | (93.5)
Issue of share capital (note 4.4) | 0.3 | 2 .6 | – | – | – | – | – | 2.9
Distributions to non-controlling interests | – | – | – | – | – | – | (0 .3) | (0 .3)
Repurchase of own shares (note 2.11) | – | – | – | – | (115 . 4) | – | – | (11 5 . 4)
Total transactions with the owners in their capacity as owner | 0.3 | 2 .6 | – | – | (115 . 4) | (93.5) | (0 . 3) | (2 0 6 .3)
Movements on cash flow hedges released |  |  |  |  |  |  |  |
directly from equity (note 7.3) | – | – | 4.8 | – | – | – | – | 4. 8
Deferred tax on cash flow hedges released |  |  |  |  |  |  |  |
directly from equity (notes 2.6 and 7.3) | – | – | (1. 2) | – | – | – | – | (1. 2)
Movements on cost of hedging released directly |  |  |  |  |  |  |  |
from equity (note 7.4) | – | – | – | (22 . 6) | – | – | – | (22 . 6)
Deferred tax on cost of hedging released directly |  |  |  |  |  |  |  |
from equity (notes 2.6 and 7.4) | – | – | – | 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 (note 2.6) | – | – | – | – | – | 1.4 | – | 1. 4
At 31 December 2024 | 49. 4 | 4 43 . 8 | ( 7. 9) | 6.9 | 4 67. 0 | 1 ,11 8 .1 | 9.8 | 2 , 0 8 7.1

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Consolidated cash flow statement

|  | Year ended 31 December |
|  | 2024 | 2023
| Notes | £m | £m
Cash generated from operations | 4.3 | 1 ,1 3 5 .1 | 1 , 111 . 0
Income taxes paid |  | (19 3 . 6) | (18 0 . 0)
Interest paid |  | (9 9.5) | (1 0 6 .1)
Interest received |  | 1 7. 5 | 10 .7
Net cash from operating activities |  | 859. 5 | 835 .6
Cash flows from investing activities |  |  |
Purchases of property, plant and equipment |  | (37 9. 8) | (4 2 9 . 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 | 5.1 | – | (9 .0)
Purchases of equity in associates |  | – | (1. 7)
Contributions to associates |  | (2 .9) | –
Net cash used in investing activities |  | (3 8 9. 9) | (451 . 8)
Cash flows from financing activities |  |  |
Equity dividends paid | 2.9 | (93.5) | (8 6 . 3)
(Distributions to)/contributions from non-controlling interests |  | (0 .1) | 0 .3
Proceeds from issue of share capital |  | 2 .7 | 8.6
Repurchase of own shares | 2.11 | (11 5 . 4) | (1 49 . 2)
Drawdown of borrowings | 4.2 | 7 31. 8 | 14 0. 0
Repayment of borrowings | 4.2 | (9 49. 2) | (12 5 . 3)
Gross receipt of financing derivatives |  | 19 8 . 3 | –
Gross payment of financing derivatives |  | (22 9. 8) | –
Payment of principal of lease liabilities |  | (2 7. 4) | (2 5. 8)
Other financing costs paid |  | (9. 0) | (0. 2)
Net cash absorbed by financing activities |  | (49 1. 6) | (2 3 7. 9)
Net (decrease)/increase in cash and cash equivalents |  | (22 .0) | 1 45.9
Cash and cash equivalents at 1 January |  | 37 9.5 | 23 8.0
Effect of changes in foreign exchange rates |  | (1. 5) | (4. 4)
Cash and cash equivalents at 31 December | 4.1 | 35 6 .0 | 37 9.5

Non-cash transactions recognised in the Consolidated income statement are reconciled to operating cash flows as part of the
disclosure provided in note 4.3. Further details of the cash flow impact of exceptional items can be found in note 2.7.
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The Financial performance section gives further information about the items in the Consolidated income statement. It includes a
summary of financial performance by each of the Group’s businesses (see note 2.1), analysis of certain Consolidated income statement
items (notes 2.2–2.6) information regarding Total and Adjusted results, dividends, retained profits, the share buyback programme and
post balance sheet events (notes 2.7-2.12). Further commentary on the Group’s trading and operational performance during the year
can be found in the Strategic report on pages 1 to 85, with particular reference to key transactions and market conditions that have
affected the results.
2.1 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). See note 3.4 for details of the costs included
within inventories.
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.
Section 2: Financial performance
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2.1 Segmental reporting continued
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 2.7.

|  |  |  |  |  | Year ended 31 December 2024 |  |  |
|  |  |  |  | Innovation, |  | Exceptional |
|  |  |  |  | capital |  |  | items |
| Pellet | Biomass | Flexible | Energy | projects and | Intra-group | Adjusted | and certain | Total
| Production | Generation | Generation | Solutions | other | eliminations | results | remeasurements | results
| £m | £m | £m | £m | £m | £m | £m | £m | £m
Revenue |  |  |  |  |  |  |  |  |
External sales | 3 4 0.1 | 1,880.7 | 74.3 | 3,7 86.1 | – | – | 6,081.2 | 81.3 | 6 ,162.5
Inter-segment sales | 602.0 | 3,040.0 | 148.5 | – | – | (3,790.5) | – | – | –
Total revenue | 9 42.1 | 4,920.7 | 222.8 | 3,786 .1 | – | (3,790.5) | 6,081.2 | 81.3 | 6 ,162.5
Cost of sales | (5 62 .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) | (2 2.1) | (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 2.2.
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 |  |  |  |
|  |  |  |  | Innovation, |  |  | Exceptional |
|  | Restated (1)(2) | Restated (1) |  | capital | Restated (1) |  | Restated (2) | items | Restated (2)
| Pellet | Biomass | Flexible | Energy | projects and | Intra-group |  | Adjusted | and certain | Total
| Production | Generation | Generation | Solutions | other | eliminations |  | results | remeasurements | results
| £m | £m | £m | £m | £m | £m |  | £m | £m | £m
Revenue |  |  |  |  |  |  |  |  |  |
External sales | 397. 8 | 2,011.4 | 82.8 | 4,958.3 | – | – |  | 7,450.3 | 282.9 | 7,7 33. 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, | 45 0.3 | 282.9 | 7,7 33.2
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) | (6 9.1) | (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. See the Net presentation of sleeved electricity trades section in note 8.4 for further details on this restatement.
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Section 2: Financial performance continued
2.1 Segmental reporting continued
Capital expenditure by reportable segment
Assets and working capital are monitored on a consolidated basis; however, capital expenditure is monitored by segment.

|  |  |  | Additions to property, plant
|  | Additions to intangible assets | and equipment
|  | Restated (1) |  | Restated (1)
| 2024 | 2023 | 2024 | 2023
At 31 December | £m | £m | £m | £m
Pellet Production | – | – | 104.8 | 163.0
Biomass Generation | 0.5 | 1.9 | 72.5 | 129.9
Flexible Generation | – | – | 139.4 | 203.5
Energy Solutions | 3.8 | 2.7 | 0.3 | 0.2
Innovation, capital projects and other | 2.6 | 5.3 | 8.5 | 12.6
Total | 6.9 | 9.9 | 325.5 | 509.2

(1) Comparative amounts have been restated to reflect the updated presentation of reporting Biomass Generation and Flexible Generation separately. See above for further
details of the change in reportable segments.
Total cash outflows in relation to capital expenditure during the year were £387.5 million (2023: £441.1 million). In the current year,
the cash outflow in relation to property, plant and equipment is higher than the cost capitalised (see note 3.1), 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
|  |  | Restated (1)
| 2024 |  | 2023
| £m |  | £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, | 38 4 .3
Total | 6,162. 5 |  | 7,7 33. 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. See the Net presentation of sleeved electricity trades section in note 8.4 for further details on this restatement.

| Non-current assets (1) |  |
| (based on asset’s location) |  |
| As at 31 December |  |
|  | 2024 | 2023
|  | £m | £m
Canada |  | 356.5 | 406.7
US |  | 698.9 | 666.0
Asia |  | 0.2 | 0.3
UK | 2 | ,33 4.1 | 2,255.1
Total | 3 | 3,389.7 | ,32 8 .1

(1) Non-current assets comprise goodwill, intangible assets, property, plant and equipment, right-of-use assets and investments.
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2.2 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 2.7 for
further details on gains and losses on derivatives and note 7.2.3 for inflation risk management. 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.

|  |  |  |  | Restated (1) |  |  |
| Year ended 31 December 2024 |  |  |  | Year ended 31 December 2023 |  |  |
| Exceptional |  |  | Exceptional |  |
|  | items and |  |  |  | items and |  |
| Adjusted | certain | Total |  | Adjusted | certain |  | Total
| results | remeasurements | results |  | results | remeasurements |  | results
| £m | £m | £m |  | £m | £m |  | £m
Revenue from contracts with customers | 5,918.2 | (6.9) | 5,911.3 | 7,14 | 8.3 | – | 7,14 | 8 .3
Other revenue | 163.0 | 88.2 | 251.2 | 302.0 | 282.9 |  | 584.9
Total revenue | 6,081.2 | 81.3 | 6 ,16 2.5 | 7,45 | 0.3 | 282.9 |  | 7,7 33. 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. See the Net presentation of sleeved electricity trades section in note 8.4 for further details on this restatement.

| Nature and timing of performance obligations, |
Revenue stream (Segment) | including significant payment terms | Method of recognising revenue, including any estimation uncertainties
Pellet sales (Pellet | The Group’s Pellet Production business produces | Revenue is recognised at the point that the pellets
Production) | biomass pellets which are sold to external | are loaded onto the shipping vessel. The amount of
| customers. Customers generally obtain control | revenue recognised is based on the contracted price
| of the pellets at the point the pellets are loaded | and volume of the pellets.
| onto the shipping vessel. | For CIF sales, revenue for the freight portion is
| Where freight is also arranged for the customer, | recognised over the period the vessel sails.
| 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. |
Electricity and gas sales | The Group’s Biomass Generation and Flexible | Revenues from sales contracts fulfilled through
(Biomass Generation and | Generation businesses have contracts | generation are recognised at a point in time based
Flexible Generation) | for wholesale electricity sales. Performance | upon metered output at rates specified under
| obligations, being the supply of electricity, are met | contractual terms. These are recognised under
| either via generation or through the procurement | the output method, whereby revenue is recognised
| of electricity from counterparties. The | based on the value transferred to the customer.
| performance obligations for these contracts are | Revenue from sales contracts fulfilled through
| deemed to be a series of distinct goods that are | procured electricity or gas is recognised at the point
| substantially the same and transfer consecutively. | at which this electricity or gas is supplied to the
| Control is deemed to have transferred to the | counterparty in accordance with the contractual
| customer at the point that the electricity has been | terms at rates specified under the contract.
| 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. |
Renewable certificate | Renewables Obligation Certificates (ROCs) and | External ROC and REGO sales are recognised at
sales (Biomass | Renewable Energy Guarantees of Origin (REGOs) | the point the relevant renewable certificates are
Generation, Flexible | are sold to counterparties at a point in time. | transferred to the counterparty.
Generation and Energy | ROCs sold to optimise working capital are invoiced | See note 3.3 for further details on how the renewable
Solutions) | in line with contractual terms and are usually | certificate schemes operate.
| 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. |

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CfD income/payment | The Group’s Biomass Generation business is party | The Group recognises the income or cost arising from
(Biomass Generation) | to a CfD with the Low Carbon Contracts Company | the CfD in the Consolidated income statement as a
| (LCCC), a Government-owned entity responsible | component of revenue at the point the Group meets
| for delivering elements of the Government’s | its performance obligation under the CfD agreement.
| Electricity Market Reform programme. Under the | This is considered to be the point at which the
| contract, the Group makes or receives payments | relevant generation is delivered and the payment
| in respect of electricity dispatched from a specific | becomes contractually due.
| biomass-fuelled generating unit. | See CfD income/payment section below for further
| Invoices are raised 7–10 days following the date | details.
| of supply and are settled within 28 days. |
Ancillary services | Ancillary services refer to the provision of a range | Revenue is recognised by reference to the stage
(Biomass Generation | of system support services to National Grid. Most | of completion of the contractual performance
and Flexible Generation) | contracts are for the delivery of a specific service | obligations, which are calculated by reference to
| either continually or on an ad-hoc basis over a | the amount of the contract term that has elapsed.
| period of time. | Depending on contract terms, this approach may
| Invoices are raised and subsequently settled in line | require judgement in estimating probable future
| with the National Grid company ancillary services | outcomes.
| settlement calendar, typically monthly. |
Other income | Other income is derived from the sale of goods. | Revenue is recognised at the point the control of the
(Allsegments) | The customer obtains control typically at the point | goods is transferred to the customer.
| of delivery to their premises or upon collection. |
| Invoices are raised in line with contractual terms. |
Electricity and gas sales | The Group’s Energy Solutions business sells | Revenue is recognised on the supply of electricity or
(Energy Solutions) | electricity and gas directly to non-domestic | gas when a contract exists, supply has taken place,
| customers. Energy supplied is measured based | a quantifiable price has been established or can be
| upon metered consumption and contractual rates. | determined, and the amounts receivable are
| The Energy Solutions business also has long-term | expected to be recovered.
| contracts for the sale of electricity and gas, which | Where supply has taken place but has not yet been
| are deemed as being satisfied over time in line | measured or billed, revenue is estimated based on
| with the progress of the contracts. | consumption statistics and selling price estimates
| Invoices are raised in line with contractual terms. | and is recognised as accrued income. This estimate
| For small and medium-sized enterprise (SME) | is not considered to be a key source of estimation
| customers, payment is generally due within | uncertainty because historical experience has
| 10–14 days. For Industrial and Commercial (I&C) | demonstrated that these estimates are materially
| customers, payment is generally due between | accurate based on the subsequent billings
| 28–90 days. | 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.

Section 2: Financial performance continued
2.2 Revenue continued
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EBRS and EBDS income | The UK Government introduced the EBDS running |  |  | The discounted price of electricity and gas supplied
(Energy Solutions) | from 1 April 2023 to 31 March 2024. Under this |  |  | under both the EBRS and EBDS is recognised in
| scheme, energy supplied to eligible non-domestic |  |  | revenue as it is supplied. The amount claimed back
| customers will have a discount applied to each |  |  | from the UK Government is recognised within
| unit of electricity and gas. Certain customers may |  |  | revenue over the same period as the underlying
| be eligible for higher levels of support dependent |  |  | discounted revenue it relates to is recognised.
| on the sector in which they operate. The discount |  |  | The revenue received from the UK Government is
| provided can then be claimed back from the UK |  |  | included in the EBRS and EBDS income line in the
| Government by the supplier. |  |  | table on page 178. The Group does not recognise
| The EBDS replaced the EBRS which supported |  |  | any additional revenue from the scheme than it
| non-domestic customers between 1 October |  |  | would have done had it not been introduced.
| 2022 and 31 March | 2023. | Under the EBRS, |
| energy supplied to non-domestic customers in this |  |  |
| period had a discount applied for the customer |  |  |
| under the scheme to cap their energy tariff. The |  |  |
| discount provided can then be claimed back from |  |  |
| the UK Government by the supplier. |  |  |
|  |  | Payment is due 10 days post submission of |
| a claim, which typically occurs monthly. |  |  |

Accounting policy
Revenue represents amounts receivable for goods or services provided to customers in the normal course of business, net of trade
discounts, VAT and other sales-related taxes and excludes transactions between Group companies. Revenue is presented gross in
the Consolidated income statement when the Group controls the specified good or service prior to the transfer to the customer. When
the Group is acting primarily as an agent, revenue is recognised on a net basis. During the year, the Group reassessed the application
of the agent and principal requirements in IFRS 15 against sleeved electricity trades. See note 8.4 for further information.
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
(2 02 3: £ 1, 27 7.4 million) primarily as a result of the reduction in these ROC sales.
See note 3.3 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.
2.2 Revenue continued
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2.2 Revenue continued
Further analysis of revenue for the year ended 31 December 2024 is provided in the table below:

|  | Year ended 31 December 2024 |  |
|  | External | Inter-segment | Total
|  | £m | £m | £m
Pellet Production |  |  |  |
Pellet sales |  | 329.6 | 597. 5 | 927.1
Other income |  | 10.5 | 4.5 | 15.0
Total Pellet Production |  | 3 4 0.1 | 602.0 | 9 42.1
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 |  | 3,7 86 .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 | 6,16 | 2. 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 ,16 2. 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). See note 3.7 for further details on contract liabilities.
Revenue recognised in the period from performance obligations satisfied or partly satisfied in the previous period was £nil (2023: £nil).
Section 2: Financial performance continued
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The following is an analysis of the Group’s revenues for the year ended 31 December 2023:

|  |  | Restated (1)(2) |  |
|  | Year ended 31 December 2023 |  |
|  | External | Inter-segment | Total |
|  | £m | £m | £m |
Pellet Production |  |  |  |  |
Pellet sales |  | 391.3 | 424.6 | 815.9 |
Other income |  | 6.5 | – | 6.5 |
Total Pellet Production |  | 397. 8 | 424.6 | 822.4 |
Biomass Generation |  |  |  |  |
Electricity and gas sales |  | 1,183. 4 | 3,908.0 | 5,091.4 |
Renewable certificate sales |  | 842.6 | 434.8 | 1, 27 7.4 |
CfD payment |  | (63.0) | – | (63.0) |
Ancillary services |  | 25.0 | – | 25.0 |
Other income |  | 23.4 | 48.7 | 7 2.1 |
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 | 3 81.1 |
Energy Solutions |  |  |  |  |
Electricity and gas sales |  | 4,554.4 | – | 4,554.4 |
EBRS and EBDS income |  | 365.8 | – | 365.8 |
Renewable certificate sales |  | 3 7.9 | – | 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 | 7,45 | 0.3 | – | 7,45 | 0.3
Certain remeasurements |  | 282.9 | – |  | 282.9
Total consolidated revenue in Total results |  | 7,7 33. 2 | – |  | 7,7 33. 2

(1) Amounts have been restated to reflect the change in reportable segments. See note 2.1 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. See the Net presentation of sleeved electricity trades section in note 8.4 for further details on this restatement.
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.
For accounting policies and other disclosures related to contract assets and liabilities, see notes 3.5 and 3.7.
For accounting policies and other disclosures related to costs incurred to acquire customer contracts, see note 3.6.
2.2 Revenue continued
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2.3 Operating and administrative expenses
This note sets out certain components of operating and administrative expenses in the Consolidated income statement and a detailed
breakdown of the fees paid to the Group’s external auditor, PricewaterhouseCoopers LLP, in respect of services provided to the Group
during the year. The fees in the year ended 31 December 2023 relate to fees paid to the Group’s previous external auditor, Deloitte LLP,
in respect of services provided to the Group during 2023.
The following expenditure has been charged in arriving at operating profit:

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Staff costs (note 6.1) | 322.8 | 294.0
Repairs and maintenance expenditure on property, plant and equipment | 159.6 | 173.9
Other operating and administrative expenses | 238.2 | 243.8
Total operating and administrative expenses | 720.6 | 711.7

Auditor’s remuneration

| Year ended 31 December |
| 2024 | 2023
| £000 | £000
Audit fees: |  |
Fees payable for the audit of the Group’s Consolidated financial statements | 2,153.0 | 1,500.0
Fees payable for the audit of the Company’s subsidiaries’ statutory accounts | 225.0 | 40.0
Total audit fees | 2,378.0 | 1,540.0
Other fees: |  |
Review of the Group’s half-year Condensed consolidated financial statements | 167.0 | 140.0
Assurance services provided to non-material affiliates | 70.0 | 18.3
Other services | 10.0 | 47.0
Other assurance services | 205.0 | 130.0
Total non-audit fees | 452.0 | 335.3
Total auditor’s remuneration | 2,830.0 | 1,875.3

Included in fees payable for the audit of the Group’s Consolidated financial statements for 2024 is £0.3 million relating to the transition
phase of the audit, which was undertaken and invoiced by PricewaterhouseCoopers LLP in 2023.
Other assurance services provided by PricewaterhouseCoopers LLP in the current year consist of ESG assurance fees. In the prior year
other assurance services provided by Deloitte LLP related to corporate refinancing fees.
In addition to the amounts presented in the table above, PricewaterhouseCoopers LLP provided ESG assurance services amounting
to £0.4 million in 2023 prior to being appointed as auditor.
See the Audit Committee report on page 112 for further details.
Section 2: Financial performance continued
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2.4 Impairment review of fixed assets and goodwill
Accounting policy
Goodwill is tested for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s
cash-generating units (CGUs) or group of CGUs expected to benefit from the synergies of the business combination.
A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. CGUs are identified consistently from period to period unless there is a change in the period that
would impact the Group’s CGUs. The Group’s CGUs are reassessed should any such changes occur.
The Group reviews its fixed assets (and, where appropriate, groups of assets combined into a CGU) whenever there is an indication
that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each
reporting period.
If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to
the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the
expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs of disposal). The
recoverable amount of an asset or CGU is the higher of its fair value less costs of disposal (FVLCD) and its value in use (ViU). The initial
assessment of the recoverable amount is normally based on ViU.
The assessment of future cash flows is based on the approved long-term forecasts that support the Board’s strategic planning
process and includes all expected costs necessary to generate the cash inflows from the CGU’s assets in their current state and
condition, including an allocation of centrally managed costs. Future cash flows include, where relevant, contracted cash flows arising
from the Group’s forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges.
Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic,
commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in
renewable technologies, electrification and the impact of relevant policies on longer-term supply and demand profiles.
As required by IAS 36, the additional value that could be obtained from enhancing the Group’s assets and the potential benefit of any
future restructuring or reorganisation that the Group is not yet committed to, is not reflected in the ViU calculation.
In determining ViU, the estimated future cash flows are discounted to present value using a pre-tax nominal discount rate reflecting
the specific risks attributable to the asset or CGU in question.
If the recoverable amount is less than the carrying amount in the Consolidated financial statements, an impairment charge is
recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is
recognised immediately in the Consolidated income statement.
Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely
independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are
allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU
on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be
allocated on a reasonable and consistent basis.
An impairment loss relating to a CGU is allocated first to the carrying amount of any goodwill allocated to the CGU and then to the
other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the
CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual
asset is limited to reducing the asset’s carrying value to its individual recoverable amount. If this results in the impairment loss
allocated to an asset being less than its pro-rata share, the excess is allocated on a pro-rata basis to the remaining assets in the CGU.
An impairment loss recognised for goodwill is not reversed in a subsequent period. Non-financial assets other than goodwill that
have an impairment loss recognised are reviewed in subsequent reporting periods for possible reversal of the impairment. Where
an impairment reversal is identified, this is reversed immediately in the Consolidated income statement.
The table below details the Group’s reportable segments, the CGUs within those segments and the value of any goodwill allocated
to them. See note 5.2 for further details on goodwill.
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CGUs

|  | As at 31 December 2024
|  | Goodwill
Segment name | CGUs contained within segment | £m
Pellet Production | Pellet Operations | 175.6
Biomass Generation | Drax Power Station | –
Flexible Generation | Lanark | 11.3
| Galloway | 4 0.1
| Cruachan | 26.9
| Hirwaun | –
| Millbrook | –
| Progress | –
| Daldowie | –
Energy Solutions | Drax Energy Solutions | 161.2
| Opus Energy | –
|  | 415.1

In respect of the Pellet Production segment, the smallest group of assets that generate independent cash inflows is the Pellet
Production business as a whole, known as the Pellet Operations CGU. This is due to the output of the individual pellet plants being
combined and used interchangeably to fulfil customer contracts.
In respect of the Biomass Generation and Flexible Generation segments, the Group generally considers the smallest groups of assets
that generate independent cash inflows to be the individual sites that share common infrastructure and control functions. The Open
Cycle Gas Turbine (OCGT) assets were previously considered as one CGU. Construction of the OCGT assets is expected to complete in
2025. With updated decisions being made about how the OCGT assets will operate once they commence commercial generation, the
OCGT assets are now considered to be separate CGUs – Hirwaun, Progress and Millbrook – due to having significant independence
around the decisions, activities and resulting cash inflows. There are no other changes to any of the Biomass Generation or Flexible
Generation CGUs from the prior year.
In respect of the Energy Solutions segment, the smallest groups of assets that generate independent cash inflows are the operating
entities within the business, Drax Energy Solutions and Opus Energy.
The Innovation, capital projects and other segment does not have any external cash inflows and therefore does not meet the
definition of a CGU. However, as explained above, corporate assets are considered for impairment individually where possible or
as part of a CGU, and relevant centrally managed costs are allocated to each CGU on a reasonable and consistent basis.
Assessment of indicators of impairment for CGUs to which no goodwill is allocated
Full impairment reviews were performed on all CGUs to which goodwill had been allocated (see Impairment review section below).
For CGUs to which no goodwill is allocated, impairment reviews are only performed if impairment indicators are identified.
In determining whether impairment indicators existed in respect of these CGUs, the Group considered changes in market prices
for commodities, foreign currency exchange rates, changes in macro-economic conditions, potential impacts of climate change and
regulatory requirements since the previous reporting date, and their potential impact on the Group’s long-term planning models and
future forecast cash flows. Given the relatively stable macro-economic conditions and exchange rates compared to the prior year end,
as well as falling interest rates, these are not considered to be impairment indicators.
The market price of certain commodities (e.g. power and gas) have fallen since the prior year but still remain above historical averages.
This was not an impairment indicator for the Drax Power Station, Hirwaun, Millbrook and Progress CGUs as they are less sensitive to
power price changes due to certain generation income being under a CfD, or generation activities being more dependent on the
spread between gas and power prices. Further, a high proportion of their income is not linked to power prices, such as renewable
certificates, system support and ancillary services. The Drax Power Station CGU also has a high hedged power position. Gas prices
are a key input cost for Daldowie and therefore this CGU has benefited as these prices have reduced during 2024.
Consideration was also given to assumptions regarding biomass generation and biomass prices post March 2027, when current
subsidies for biomass generation at Drax Power Station are due to end, and whether that was an indicator of impairment (see the
Principal risks and uncertainties section starting on page 70 for further details). Previously the carrying amount of the Drax Power
Station CGU was supported by pre-2027 cash flows. As there is now one less year of pre-2027 cash flows compared to the prior year
this was considered to be an impairment indicator. Heads of terms have been agreed with the UK Government for a proposed low-
carbon dispatchable CfD agreement for the period April 2027 to March 2031 (see note 2.12 for further details). However these heads
of terms are non-binding and therefore there remains some uncertainty over the cash flows post 2027. Accordingly a full impairment
review of the Drax Power Station CGU has been performed.
There were no impairment indicators present for the Hirwaun, Millbrook, Progress or Daldowie CGUs and accordingly no impairment
review was performed for these CGUs in the current year.
As part of the Opus Energy sale of meter points and restructuring, the non-current assets in the Opus Energy CGU were either
disposed of or impaired to £nil, with the exception of Opus Energy House (see note 2.7 for further details). Opus Energy House
is recognised at its recoverable amount. As a result, a full impairment review was not required for the Opus Energy CGU.
Section 2: Financial performance continued
2.4 Impairment review of fixed assets and goodwill continued
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Impairment review
For the purpose of impairment reviews the recoverable amounts of the CGUs, or groups of CGUs, are measured based on ViU
calculations using the Group’s established planning models. These calculations depend on a broad range of assumptions, the most
significant of which are outlined below for each CGU, or group of CGUs, to which an impairment test has been performed in the
current year. The bases of these estimates are outlined below.

| Significant assumptions for value |
CGUs | in use calculation | Management’s bases for determining estimates used in value in use calculation
Pellet Operations | – Production costs | – Future production costs are estimated based on a combination of current and
| – Production volumes | historical costs, inflation expectations and maintenance/operating assumptions
| – Sales prices | – Production volumes are estimated based on a combination of the capacity of
| – Discount rate | the plant, current and historical volumes produced, planned and unplanned
|  | downtime provisions, and fibre availability
|  | – Sales prices are estimated based on contractual sales agreements and an
|  | assumed market price after current contracts expire based on third-party
|  | market forecasts and current contract negotiations
|  | – See below for details of the basis used to estimate discount rates
Drax Power Station, | – Power prices | – Power revenue is derived from hedged power sales, future wholesale energy
Lanark, Galloway | – Post-2027 biomass support | price estimates and an assumption of additional value added through the
and Cruachan | mechanism (Drax Power | balancing market and optimisation
| Station only) | – Future wholesale energy price estimates are based on market traded power
| – Fuel cost (Drax Power | prices for around three years (the period they are liquid), gas market prices as a
| Station only) | proxy for power for another two years, then the Group’s long-term power price
| – Ancillary income | forecast, which is prepared using externally provided gas price forecasts and
| – Volume of generation | demand inputs
| (excluding Cruachan) | – Post-2027 biomass generation value is based on the heads of terms agreed with
| – Discount rate | UK Government for a proposed low carbon dispatchable CfD agreement for the
|  | period April 2027 to March 2031 and a similar level of value continuing to 2039
|  | – Fuel costs are estimated based on contractual purchase agreements and an
|  | assumed market price after current contracts expire based on third-party
|  | market forecasts and current contract negotiations
|  | – Ancillary income assumptions are based on past performance and current
|  | agreed prices with National Grid
|  | – Volume of generation for the run-of-river hydro assets is derived from historical
|  | rainfall averages. Volume of generation for Drax Power Station is based on
|  | biomass prices and availability, renewable support scheme terms and power
|  | price forecasts
|  | – See below for details of the basis used to estimate discount rates
Drax Energy | – Customer margins | – Customer margins are estimated based on current contracted prices and on
Solutions | – Supply volumes | current and previously achieved profitability
| – Collection rates | – The expectation of future organic supply volumes is based on past performance
| – Third-party cost estimates | and management’s expectations of market developments
| – Renewables services | – Collection rates are estimated based on historical data and adjusted for
| growth rates | expected changes in future circumstances
| – Discount rate | – Third-party cost estimates are based on a combination of externally published
|  | rates, management analysis of key market input assumptions, and forecasts
|  | from external experts
|  | – Renewables services growth is based on assumptions about the growth of
|  | relevant markets, such as electric vehicles
|  | – See below for details of the basis used to estimate discount rates

2.4 Impairment review of fixed assets and goodwill continued
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For the Drax Energy Solutions CGU, management has projected detailed cash flows based on a period of five years, with cash flows
beyond the five-year period taken into perpetuity using a long-term growth rate of 2%. For all other CGUs, management has projected
detailed cash flows based on a period of 15 years. Whilst this is longer than the five-year period specified by IAS 36, and the period the
Group assesses viability over in the Viability statement, it aligns with the Group’s long-term strategic planning and takes into account
future structural changes forecast within the generation and pellet production industries, as well as expected growth in the biomass
industry. These longer-term structural changes are mainly linked to climate change and the impact of changing weather patterns
(including increased rain fall from storms and drier summer months for the run-of-river hydro CGUs and the impact on plant downtime
and supply chains due to extreme weather events for the Pellet Operations and Drax Power Station CGUs), the impact of
decarbonisation and the transition to more renewable forms of energy and net zero, the impact of subsidy and support regimes, and
the impact of repairs and maintenance expenditure which is not uniform across the lives of assets. Using a period of only five years for
detailed cash flow forecasts could materially overstate or understate the ViU of these CGUs as the impact of these factors in periods
after five years can be significant. The Pellet Operations CGU also has long term contracts that can typically be in excess of 10 years
which further supports using a period greater than five years.
Where possible, for relevant commodities, forecasts are based on either contracted prices, particularly for the Pellet Operations CGU
where the Group has a number of longer-term contracts to support the prices used, or observable market curves. Beyond the liquid
portion of forward curves, internally constructed price curves are benchmarked against third-party market analysis to validate the
reasonableness of the assumptions used. Management continually reassesses forecasting accuracy, taking into account changes in
circumstances and events that could not reasonably be foreseen between the date of the forecast and the forecast period. These
reviews support the accuracy of management’s forecasts. This supports the use of detailed forecast periods of longer than five years.
Where management has projected detailed cash flows based on a period of 15 years, other than for Drax Power Station, cash flows
beyond the 15-year period are taken into perpetuity using a long-term growth rate of 2%. The Drax Power Station CGU assumes cash
flows to the end of 2039 in line with the assumed end of station life. The long-term growth rate is based on prudent expectations of
market share and profitability along with more general macro-economic factors which were obtained from the Group’s established
planning model along with external macro-economic forecasts. The long-term growth rate does not exceed the relevant long-term
average growth rate for each of the industries in which the Group operates.
The discount rates used for each CGU are calculated by third-party experts and reflect the weighted average cost of capital derived
using the Capital Asset Pricing Model (CAPM). The estimations use a risk-free rate based on Government bonds, market participant
capital structures and beta estimates adjusted for the specific circumstances and risk factors affecting the industry and markets in
which the CGU operates (taking into account relevant peer data sets). This calculation uses the relevant tax rates to calculate a pre-tax
discount rate.
Further details on the assessments for each group of CGUs as well as sensitivities for reasonably possible changes in key assumptions
at the date of the impairment test are given below. Where reasonably possible changes would result in a material adjustment to the
carrying value, these are disclosed as a key source of estimation uncertainty.
The carrying amount, length of detailed cash flows, pre-tax discount rate and the perpetuity growth rate used, where applicable,
applied to each CGU are set out in the table below:

| Carrying |  |  |
| amount |  |  |
| including | Length of |  |
| allocated | detailed | Pre-tax |
| goodwill | cash flows | discount | Perpetuity
CGU | £m | £m | rate | growth rate
Pellet Operations | 1,072.4 | 15 years | 8.9% | 2.0%
Drax Power Station | 1,071.3 | 15 years | 16.8% | n/a
Drax Energy Solutions | 175.5 | 5 years | 9.8% | 2.0%
Lanark | 45.4 | 15 years | 8.3% | 2.0%
Galloway | 168.8 | 15 years | 8.3% | 2.0%
Cruachan | 278.9 | 15 years | 8.3% | 2.0%

Pellet Operations
The Pellet Operations CGU is principally engaged in the production and sale of biomass pellets.
The ViU for the Pellet Operations CGU was in excess of its carrying amount. For the Pellet Operations CGU, a reasonably possible
increase in the discount rate to 9.7% combined with an increase in production costs of $7 per tonne and a 7% decrease in the
production volumes in the ViU calculation, would result in a £973.0 million reduction in headroom, but would not result in an
impairment. Whilst reasonably possible changes in assumptions would reduce the headroom, they would not result in the recoverable
amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key
assumptions would result in an adjustment to the carrying value of the Pellet Operations CGU.
Section 2: Financial performance continued
2.4 Impairment review of fixed assets and goodwill continued
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Drax Power Station
The Drax Power Station CGU is principally focused on renewable biomass electricity generation. Given an impairment indicator
was identified (see above for further details) a full impairment assessment has been performed (an assessment was not required
to be performed in the prior year due to no indicators of impairment being identified). The cash flows post March 2027 reflect
management’s best estimate of earnings based on the heads of terms of the low-carbon dispatchable CfD agreement with the UK
Government (see note 2.12 for further details) to 2031 and the expected income beyond this date to the cessation of operations in line
with the current end of station life of 2039. No value has currently been included in the ViU calculation for disposing of the site
and assets in 2039 due to the uncertainty over the value that could be achieved as a result of a lack of comparable transactions for
a large-scale generation site with a live grid connection. If a value was included this would further increase the headroom.
The ViU of the Drax Power Station CGU was in excess of its carrying amount. A reasonably possible £15/MWh decrease in power
prices combined with a 10% increase in the forced outage rate, an increase in the pre-tax discount rate from 16.8% to 48.5%
(equivalent to an increase in the post-tax discount rate from 6.8% to 8.0%), and operations to cease in March 2027 due to no low-
carbon dispatchable CfD agreement being confirmed, would result in an impairment of £515.5 million. A reasonably possible £15/MWh
decrease in power prices combined with a 10% increase in the forced outage rate, an increase in the pre-tax discount rate from 16.8%
to 29.8% (equivalent to an increase in the post-tax discount rate from 6.8% to 8.0%), and operations to cease in March 2031 at the end
of the proposed low-carbon dispatchable CfD agreement, would result in an impairment of £321.4 million. Accordingly, reasonably
possible changes in assumptions within the ViU calculation could result in a material adjustment to the carrying value of the Drax
Power Station CGU. Therefore, the assumptions in the ViU calculation of the Drax Power Station CGU have been identified as a key
source of estimation uncertainty.
Whilst no impairment has been recognised in relation to the Drax Power Station CGU as at 31 December 2024, if any eventual CfD
agreement was to be agreed at a lower value, or not agreed at all and the power station was to cease operations in 2027, it is expected
there could be a significant impairment required to reduce the carrying value of the Drax Power Station CGU. Even if cash flows in the
period April 2027 to March 2031 are consistent with the agreed heads of terms, the risk of an impairment needing to be recognised on
the Drax Power Station CGU increases in future periods as the amount of higher value, pre-April 2027 cash flows become realised and
will therefore not be included in future cash flow forecasts.
The recoverable amount of a CGU is assessed based on the higher of ViU and FVLCD. The impairment assessment for the Drax Power
Station CGU has been performed on a ViU basis. The ViU basis is required to be performed based on the current condition of an asset
and as such cash flows related to improving or enhancing an asset’s performance are required to be excluded. For the Drax Power
Station CGU, cash flows relating to UK BECCS, or other alternative enhancements such as data centres, have been excluded as these
cash flows are the result of significant capital expenditure to enhance the current Drax Power Station assets. Had the ViU basis
indicated an impairment to the carrying value, a FVLCD calculation would have been performed. The FVLCD basis is calculated based
on what a market participant would pay for an asset, less any disposal costs. If a market participant would attribute value to the
anticipated cash flow impact of improving or enhancing an asset’s performance (for example UK BECCS or other opportunities to
create value from alternative uses for a large-scale generation site with a live grid connection, such as data centres) these are included
in a FVLCD calculation. As such, for the Drax Power Station CGU, FVLCD may be higher than ViU.
Drax Energy Solutions
This segment is principally focused on renewable electricity sales to industrial and commercial (I&C) customers and providing other
renewables services, and therefore consideration of climate and environmental impacts are already a key feature of the business model.
The ViU of the Drax Energy Solutions CGU was in excess of its carrying amount. A reasonably possible increase in the pre-tax discount
rate to 10.6% combined with factoring in a reduction in gross margin growth from 7.5% to 2.0% from 2027 to 2029, 0% perpetuity
growth rate and a 10% increase in bad debt, would reduce the headroom by £227.5 million. This would not result in an impairment.
Whilst reasonably possible changes in assumptions would reduce the headroom, they would not result in the recoverable amounts
being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions
would result in an adjustment to the carrying value of the Drax Energy Solutions CGU.
Lanark, Galloway and Cruachan
These CGUs are engaged in run-of-river hydro and pumped storage power generation.
The ViU for all three CGUs (Lanark, Galloway and Cruachan) were in excess of their carrying amounts. A reasonably possible 10%
power price reduction combined with an increase in the pre-tax discount rate to 8.9%, a three-month historically low generation
period and a two-month unit outage would reduce the headroom in the Lanark CGU by £28.1 million. This would not result in an
impairment. A reasonably possible 10% power price reduction in the Cruachan CGU combined with an increase in the pre-tax discount
rate to 8.9%, a three-month historically low generation, a two-month unit outage and removal of value assumed from market volatility
would reduce the headroom by £660.1 million. This would not result in an impairment. Whilst reasonably possible changes in
assumptions for the Lanark and Cruachan CGUs would reduce the headroom, they would not result in the recoverable amount being
lower than the carrying values. As such the Group does not believe that any reasonably possible changes in the key assumptions
would result in an adjustment to the carrying values of either the Lanark or Cruachan CGUs.
2.4 Impairment review of fixed assets and goodwill continued
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2.4 Impairment review of fixed assets and goodwill continued
For the Galloway CGU, a reasonably possible 10% power price reduction combined with an increase in the pre-tax discount rate to
8.9%, a three-month historically low generation period and a two-month unit outage would result in an impairment of £10.2 million.
The Galloway CGU is sensitive to reasonably possible changes in the key assumptions. Whilst reasonably possible changes to
assumptions would result in an adjustment to the carrying value of the Galloway CGU, they would not result in a material adjustment
to its carrying value and so it is not considered a key source of estimation uncertainty as defined by IAS 1.
Daldowie, Hirwaun, Millbrook and Progress
For the Daldowie, Hirwaun, Millbrook and Progress CGUs, there were no impairment indicators identified and none of these CGUs
have allocated goodwill. Therefore, ViU calculations to determine the recoverable amounts of these CGUs were not required.
Impairment of non-current assets
During the current year, the Group has sold a number of non-core small and medium-sized enterprise (SME) energy supply customer
meter points to EDF Energy Customers Limited. The Group has also commenced a restructuring of the Opus Energy business to
reflect its reduced customer base and the Group’s focus on core I&C customers and renewables services. The transaction and the
resulting strategic decision to restructure the Opus Energy business has resulted in a number of non-current asset impairments.
The carrying value of the Opus Energy brand of £0.2 million and the tangible and intangible assets of £2.4 million (excluding the
Opus Energy House) were impaired as a direct result of the transaction and strategic restructuring to focus on the core I&C customer
and renewables services. These amounts were classified as exceptional. See note 2.7 for further details of this transaction.
A £2.8 million impairment was recognised in respect of the office building used by Opus Energy (Opus Energy House). This decrease
in value predominantly reflects worsening market conditions for offices in the local area rather than being a consequence of the
transaction and restructuring and as a result has not been classified as exceptional.
The Group has recognised an impairment of £4.6 million, being the full value of its equity accounted investment in C-Capture Limited.
Other impairments of non-current assets in 2024 totalled £4.4 million and were charged to the Consolidated income statement.
In 2023, the recoverable amount of the Opus Energy House property was assessed and an impairment charge of £8.9 million
was recognised to reduce the carrying value to its recoverable amount of £6.0 million. The ViU calculation of the Opus Energy CGU
resulted in recognising a full impairment of the £14.5 million allocated goodwill and a further £45.7 million impairment charge across
the remaining non-current assets. The total impairment charge, recognised as exceptional in the Consolidated income statement,
in relation to the non-current assets in the Opus Energy CGU was £69.1 million. See note 2.7.

| Year ended 31 December 2024 |  |  | Year ended 31 December 2023 |  |
| Opus Energy |  |  |  |  |
| transaction and |  |  |  |  |
| related |  |  |  |  |
| restructuring | Other assets | Total | Opus Energy | Other assets | Total
Impairment | £m | £m | £m | £m | £m | £m
Investment in associate | – | 4.6 | 4.6 | – | – | –
Goodwill – accumulated amortisation and impairment | – | – | – | 14.5 | – | 14.5
Freehold land and buildings – accumulated |  |  |  |  |  |
depreciation and impairment | – | 2.8 | 2.8 | 8.9 | – | 8.9
Property, plant and equipment – accumulated |  |  |  |  |  |
depreciation and impairment | – | – | – | 0 .1 | – | 0 .1
Plant spares – accumulated depreciation |  |  |  |  |  |
and impairment | – | 0 .1 | 0.1 | – | – | –
Assets under the course of construction – |  |  |  |  |  |
accumulated depreciation and impairment | – | 3.2 | 3.2 | – | 1.7 | 1.7
Right of use assets – accumulated depreciation |  |  |  |  |  |
and impairment | – | 0.1 | 0.1 | – | – | –
Intangible assets – accumulated amortisation |  |  |  |  |  |
and impairment: |  |  |  |  |  |
Customer-related assets | – | – | – | 31.5 | – | 31.5
Brand assets | 0.2 | – | 0.2 | 3.0 | – | 3.0
Software and licences | 2.4 | – | 2.4 | 11.1 | – | 11.1
Other receivables | – | 1.0 | 1.0 | – | – | –
Total impairment of non-current assets | 2.6 | 11.8 | 14.4 | 69.1 | 1.7 | 70.8

The total non-current asset impairment charge for the year of £14.4 million (2023: £70.8 million) is recognised in the impairment of
non-current assets line in the Consolidated income statement. The £2.6 million of impairment directly relating to the Opus Energy
transaction and related restructuring was treated as an exceptional item (2023: the £69.1 million relating to the impairment of Opus
Energy was treated as an exceptional item). See note 2.7 for further details.
Section 2: Financial performance continued
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2.5 Net finance costs
Net finance costs reflect expenses incurred in managing the capital structure (such as interest payable on borrowings) as well as
foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group’s sites at the end of
their useful economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that
the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest
income on the Group’s defined benefit pension scheme surplus (see note 6.3).
A reconciliation of net finance costs is shown in the table below:

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Interest payable and similar charges: |  |
Interest payable | (104.2) | (113.2)
Unwinding of discount on provisions (note 5.3) | (2.7) | (1.9)
Other financing charges | – | (0 .1)
Total interest payable and similar charges included in Adjusted results | (106.9) | (115.2)
Interest receivable and similar gains: |  |
Interest income on bank deposits | 17.1 | 11.0
Net interest income on defined benefit pension surplus (note 6.3) | 0.9 | 2 .1
Other interest income | 0.4 | –
Gain on repurchase of loan notes (note 4.2) | 1.7 | –
Total interest receivable and similar gains included in Adjusted results | 20 .1 | 13.1
Foreign exchange losses included in Adjusted results | (9.4) | (14.3)
Net finance costs included in Adjusted results | (96.2) | (116.4)
Certain remeasurements on financing derivatives | (0.6) | 4.6
Net finance costs included in Total results | (96.8) | (111.8)

Interest payable and similar charges is stated net of £1.7 million (2 023: £ 8 .1 million) of interest capitalised as part of the cost of
qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred
letters of credit that have been used specifically to finance the construction of the qualifying assets.
Changes in the Group’s financing structure during 2024 are described in note 4.2.
Foreign exchange gains and losses in net finance costs arise on the retranslation of non-derivative balances denominated in foreign
currencies to prevailing rates at the reporting date and gains and losses on derivative contracts hedging foreign exchange risk on
borrowings.
The Group has a number of intercompany loans denominated in the functional currencies of certain foreign subsidiaries, that are owed
to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain
of £1.3 million (2023: loss of £17.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This
gain (2023: loss) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in
Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries
into the Group’s sterling presentational currency there is a foreign exchange loss (2023: gain) relating to the translation of the foreign
subsidiaries’ intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income.
2.6 Current and deferred tax
The tax charge (2023: charge) includes both current and deferred tax. It reflects the estimated tax on the profit before tax for the
Group for the year ended 31 December 2024 and the movement in the deferred tax balance in the year, so far as it relates to items
recognised in the Consolidated income statement, in line with IAS 12.
Accounting policy
Current tax includes UK corporation tax, corporate income tax in Canada and US income tax. It is based on the taxable profit or loss
for the year in the relevant jurisdiction. Taxable profit or loss differs from profit or loss before tax as reported in the Consolidated
income statement because it excludes items of income or expenditure that are either taxable or deductible in other years or never
taxable or deductible. The Group’s liability (or asset) for current tax is provided at amounts expected to be paid (or recovered) using
the tax rates and laws that have been enacted or substantively enacted by the reporting date.
A provision is made for those matters for which the tax determination is uncertain, but it is considered probable that there will be
a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become
payable. The assessment is based on the judgement of tax professionals within the Group supported by previous experience in respect
of such activities and in certain cases is based on specialist third-party tax advice. No uncertain tax provisions have been recognised
in the current or prior year.
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2.6 Current and deferred tax continued
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the Consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Current and deferred taxes are credited or charged against profit or loss in the Consolidated income statement, except when they
relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred taxes
are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in
equity respectively.
In accounting for tax, the Group makes assumptions regarding the treatment of items of income and expenditure for tax purposes.
The Group believes that these assumptions are reasonable, based on prior experience and consultation with third-party advisers
where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated financial
statements. Full provision is made for deferred tax at the rates of tax prevailing at the reporting date unless future rates have been
substantively enacted. Deferred tax assets are recognised where it is considered more likely than not that they will be recovered.
The recoverability of the deferred tax asset is considered an estimate as it relies on the future profitability of the Group’s businesses.
See table on page 190 for a breakdown of the net deferred tax asset or liability position for each jurisdiction.

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Total tax charge comprises: |  |
Current tax |  |
– UK tax | (182.2) | (186.5)
– Overseas tax | – | (1.6)
– Adjustments in respect of prior periods | (2.4) | 2.0
Deferred tax |  |
– Before impact of tax rate changes | (37.6) | (46.7)
– Adjustments in respect of prior periods | (5.7) | 0.3
– Effect of changes in tax rate | – | (3.0)
Total tax charge | (227.9) | (235.5)

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Tax (charged)/credited on items recognised in other comprehensive income: |  |
Deferred tax on remeasurement of defined benefit pension surplus | (1.3) | 7. 2
Deferred tax on cash flow hedges | 73.0 | (130.7)
Deferred tax on cost of hedging | (1.7) | (1.9)
Total tax credit/(charge) | 70.0 | (125.4)

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Tax (charged)/credited on items released directly from equity: |  |
Deferred tax on cash flow hedges | (1.2) | 10.9
Deferred tax on cost of hedging | 5.7 | 9.0
Deferred tax on share-based payments | 1.4 | (2.4)
Current tax on share-based payments | – | 6.9
Total tax credit | 5.9 | 24.4

Section 2: Financial performance continued
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2.6 Current and deferred tax continued
UK corporation tax is the main income tax applicable on the Group’s taxable profits and is calculated at 25.0% (2023: 23.5%) of
the assessable profit or loss for the year. This follows the rate increase to 25.0% from 1 April 2023 that was included within the
Finance Bill 2021.
Due to the Group’s overseas operations, the US income tax rate of 21.0% (2023: 21.0%) and the Canadian corporate income tax rate
of 27.0% (2023: 27.0%) are also relevant to the Group’s total tax charge.
The effective tax rate of 30.2% (2023: 29.6%) for the full year is higher than the standard corporation tax rate applicable in the UK,
principally due to the non-deductible Electricity Generator Levy. Following a number of tax rate changes in prior periods, an exercise
was undertaken in 2024 to validate the deferred tax balances held on consolidation. As a result of this exercise, the deferred tax
liability associated with the fair value accounting of the hydro assets was uplifted by £16.4 million, increasing the effective tax rate.
A net deferred tax asset of £9.6 million has also been recognised in relation to decommissioning provisions following a review of the
IAS 12 single transaction amendments. In addition, there was a release of a £10.9 million deferred tax asset in respect of US unpaid
intercompany interest, required following US debt capitalisation. The primary current tax rate benefits arise from research and
development credits and UK Patent Box claims.
Drax Power Limited was granted a patent to protect certain intellectual property it owns and which attaches to the technology
developed to manage the combustion process in generating electricity from biomass. Under UK tax legislation, the company is
entitled to apply a lower tax rate of 10.0% to profits derived from utilisation of the patented technology.
The Group tax charge for the year can be reconciled to the profit before tax as follows:

| Year ended 31 December 2024 |  |  | Year ended 31 December 2023 |  |
| Exceptional |  | Exceptional |
|  | items |  |  | items |
| Adjusted | and certain | Total | Adjusted | and certain | Total
| results | remeasurements | results | results | remeasurements | results
| £m | £m | £m | £m | £m | £m
Profit before tax | 704.0 | 49.4 | 753.4 | 665.2 | 131.2 | 796.4
Profit before tax multiplied by the rate of corporation tax in the UK of 25.0% (2023: 23.5%) | 176.0 | 12.4 | 188.4 | 156.3 | 30.8 | 18 7.1
Effects of: |  |  |  |  |  |
Adjustments in respect of prior periods | 5.6 | 2.5 | 8.1 | (2.3) | – | (2.3)
Expenses not deductible for tax purposes | 5.4 | – | 5.4 | 5.2 | 6.5 | 11.7
Electricity Generator Levy | 40.2 | – | 40.2 | 4 8 .1 | – | 4 8 .1
Impact of tax rate change | – | – | – | 0.6 | 2.4 | 3.0
Share-based payments recognised in equity | – | – | – | 8 .1 | – | 8 .1
Deferred tax asset unwind on US interest | 10.9 | – | 10.9 | – | – | –
Difference in overseas tax rates | (1.7) | – | (1.7) | (0.7) | – | (0.7)
UK Patent Box benefit | (23.4) | – | (23.4) | (17.4) | – | (17.4)
Tax effect of RDEC | – | – | – | (0.9) | – | (0.9)
UK super-deduction | – | – | – | (1.2) | – | (1.2)
Total tax charge | 213.0 | 14.9 | 227.9 | 195.8 | 39.7 | 235.5

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2.6 Current and deferred tax continued
The movements in deferred tax assets and liabilities during each year are shown below.

|  | Accelerated |  |  |  |  |  |
| Financial | capital | Non-trade | Intangible | Trade | Other | Other |
| instruments | allowances | losses | assets | losses | liabilities | assets | Total
| £m | £m | £m | £m | £m | £m | £m | £m
At 1 January 2023 | 124.7 | (321.3) | 0.5 | (12.9) | 8 0 .1 | (33.3) | 5 7.9 | (104.3)
(Charged)/credited to the income |  |  |  |  |  |  |  |
statement | (51.2) | 9.0 | (0.5) | 12.3 | (21.0) | (0.6) | 2.6 | (49.4)
Credited to other comprehensive income in respect of actuarial gains | – | – | – | – | – | 7.2 | – | 7. 2
Charged to other comprehensive income in respect of cash flow |  |  |  |  |  |  |  |
hedges | (130.7) | – | – | – | – | – | – | (130.7)
Charged to other comprehensive income in respect of cost of hedging | (1.9) | – | – | – | – | – | – | (1.9)
Credited to equity in respect of cash |  |  |  |  |  |  |  |
flow hedges | 10.9 | – | – | – | – | – | – | 10.9
Credited to equity in respect of cost |  |  |  |  |  |  |  |
of hedging | 9.0 | – | – | – | – | – | – | 9.0
Charged to equity in respect of share-based payments | – | – | – | – | – | – | (2.4) | (2.4)
Impact of acquisition | – | – | – | (1.3) | – | – | – | (1.3)
Effect of changes in foreign |  |  |  |  |  |  |  |
exchange rates | – | 1.8 | – | – | (2.5) | (0.1) | (0.5) | (1.3)
At 1 January 2024 | (39.2) | (310.5) | – | (1.9) | 56.6 | (26.8) | 57.6 | (264.2)
(Charged)/credited to the income |  |  |  |  |  |  |  |
statement | (29.7) | (38.4) | – | 1.1 | ( 7.0) | 14.7 | 16.0 | (43.3)
Charged to other comprehensive income in respect of actuarial gains | – | – | – | – | – | (1.3) | – | (1.3)
Credited to other comprehensive income in respect of cash flow |  |  |  |  |  |  |  |
hedges | 73.0 | – | – | – | – | – | – | 73.0
Charged to other comprehensive income in respect of cost of hedging | (1.7) | – | – | – | – | – | – | (1.7)
Credited to equity in respect of cash |  |  |  |  |  |  |  |
flow hedges | (1.2) | – | – | – | – | – | – | (1.2)
Credited to equity in respect of cost |  |  |  |  |  |  |  |
of hedging | 5.7 | – | – | – | – | – | – | 5.7
Credited to equity in respect of share-based payments | – | – | – | – | – | – | 1.4 | 1.4
Effect of changes in foreign |  |  |  |  |  |  |  |
exchange rates | – | (0.9) | – | (0.1) | 0.6 | – | 0.2 | (0.2)
At 31 December 2024 | 6.9 | (349.8) | – | (0.9) | 50.2 | (13.4) | 75.2 | (231.8)
Deferred tax balances (after offset) |  |  |  |  |  |  |  |
for financial reporting purposes: |  |  |  |  |  |  |  |
Net Canadian deferred tax asset at 31 December 2024 | – | (9.4) | – | 0.3 | 20.3 | (0.3) | 25.1 | 36.0
Net US deferred tax asset at 31 December 2024 | – | (22.3) | – | – | 29.5 | – | 5.4 | 12.6
Net UK deferred tax liability at 31 December 2024 | 6.9 | ( 318 .1) | – | (1.2) | 0.4 | (13.1) | 44.7 | (280.4)
Net Canadian deferred tax asset |  |  |  |  |  |  |  |
at 31 December 2023 | – | (18.8) | – | 0.4 | 16.8 | (0.2) | 28.2 | 26.4
Net US deferred tax asset at 31 December 2023 | – | (21.9) | – | – | 39.8 | – | 8.6 | 26.5
Net UK deferred tax liability at 31 December 2023 | (39.2) | (269.8) | – | (2.3) | – | (26.6) | 20.8 | (317.1)

Section 2: Financial performance continued
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2.6 Current and deferred tax continued
Deferred tax assets and liabilities are offset where they are levied by the same taxation authority and the Group has a legally
enforceable right to offset the current taxes, otherwise they are shown separately in the Consolidated balance sheet. Within the above
deferred tax asset on trade losses of £50.2 million (2023: £56.6 million) there is £29.5 million (2023: £39.8 million) in relation to losses
in the US Pellet Production business, £20.3 million relating to losses of the Canadian Pellet Production business (2023: £16.8 million),
and the remaining £0.4 million relates to UK operations (2023: £nil).
The future expected reversal of accelerated capital allowances and other timing differences, coupled with the profitability (inclusive
of the impact of transfer pricing adjustments), stable output and forecast improvement in operational performance, mean that the US
and Canadian businesses expect to generate sufficient profits in the short to medium term against which to utilise the deferred tax
assets. The estimates used when assessing the future profitability of the US and Canadian businesses have been approved by the
Board, and are consistent with estimates used in the going concern assessment and the impairment assessments. The impairment
assessment factors in climate change risks in the forecasts. See note 2.4 for further details on how climate change has been
considered as part of the impairment assessments.
As at 31 December 2024, the Group held £78.5 million (2023: £78.8 million) of gross UK capital losses available for offset against future
chargeable gains. These losses are unrecognised for deferred tax purposes as the Group does not currently expect UK taxable gains to
arise that would be eligible to offset against these losses.
The Group is within scope of the Organisation for Economic Co-operation and Development’s (OECD) Global Anti-Base Erosion Rules,
which provide for an internationally co-ordinated system of taxation to ensure that large multinational groups pay a minimum level
of corporate income tax in countries in which they operate, referred to as Pillar Two. The legislation implementing the rules in the
UK was substantively enacted on 20 June 2023 and applies to the 2024 financial year onwards.
The Group has applied the temporary exemption under IAS 12 in relation to the accounting for deferred taxes arising from the
implementation of the Pillar Two rules, so that the Group neither recognises nor discloses information about deferred tax assets and
liabilities related to Pillar Two. Supported by external advisers, a detailed review was undertaken during 2024 confirming that the
Group falls within the Transitional Country by Country Reporting Safe Harbour for all jurisdictions, such that the expected top-up tax
payable over the transitional period is expected to be £nil. This is based on these Consolidated financial statements along with the
latest medium-term forecasts up to and including the year ending 31 December 2026.
The Group continues to monitor developments in the UK and outside of the UK to ensure ongoing compliance with its administrative
obligations under these rules along with reassessments of the latest forecasts to confirm the Group’s exposure to Pillar Two.
2.7 Alternative performance measures
The alternative performance measures (APMs) glossary to these Consolidated financial statements on page 277 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. See the Audit Committee report on page 112 for further details.
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). See note 2.4 for further information
– 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). See note 7.1 for further information
– Impact of the UK tax rate change on deferred tax balances (2023, Generation and Energy Solutions). See note 2.6 for further
information
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2.7 Alternative performance measures continued
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.
Further details on the Group’s derivative financial instruments are provided in Section 7.

|  | Year ended 31 December |
|  | 2024 | 2023
|  | £m | £m
Exceptional items: |  |  |
Opus Energy sale of meter points and restructuring |  | (59.5) | –
2023 | Opus Energy impairment | – | (69.1)
Net credit from legal claim |  | – | 13.7
Change in fair value of contingent consideration |  | – | (18.2)
Exceptional items included within operating profit and profit before tax |  | (59.5) | (73.6)
Tax on exceptional items |  | 14.8 | 10.8
Impact of tax rate change |  | – | 0.7
Exceptional items after tax |  | (44.7) | (62.1)
Certain remeasurements: |  |  |
Net fair value remeasurements on derivative contracts included in revenue |  | 11.9 | 70.7
Net remeasurements realised on maturity of derivative contracts included in revenue |  | 7 7.6 | 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) | (4 8.1)
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) | (6 2.1)
Certain remeasurements after tax |  | 79.2 | 153.6
Total profit for the period |  | 525.5 | 560.9

Section 2: Financial performance continued
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2.7 Alternative performance measures continued
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. See note 5.3 for further details.
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. See note 5.3 for further details.
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 (see note 3.5) – included in operating and administrative expenses | (12.9)
Additional impairment of receivables relating to retained customers (see note 3.5) – included in impairment losses on financial assets | (12.7)
Impairment of non-current assets (see note 2.4) – 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.
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2.7 Alternative performance measures continued
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 |  |  |
|  |  |  |  |  | Profit/(loss) | Basic | Net cash from
|  |  | Operating | Profit | Tax (charge)/ | for the | earnings/(loss) | operating
| Revenue | Gross profit | profit | before tax | credit | period | per share | activities
| £m | £m | £m | £m | £m | £m | Pence | £m
Total results IFRS measure | 6 ,162.5 | 1,876.5 | 850.2 | 753.4 | (227.9) | 525.5 | 137.5 | 859.5
Certain remeasurements: |  |  |  |  |  |  |  |
Net fair value remeasurement on derivative contracts | (81.3) | (109.5) | (109.5) | (108.9) | 29.7 | (79.2) | (20.7) | –
Exceptional items: |  |  |  |  |  |  |  |
Opus Energy sale of meter points |  |  |  |  |  |  |  |
and restructuring | – | 23.3 | 59.5 | 59.5 | (14.8) | 44.7 | 11.6 | (9.6)
Total | (81.3) | (86.2) | (50.0) | (49.4) | 14.9 | (34.5) | (9.1) | (9.6)
Adjusted results totals | 6,081.2 | 1,790.3 | 800.2 | 704.0 | (213.0) | 491.0 | 128.4 | 849.9

|  |  |  |  |  |  | Year ended 31 December 2023 |  |  |
|  |  |  |  |  |  |  | Profit/(loss) | Basic | Net cash from
|  | Restated (1) |  |  | Operating | Profit | Tax (charge)/ | for the | earnings/(loss) | operating
|  | Revenue |  | Gross profit | profit | before tax | credit | period | per share | activities
|  | £m |  | £m | £m | £m | £m | £m | Pence | £m
Total results IFRS measure |  | 7,7 33. 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) | 4 8.1 | (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, | 45 0.3 | 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. See further details of this restatement in the Net presentation of sleeved electricity trades section on page 266.
Section 2: Financial performance continued
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2.7 Alternative performance measures continued
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 | Non-controlling |
| parent company | interests | Total
| £m | £m | £m
Adjusted operating profit/(loss) | 801.3 | (1.1) | 800.2
Depreciation and amortisation | 240.4 | 1.4 | 241.8
Other losses | 8.5 | – | 8.5
Share of losses from associates | 2.2 | – | 2.2
Impairment of non-current assets | 11.8 | – | 11.8
Adjusted EBITDA | 1,064.2 | 0.3 | 1,064.5

| Year ended 31 December 2023 |  |
| Attributable to |
| Owners of the | Non-controlling |
| parent company | interests | Total
| £m | £m | £m
Adjusted operating profit/(loss) | 782.9 | (1.3) | 781.6
Depreciation and amortisation | 223.7 | 1.3 | 225.0
Other gains | (0.7) | – | (0.7)
Share of losses from associates | 1.6 | – | 1.6
Impairment of non-current assets | 1.7 | – | 1.7
Adjusted EBITDA | 1,009.2 | – | 1,009.2

|  | Year ended 31 December
|  | Restated (1)
| 2024 | 2023
| £m | £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 2.1 for further details of the change in reportable segments.
Net debt
Net debt is calculated by taking the Group’s borrowings (note 4.2), adjusting for the impact of associated hedging instruments, adding
lease liabilities (note 3.2), and subtracting cash and cash equivalents (note 4.1). 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. See page 165 for further details of this change.
Borrowings includes external financial debt, such as loan notes, term loans and amounts drawn in cash under revolving credit facilities
(RCFs) (see note 4.2). Borrowings does not include other financial liabilities such as pension obligations (see note 6.3), trade and other
payables (see note 3.7), lease liabilities calculated in accordance with IFRS 16 (see note 3.2), 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 4.3). 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 (see note 3.7).
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 (see note
4.2). 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 and the APMs
section within the Basis of preparation for further details on the calculation of Net debt.
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2.7 Alternative performance measures continued

| As at 31 December |  |
| 2024 | 2023 (1) |
| £m | £m |
Borrowings (note 4.2) | (1,176.7) | (1,425.3) |
Lease liabilities (note 3.2) | (116.5) | (135.8) |
Cash and cash equivalents | 356.0 | 379.5 |
Net cash, borrowings and lease liabilities | (937. 2) | (1 | ,18 1. 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. See pages 165 and 166 for further
information.
The table below reconciles Net debt in terms of changes in these balances across the year:

| Year ended 31 December |
| 2024 | 2023 (1)
| £m | £m
Net debt at 1 January | (1,219.7) | (1,359.0)
(Decrease)/increase in cash and cash equivalents | (23.5) | 141.5
(Increase)/decrease in non-controlling interests’ share of cash and cash 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. See pages 165 and 166 for further information.
A reconciliation of the change in borrowings during the year is set out in the table in note 4.2.
As explained in the Basis of preparation, 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, See pages 165 and 166 for further information.
Cash and committed facilities
The below table reconciles the Group’s available cash and committed facilities:

| As at 31 December |
| 2024 | 2023
| £m | £m
Cash and cash equivalents (note 4.1) | 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. See note 4.2 for further information on the Group’s facilities. 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 starting on page 18.
Section 2: Financial performance continued
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2.8 Earnings per share
Earnings per share (EPS) represents the amount of earnings (post-tax profit or losses) attributable to the weighted average number
of ordinary shares outstanding in the year. Basic EPS is calculated by dividing the Group’s earnings attributable to owners of the
parent company (profit or loss after tax, excluding amounts attributable to non-controlling interests) by the weighted average number
of ordinary shares that were outstanding during the year. Diluted EPS demonstrates the impact of all outstanding share options that
would vest on their future maturity dates if the conditions at the end of the reporting period were the same as those at the end of
the vesting period (such as those to be issued under employee share schemes – see note 6.2), and the options were exercised and
treated as ordinary shares as at the reporting date. The 57.8 million of repurchased shares (2023: 40.3 million) held in the treasury
shares reserve are not included in the weighted average calculation of shares. See note 2.11 for details of the shares repurchased in
the current year as part of the £300 million share buyback programme and note 4.4 for further details on the treasury shares reserve.
For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an
anti-dilutive impact.

| Year ended 31 December |
| 2024 | 2023
Number of shares (millions): |  |
Weighted average number of ordinary shares for the purposes of calculating Basic earnings per share | 383.2 | 393.8
Effect of dilutive potential ordinary shares under share plans | 7. 6 | 9.3
Weighted average number of ordinary shares for the purposes of calculating Diluted earnings |  |
per share | 390.8 | 4 03.1

|  |  | Year ended 31 December |
| 2024 |  | 2023 |
| Adjusted results | Total results | Adjusted results | Tot al results
Earnings per share attributable to owners of the parent company |  |  |  |
Earnings – profit after tax (£m) | 492.1 | 526.6 | 470.7 | 562.2
Earnings per share – Basic (pence) | 128.4 | 137. 5 | 119.6 | 142.8
Earnings per share – Diluted (pence) | 126.0 | 134.8 | 116.8 | 139.5

2.9 Dividends

|  | Year ended 31 December |
|  | 2024 | 2023
| Pence per share | £m | £m
Amounts recognised as distributions to equity holders in the year (based on the number of ordinary shares outstanding at the record date): |  |  |
Interim dividend for the year ended 31 December 2024 paid on 25 October 2024 | 10.4 | 39.8 | –
Final dividend for the year ended 31 December 2023 paid on 17 May 2024 | 13 .9 | 53.7 | –
Interim dividend for the year ended 31 December 2023 paid on 6 October 2023 | 9.2 | – | 35.7
Final dividend for the year ended 31 December 2022 paid on 19 May 2023 | 12 . 6 | – | 50.6
Total distributions |  | 93.5 | 86.3

At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a resolution is passed to approve
payment of a final dividend for the year ended 31 December 2024 of 15.6 pence per share (equivalent to approximately £57 million)
payable on 16 May 2025. The final dividend has not been included as a liability as at 31 December 2024. This would bring total
dividends payable in respect of the 2024 financial year to approximately £97 million.
The Group has a long-standing capital allocation policy. This policy is based on a commitment to robust financial metrics that underpin
the Group’s strong credit rating: investment in the core business; paying a sustainable and growing dividend; and returning surplus
capital to shareholders. The Board is confident that the dividend is sustainable and expects it to grow as the implementation of the
Group’s strategy generates an increasing proportion of stable earnings and cash flows. In determining the rate of growth in dividends,
the Board will take account of future investment opportunities and the less predictable cash flows from the Group’s commodity-linked
revenue streams.
In future years, if there is a build-up of capital in excess of the Group’s investment needs, the Board will consider the most appropriate
mechanism to return this to shareholders.
Consideration of sustainability, including a link to the Group’s dividend, can be found in the Market context section on pages 6 and 7.
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2.10 Retained profits
Retained profits are a component of equity reserves. The overall balance reflects the total profits the Group has generated over
its lifetime that are attributable to the equity holders of the parent company, reduced by the amount of that profit distributed to
shareholders. The table below sets out the movements in retained profits during the year:

| Year ended 31 December |
| 2024 | 2023
| £m | £m
At 1 January | 666.4 | 193.8
Profit for the year attributable to the owners of the parent company | 526.6 | 562.2
Remeasurement of defined benefit pension scheme (note 6.3) | 5.5 | (28.8)
Deferred tax on remeasurement of defined benefit pension scheme (note 2.6) | (1.3) | 7.2
Equity dividends paid (note 2.9) | (93.5) | (86.3)
Movements in equity associated with share-based payments | 13.0 | 13.4
Tax on share-based payments (note 2.6) | 1.4 | 4.5
Gain on equity investments | – | 0.4
At 31 December | 1,118 .1 | 666.4

Distributable reserves
The capacity of the Group to make dividend payments is primarily determined by the availability of retained distributable profits and
cash resources.
The parent company’s financial statements, set out on pages 267 to 273 of these Annual report and accounts, disclose the basis of
the parent company’s distributable reserves.
The majority of the Group’s distributable reserves are held in holding and operating subsidiaries. Management actively monitors
the level of distributable reserves in each company in the Group, ensuring adequate reserves are available for upcoming dividend
payments and any share buyback transactions, and that the parent company has access to these reserves.
The immediate cash resources of the Group of £356.0 million are set out in note 4.1 and the recent history of cash generation
within note 4.3. The majority of these cash resources are held centrally within the Group by Drax Corporate Limited for treasury
management purposes and are available for funding the working capital and other requirements of the Group.
The Group’s financing facilities (see note 4.2) place customary conditions on the amount of dividend payments that can be made
in any given year. The Group expects to be able to make dividend payments, in line with its policy, within these conditions for the
foreseeable future. See note 4.2 for further details on the covenants relating to the financing facilities.
2.11 Share buyback programme
On 26 July 2024, the Group announced a £300 million share buyback programme. A first tranche of £75 million commenced on
7 August 2024. On 22 October 2024, it was announced that a further £75 million tranche would commence immediately following
the completion of the first tranche.
The shares repurchased up to 31 December 2024 were acquired at an average price of 645.6 pence per share, with prices ranging
from 618.8 pence to 673.9 pence. In total the Group repurchased 17.8 million ordinary shares during 2024 at a total net cost of
£115.4 million. As at 26 February 2025, 23.2 million shares have been repurchased at a total net cost of £150.1 million.
During 2023, the Group undertook a £150 million share buyback programme. The shares were acquired at an average price of
567.5 pence per share, with prices ranging from 521.6 pence to 637.7 pence. In total the Group repurchased 26.5 million ordinary
shares at a total net cost of £149.2 million.
Shares purchased under these share buyback programmes are held in a separate treasury shares reserve awaiting reissue or
cancellation and have no voting rights attached to them. See note 4.4 for a reconciliation of the movement in the treasury
shares reserve.
2.12 Post balance sheet event
Low-carbon dispatchable Contract for Difference
On 10 February 2025 Drax Power Limited agreed a non-binding heads of terms with the UK Government on a low-carbon dispatchable
Contract for Difference (CfD) agreement for Drax Power Station.
The heads of terms propose a CfD mechanism with a strike price of £113/MWh (at 2012 values) indexed to UK CPI. The CfD applies
to all four biomass units at Drax Power Station, with an aggregate collar of approximately 6TWh per annum (and a minimum of
approximately 5TWh) and a four-year term from 1 April 2027 to 31 March 2031.
Under the proposed agreement Drax Power Station will sell approximately 6TWh of power annually against a season ahead reference
price (as per the current CfD scheme) and then seek to maximise generation from its four units at times of high demand and reduce
generation at times of low demand, using the power station’s flexibility to support UK energy security. The proposed agreement also
allows for system support and ancillary services.
Section 2: Financial performance continued
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Section 3: Operating assets and working capital
This section gives further information on the operating assets the Group uses to generate revenue and the short-term assets and
liabilities, managed during day-to-day operations, that comprise the Group’s working capital balances.
3.1 Property, plant and equipment
This note shows the cost, accumulated depreciation and impairment, and net book value of the physical assets controlled by the
Group.
Accounting policy
Property, plant and equipment is stated at net book value, which is its cost less any accumulated depreciation and any accumulated
impairment losses, if required, charged to date. Property, plant and equipment assets are initially measured at cost.
Cost comprises: the purchase price (after deducting trade discounts and rebates); any directly attributable costs of bringing the asset
to the location and condition necessary for it to be capable of operating in the manner intended by management; and an estimate of
the present value of the costs of dismantling and removing the item and restoring the site, where required. Depreciation reflects the
usage of the asset over time and is calculated by taking the cost of the asset, net of any expected residual value, and charging it to the
Consolidated income statement on a straight-line basis from the date that the asset is available for use and over its useful economic life
(UEL). Where relevant, this is limited to the estimated decommissioning date of the site where the asset is located.
The Group constructs many of its assets as part of long-term development projects. Assets that are under the course of construction
are not depreciated until they are ready for use in the manner intended by management.
The table below shows the weighted average remaining UELs of the main categories of assets held at the reporting date:

| Average UEL
| remaining
| 2024
| (years)
Freehold buildings | 21
Plant and equipment |
Electricity generation assets: |
Biomass plant | 14
Hydro plants (including pumped storage) | 36
Pellet production plant | 8
Other plant, machinery and equipment | 12
Reinstatement assets | 18
Plant spare parts | 15

Freehold land held at cost is considered to have an unlimited UEL and is not depreciated. The value of freehold land held at
31 December 2024 is £35.5 million (2023: £35.6 million).
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Section 3: Operating assets and working capital cont inued
3.1 Property, plant and equipment continued
Electricity generation assets are grouped according to the fuel type of the relevant plant.
Pellet production plant includes the US and Canada based assets of the Group’s Pellet Production business and the assets at the
Daldowie fuel plant near Glasgow.
Plant spare parts are depreciated over the remaining UEL of the relevant power station or plant, or shorter if a shorter UEL is more
appropriate.
Plant spare parts can be used within maintenance projects which are operating in nature (in addition to capital maintenance projects).
In this instance the net book value of the part is transferred from the property, plant and equipment balance and recognised as an
expense in the Consolidated income statement within operating and administrative expenses. These issues are reflected in the issues
to maintenance projects line in the table below.
Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying amounts of existing assets or
recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic
benefits associated with the expenditure will flow to the Group and the cost can be measured reliably. Assets that are replaced as
part of any overhauls or upgrades are disposed of. All other repairs and maintenance costs are expensed as incurred.
Estimated UELs and residual values are reviewed as a minimum at the end of each reporting period, taking into account regulatory
changes, climate change (see note 3.8 for further details) and commercial and technological obsolescence, as well as normal wear and
tear. Residual values are based on prices prevailing at the reporting date. Any changes to estimated UELs or residual values are applied
prospectively.
At each reporting date the Group reviews its property, plant and equipment to determine whether there is any indication that these
assets may be impaired. The Group’s accounting policy in respect of impairment, along with details of the impairment review
conducted during the year are set out in note 2.4.
An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the
higher of an asset’s value in use and its fair value less costs to sell. The Group’s policy is to recognise an impairment charge through
accumulated depreciation and impairment if the asset will continue to be used or retained by the Group. Cost and any accumulated
depreciation and impairment are removed when an asset is disposed. Gains and losses on disposals are determined by comparing
proceeds with the asset’s carrying amount.
During the year, the Group has capitalised £4.4 million (2023: £18.3 million) of costs relating to the UK BECCS project at Drax Power
Station resulting in a total amount of £47.2 million capitalised in relation to this project as at 31 December 2024 (2023: £42.8 million).
During the year, the Group has also capitalised £63.6 million (2023: £45.4 million) of costs relating to the Longview pellet plant
development project resulting in a total amount of £122.0 million capitalised in relation to this project as at 31 December 2024 (2023:
£55.9 million). The capitalisation of development project costs has been classified as a critical accounting judgement due to the
judgements required in determining whether costs incurred meet the criteria to be capitalised or not, and should expectations around
development projects change then the amounts capitalised may need to be impaired.
The Group has also continued construction of the three OCGT projects that have obtained Capacity Market contracts. Construction
of these projects is expected to complete during 2025. The amount capitalised up to the reporting date relating to these projects totals
£420.7 million (2023: £323.5 million). Of this, £97.2 million (2023: £188.6 million) was capitalised during the year.
The Group’s total commitment for future capital expenditure is disclosed in note 7.7.
Significant estimation uncertainty
As disclosed on page 164, the Group has made an estimate regarding the UEL of Drax Power Station. Given the continued focus on
climate change, renewable sources of energy and transitioning to a net zero economy, the power generation industry is going through
a period of transformation, which can impact on the UELs of assets. As the UK Government’s net zero strategy becomes clearer,
particularly in relation to biomass and BECCS, the Group will continue to assess any potential impact of these developments on the
UEL of Drax Power Station.
The rate of change in these areas increases the risk that the UEL of Drax Power Station will be updated in the future as new
information becomes available. As such, a change in UELs in relation to Drax Power Station’s assets has been disclosed as a key
source of estimation uncertainty. If options, such as UK BECCS or data centres, are deployed at Drax Power Station this could result
in an extension of the end of station life beyond the current assumed end date of 2039. If the UELs of Drax Power Station assets that
are currently limited to 2039 were to increase by a further 10 years, the annual depreciation charge would decrease by approximately
£18.1 million. If a low-carbon dispatchable CfD agreement is not agreed with the UK Government for the period post March 2027
(see note 2.12 for further details on the heads of terms of the low-carbon dispatchable CfD agreement), when the current renewable
schemes end, this could result in a reduction to the end of station life. If the assumed end of station life of 2039 were to decrease by
12 years to 2027, in line with the end of the current renewable schemes, the annual depreciation charge would be increased by
approximately £183.8 million, excluding the impact of any potential impairment.
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3.1 Property, plant and equipment continued

|  |  |  | Assets under the |
| Freehold land | Plant and | Plant spare | course of |
| and buildings | equipment | parts | construction | Total
| £m | £m | £m | £m | £m
Cost: |  |  |  |  |
At 1 January 2023 | 503.5 | 3,376.7 | 81.0 | 329.0 | 4,290.2
Additions at cost | – | 0.4 | 8 .1 | 500.7 | 509.2
Acquired in business combinations | – | 0 .1 | – | – | 0 .1
Disposals | (0.3) | (27.8) | – | – | (28 .1)
Movement in reinstatement asset | – | 22.7 | – | – | 22.7
Issues to maintenance projects | – | – | (6.5) | – | (6.5)
Transfers to intangibles (see note 5.2) | – | (0 .1) | – | (0.5) | (0.6)
Transfers between PPE categories | 0.4 | 168.0 | 0.5 | (168.9) | –
Effect of changes in foreign exchange rates | (9.5) | (33.8) | – | (4.2) | (47.5)
At 1 January 2024 | 49 4 .1 | 3,506.2 | 83.1 | 656.1 | 4,739.5
Additions at cost | – | 0.3 | 9.9 | 315.3 | 325.5
Disposals | (0.3) | (20.2) | – | (4 .1) | (24.6)
Movement in reinstatement asset (see note 5.3) | – | 0.7 | – | – | 0.7
Issues to maintenance projects | – | – | (3.3) | – | (3.3)
Transfers from/(to) intangibles (see note 5.2) | 0.2 | – | – | (3.4) | (3.2)
Transfers to right-of-use assets | – | (1.5) | – | – | (1.5)
Transfers from inventories | – | – | 3.3 | – | 3.3
Transfers between PPE categories | 20.4 | 231.7 | 2.2 | (254.3) | –
Effect of changes in foreign exchange rates | (0.3) | (4.2) | 0.2 | 2.8 | (1.5)
At 31 December 2024 | 514 .1 | 3,713.0 | 95.4 | 712.4 | 5,034.9
Accumulated depreciation and impairment: |  |  |  |  |
At 1 January 2023 | 142.5 | 1,706.1 | 33.5 | 20.1 | 1,902.2
Depreciation charge for the year | 19.3 | 145.2 | 2.6 | – | 16 7.1
Impairment | 8.9 | 0 .1 | – | 1.7 | 10.7
Disposals | (0 .1) | (2 5.1) | – | – | (25.2)
Issues to maintenance projects | – | – | (0.7) | – | (0.7)
Effect of changes in foreign exchange rates | (2.7) | (10.7) | – | – | (13.4)
At 1 January 2024 | 167.9 | 1,815.6 | 35.4 | 21.8 | 2,040.7
Depreciation charge for the year | 23.8 | 168.2 | 5.5 | – | 197.5
Impairment | 2.8 | – | 0.1 | 3.2 | 6 .1
Disposals | (0.1) | (12.8) | – | – | (12.9)
Issues to maintenance projects | – | – | (1.1) | – | (1.1)
Transfers from right-of-use assets | – | 1.1 | – | – | 1.1
Effect of changes in foreign exchange rates | 0.5 | 1.0 | – | – | 1.5
At 31 December 2024 | 194.9 | 1,973.1 | 39.9 | 25.0 | 2,232.9
Net book value: |  |  |  |  |
At 31 December 2023 | 326.2 | 1,690.6 | 47.7 | 634.3 | 2,698.8
At 31 December 2024 | 319.2 | 1,739.9 | 55.5 | 687.4 | 2,802.0

Impairments previously presented through cost on non-depreciating assets have been re-presented in the table above. Impairments
are presented through accumulated depreciation and impairment.
Included within the cost of assets under the course of construction is capitalised interest of £15.0 million (2023: £13.3 million) relating
to the construction of the three OCGT projects, Longview pellet plant and the Cruachan upgrade project. See note 2.5 for further
details of borrowing costs capitalised during the year.
Freehold land and buildings, and plant and equipment with a carrying amount of £1,580.7 million (2023: £1,609.7 million) have been
pledged as security over the Group secured borrowings. See note 4.2 for details of the Group’s secured borrowings.
See note 2.4 for further details of the Group’s accounting policy and presentation of impairments of non-current assets.
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Section 3: Operating assets and working capital cont inued
3.1 Property, plant and equipment continued

|  |  | Pellet |  | Total
| Biomass | Hydro | production |  | plant and
| plant | plant | plant | Other | equipment
| £m | £m | £m | £m | £m
Cost: |  |  |  |  |
At 1 January 2023 | 2,141. 3 | 479.4 | 738.8 | 17. 2 | 3,376.7
Additions at cost | – | – | – | 0.4 | 0.4
Acquired in business combinations | – | – | – | 0 .1 | 0 .1
Disposals | – | – | (27.6) | (0.2) | (27. 8)
Movement in reinstatement asset | 20.1 | – | 2.6 | – | 22.7
Transfers to intangibles | – | – | (0 .1) | – | (0 .1)
Transfers between PPE categories | 117.1 | – | 50.9 | – | 168.0
Effect of changes in foreign exchange rates | – | – | (33.8) | – | (33.8)
At 1 January 2024 | 2,278.5 | 479.4 | 730.8 | 17. 5 | 3,506.2
Additions at cost | – | – | – | 0.3 | 0.3
Disposals | (10.0) | – | (10.2) | – | (20.2)
Movement in reinstatement asset (see note 5.3) | (6.9) | – | – | 7.6 | 0.7
Transfers between PPE categories | 13 8.1 | 9.3 | 71.9 | 12.4 | 231.7
Transfers (to)/from right-of-use assets | – | – | (1.6) | 0.1 | (1.5)
Effect of changes in foreign exchange rates | – | – | (4.2) | – | (4.2)
At 31 December 2024 | 2,399.7 | 488.7 | 786.7 | 37.9 | 3,713.0
Accumulated depreciation and impairment: |  |  |  |  |
At 1 January 2023 | 1,417.3 | 53.3 | 221.8 | 13.7 | 1,7 0 6.1
Depreciation charge for the year | 66.2 | 12.9 | 64.2 | 1.9 | 145.2
Impairment | – | – | – | 0.1 | 0.1
Disposals | – | – | (24.9) | (0.2) | (2 5.1)
Effect of changes in foreign exchange rates | – | – | (10.7) | – | (10.7)
At 1 January 2024 | 1,483.5 | 66.2 | 250.4 | 15.5 | 1,815.6
Depreciation charge for the year | 75.1 | 12.9 | 75.3 | 4.9 | 168.2
Disposals | (6 .1) | – | (6.7) | – | (12.8)
Transfers from right-of-use assets | – | – | 1.1 | – | 1.1
Effect of changes in foreign exchange rates | – | – | 1.0 | – | 1.0
At 31 December 2024 | 1,552.5 | 79.1 | 321.1 | 20.4 | 1, 973.1
Net book value: |  |  |  |  |
At 31 December 2023 | 795.0 | 413.2 | 480.4 | 2.0 | 1,690.6
At 31 December 2024 | 8 47.2 | 409.6 | 465.6 | 17.5 | 1,739.9

The depreciation expense in the Consolidated income statement comprises the following:

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Depreciation charged on property, plant and equipment | 197. 5 | 167.1
Depreciation charged on right-of-use assets | 28.1 | 26.9
Movement on depreciation included in closing inventories | (0.8) | 1.6
Total depreciation expense | 224.8 | 195.6

Depreciation charged on right-of-use assets in the table above is presented net of £0.9 million (2023: £nil) depreciation related to
salary sacrifice electric vehicles included within staff cost in operating and administrative expenses. Right-of-use asset depreciation
totals £29.0 million for the year ended 31 December 2024 (2023: £26.9 million).
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3.2 Leases
Accounting policy
IFRS 16 determines a control model to distinguish between lease agreements and service contracts on the basis of whether the
use of an identified asset is controlled by the Group for a period of time. If the Group is deemed to have control of an identified asset,
then a right-of-use asset and corresponding lease liability are recognised on the Consolidated balance sheet.
The lease liability is initially measured at the present value of the future lease payments discounted using the discount rate that is
implicit in the lease. If this discount rate cannot be determined from the agreement, the liability is discounted using an incremental
borrowing rate. Incremental borrowing rates are updated biannually. The borrowing rate for leased property is derived with reference
to property yields specific to the location of the leased property and property type. For non-property leases, the borrowing rate is
derived from a series of inputs including counterparty-specific proxies for risk-free rates, such as UK Gilt curves, and an adjustment
for credit risk based on the Group’s credit rating. The liability is subsequently adjusted for interest, repayments, remeasurements and
other modifications. The right-of-use asset is initially measured at cost and is subsequently measured at cost less accumulated
depreciation and accumulated impairment losses. Cost comprises the initial calculation of the lease liability, estimated costs for
dismantling or restoring the asset, any initial direct costs, and lease payments made or incentives received prior to commencement
of the lease.
Lease modifications are accounted for as a separate lease where the scope of the lease increases through the right to use one or
more underlying assets, and where the consideration of the lease increases by an amount that is equivalent to the standalone price of
the increase in scope. Where a modification decreases the scope of the lease, the carrying amount of the right-of-use asset and lease
liability are adjusted, and a gain or loss is recognised in proportion to the decrease in the scope of the lease. All other modifications are
accounted for as a reassessment of the lease liability with a corresponding adjustment to the right-of-use asset.
Lease extension or termination options are included within the lease term when the Group, as the lessee, has the discretion to exercise
the option and where it is reasonably certain that the option will be exercised.
Leases with a term shorter than 12 months, or where the identified asset has a value below £3,500, are expensed to the Consolidated
income statement on a straight-line basis over the term of the agreement.
Lease remeasurements, lease modifications, transfers between property, plant and equipment and right-of-use assets, and disposals
of leased assets are included within other movements in the table below.
Right-of-use assets

| Land and | Plant and |  |  |
| buildings | equipment | Rail cars | Vessels | Total
| £m | £m | £m | £m | £m
Cost: |  |  |  |  |
At 1 January 2023 | 30.4 | 24.8 | 33.7 | 90.8 | 179.7
Additions at cost | 9.9 | 5.6 | 0.6 | – | 16 .1
Acquired in business combinations | – | 0 .1 | – | – | 0 .1
Other movements | (1.1) | (3.2) | (4.6) | (0.4) | (9.3)
Effect of changes in foreign exchange rates | (0.5) | (0.5) | (1.3) | (2.9) | (5.2)
At 1 January 2024 | 38.7 | 26.8 | 28.4 | 87. 5 | 181.4
Additions at cost | 2.3 | 6.0 | – | – | 8.3
Movement in reinstatement asset (see note 5.3) | 2.3 | – | – | – | 2.3
Other movements | 5.1 | (3.2) | (0.4) | (5.2) | (3.7)
Effect of changes in foreign exchange rates | (0.3) | 0 .1 | (1.0) | (5.3) | (6.5)
At 31 December 2024 | 4 8.1 | 29.7 | 27. 0 | 77.0 | 181.8
Accumulated depreciation and impairment: |  |  |  |  |
At 1 January 2023 | 11.5 | 10.6 | 10.6 | 8.7 | 41.4
Depreciation charge for the year | 6.7 | 6.6 | 5.0 | 8.6 | 26.9
Other movements | (0.3) | (3.3) | (4.3) | 0.3 | (7.6)
Effect of changes in foreign exchange rates | (0.2) | (0.3) | (0.5) | (0.5) | (1.5)
At 1 January 2024 | 17.7 | 13.6 | 10.8 | 17.1 | 59.2
Depreciation charge for the year | 8.2 | 7.7 | 5.0 | 8.1 | 29.0
Impairment | 0.1 | – | – | – | 0.1
Other movements | (0.1) | (3.3) | (2.3) | 0.1 | (5.6)
Effect of changes in foreign exchange rates | (0.2) | 0 .1 | (0.3) | (1.4) | (1.8)
At 31 December 2024 | 25.7 | 18 .1 | 13.2 | 23.9 | 80.9
Net book value: |  |  |  |  |
At 31 December 2023 | 21.0 | 13.2 | 17.6 | 70.4 | 122.2
At 31 December 2024 | 22.4 | 11.6 | 13.8 | 53.1 | 100.9

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Section 3: Operating assets and working capital cont inued
3.2 Leases continued
Lease liabilities

| Year ended 31 December |
| 2024 | 2023
Carrying amount: | £m | £m
At 1 January | 135.8 | 153.1
Additions | 9.8 | 16 .1
Acquired in business combinations | – | 0.1
Interest charge for the year | 6.6 | 7. 2
Payments | (34.0) | (33.0)
Other movements | (2.8) | (1.0)
Effect of changes in foreign exchange rates | 1.1 | (6.7)
At 31 December | 116.5 | 135.8

The existence of termination, extension and purchase options has not had a material impact on the determination of the lease liabilities.
In addition to the payments disclosed above, the Group made payments of £6.0 million during the year (2023: £0.3 million) in relation
to short-term and low value leases.
The maturity of the gross undiscounted lease liabilities at 31 December is as follows:

| As at 31 December |
| 2024 | 2023
| £m | £m
Within one year | 31.6 | 33.4
Within one to two years | 24.6 | 28.6
Within two to five years | 39.0 | 52.5
After five years | 47.2 | 5 7.0
Total gross lease liabilities | 142.4 | 171.5
Effect of discounting | (25.9) | (35.7)
Lease liabilities recognised in the Consolidated balance sheet | 116.5 | 135.8
Current | 26.0 | 25.1
Non-current | 90.5 | 110.7

The Group recognised the following charges relating to leases in the Consolidated income statement:

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Expense relating to short-term leases | 5.9 | 0.3
Expense relating to low value leases | 0 .1 | –
Interest charge for the year | 6.6 | 7. 2
Depreciation charge for the year | 29.0 | 26.9
Variable lease payments | 0.6 | –

Right-of-use asset depreciation in the table above includes £0.9 million (2023: £nil) depreciation related to salary sacrifice electric
vehicles included within staff costs in operating and administrative expenses.
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3.3 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 2.2) 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.
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Section 3: Operating assets and working capital cont inued
3.3 Renewable certificate assets continued

| Year ended 31 December |
| 2024 | 2023
Carrying amount: | £m | £m
At 1 January | 292.2 | 187.8
Earned from generation | 752.6 | 749.7
Purchased from third parties | 464.6 | 673.8
Utilised by the Energy Solutions business | (654.7) | (435.7)
Sold to third parties | (314.7) | (883.4)
At 31 December | 540.0 | 292.2

Of the £540.0 million of renewable certificates recognised at 31 December 2024 (2023: £292.2 million), £4 86.1 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
(2 02 3: £ 147.9 million) to REGOs.
Recognition of revenue from the sale of renewable certificates is described in further detail in note 2.2.
Climate change considerations for renewable certificate assets are discussed in more detail in note 3.8.
3.4 Inventories
The Group holds inventories of fuels and other consumable items that are used in the process of generating electricity and raw
materials used in the production of biomass pellets. This note shows the cost of biomass, other fuels and consumables held at the
reporting date.
Accounting policy
The Group’s inventories are valued at the lower of cost and net realisable value. The costs of items of inventory are determined using
weighted average costs.
The cost of purchased inventories includes all direct costs incurred in bringing the raw material, fuel or consumables to their present
location and condition, including the purchase price, import duties and other taxes, and transport and handling costs. The Group
uses forward foreign exchange contracts to hedge the costs of fuel denominated in foreign currencies. Where these contracts are
designated into hedge relationships in accordance with IFRS 9, the inventory cost is recognised at the hedged value, to the extent
these hedges are effective, and all such gains and losses are included in cost of sales as part of the inventory cost.
Biomass inventories are weighed when entering, moving within or exiting the Group’s sites using technology regularly calibrated to
industry standards. Fuel burn in the electricity generation process is calculated using calibrated weighers to provide closing inventory
volumes. Calibrated weighers are subject to a range of tolerable error. All fuel inventories are subject to regular surveys to ensure
measurements are sufficiently accurate.
The characteristics of biomass require specialist handling and storage. Biomass at Drax Power Station is stored in sealed domes with
a carefully controlled atmosphere for fire prevention purposes and thus cannot be surveyed using traditional methods. Instead, this
inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy of the weights outlined above.
Recorded system volumes are also periodically verified through dome cycling (running a dome down until empty).
The cost of manufactured inventories includes all direct costs as well as conversion costs including labour, direct overheads and
an allocation of indirect overheads, including depreciation. The cost of inventories includes other costs incurred in bringing the
inventories to their existing condition and location.
Costs that do not contribute to bringing inventories to their present condition and location, such as storage and administration
overheads, are excluded from the cost of inventories and expensed as incurred. Abnormal amounts of wasted materials, labour
or other production costs are also excluded from the cost of inventories.
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3.4 Inventories continued
The valuation of fibre inventory involves estimations of conversion rates to determine the volume of residual fibre stockpiles and log
inventory. Third-party surveys are performed regularly to assess the volume of inventory and appropriate adjustments are made, if
required, using conversion factors estimated by management. Internal inventory counts are performed periodically at all locations.

| As at 31 December |
| 2024 | 2023
| £m | £m
Biomass – finished goods | 244.7 | 266.0
Biomass – fibre and other raw materials | 15.8 | 20.0
Other fuels and consumables | 41.5 | 42.4
Total inventories | 302.0 | 328.4

Total inventories of £302.0 million (2023: £328.4 million) are stated net of provisions of £5.3 million (2023: £3.4 million).
The cost of inventories recognised as an expense in the Consolidated income statement in the year ended 31 December 2024 was
£1,708.5 million (2023: £1,505.7
(1)
million). This includes the value of provisions recognised against inventory in the year.
(1) The 2023 amount for the cost of inventories recognised as an expense has been restated from £1,745.4 million to £1,505.7 million due to a correction of the rate used
to translate the cost of inventories of certain foreign operations.
3.5 Trade and other receivables and contract assets
Trade receivables represents amounts owed by customers for goods or services provided in the ordinary course of business that they
have been invoiced for, but have not yet been paid. Accrued income represents income earned on goods or services provided in the
ordinary course of business in the period, but not yet invoiced, largely in respect of energy supplied to customers that will be invoiced
the following month. Prepayments represent amounts paid in respect of goods or services not yet received. Other receivables include
collateral posted in relation to the Group’s commodity and treasury trading activities, and other amounts for goods or services
provided that have been invoiced for but not yet paid that do not fall under trade receivables. Contingent consideration relates to
amounts receivable dependent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part
of the sale of the Combined Cycle Gas Turbines (CCGT) generation portfolio in 2021.
Accounting policy
Trade receivables and accrued income that do not contain a significant financing component are initially measured at the transaction
price. Other financial assets, principally other receivables, are initially measured at fair value plus transaction costs, other than financial
assets measured at fair value through profit or loss (FVTPL) where transaction costs are recognised immediately in the Consolidated
income statement.
The classification of financial assets subsequent to initial recognition depends on the business model used by the Group to manage
them and the characteristics of the contractual cash flows.
Financial assets are recognised at amortised cost if:
– it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
– the contractual terms give rise to payments that are solely payments of principal and interest (SPPI).
Financial assets are recognised at fair value through other comprehensive income (FVOCI) if:
– it is held within a business model whose objective is achieved by both holding financial assets in order to collect contractual
cash flows and selling financial assets; and
– the contractual terms give rise to payments that are SPPI.
All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL.
The Group has access to a receivables monetisation facility under which amounts receivable from a portfolio of receivables can be
sold to a third party on a non-recourse basis. This portfolio of receivables, that may be sold under this facility or held to collect the
contractual cash flows, are accounted for at fair value through other comprehensive income (FVOCI) in accordance with IFRS 9, due
to the objective of the business model being achieved by both collecting contractual cash flows and the selling of the financial assets.
For the receivables within this portfolio that are sold, the receivables are derecognised from the Consolidated balance sheet at the
point of sale, which is shortly after the initial recognition of the receivable balance, as the significant risks and rewards of ownership
are deemed to have been transferred. Fair value gains or losses on these receivables are recognised within other comprehensive
income and reclassified to interest payable and similar charges in the Consolidated income statement when derecognised. Impairment
gains or losses are recognised directly in the Consolidated income statement. At 31 December 2024, the receivables sold under this
facility were £386.3 million (2023: £400.0 million). See note 4.3 for further information about the facility.
As part of the sale of customer meter points to EDF by Opus Energy (see note 2.7 for further details), the receivables relating to the
meter points sold were transferred to EDF. The amount the Group receives for transferring these receivables is dependent on the
amounts collected by EDF. The receivables sold to EDF do not qualify for derecognition under IFRS 9 as Opus Energy has retained
substantially all the risks and rewards of ownership of the financial assets. These receivables are accounted for at FVTPL in
accordance with IFRS 9, due to the contractual terms of the financial assets giving rise to cash flows that are not SPPI. The cash flows
to be received by Opus Energy on collection of the receivables by EDF are calculated in accordance with the Asset Purchase
Agreement (APA) and are dependent on the amounts collected by EDF. The impairment requirements of IFRS 9 do not apply to these
receivables as the receivables are measured at fair value. Since the transfer, any fair value gains or losses on these receivables have
been recognised within the Consolidated income statement within operating and administrative expenses.
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Section 3: Operating assets and working capital cont inued
3.5 Trade and other receivables and contract assets continued
The UK Government introduced the Energy Bills Discount Scheme (EBDS) running from 1 April 2023 to 31 March 2024 which replaced
the Energy Bill Relief Scheme (EBRS). Under these schemes, energy supplied to eligible non-domestic customers had a discount
applied. The discount provided was then able to be claimed back from the UK Government by the supplier. The amount the Group is
entitled to claim from the Government is recognised in other receivables.
See note 2.2 for details of amounts relating to EBDS and EBRS within the Consolidated income statement. At 31 December 2024,
there are no amounts outstanding from these schemes (2023: £4.8 million).
Contingent consideration receivable is a financial asset. As the cash flows are not SPPI, it does not meet the criteria for recognition
at either amortised cost or FVOCI, and is therefore recognised at FVTPL. The impairment requirements of IFRS 9 do not apply to these
receivables as the receivables are measured at FVTPL. Fair value gains and losses on this receivable are recognised in other gains and
losses in the Consolidated income statement.

| As at 31 December |
| 2024 | 2023
| £m | £m
Amounts falling due: |  |
Trade receivables | 105.4 | 336.0
Accrued income | 278.6 | 420.7
Prepayments | 24.9 | 77.2
Other receivables | 52.0 | 133.8
Contingent consideration | 9.4 | 9.2
Total trade and other receivables and contract assets | 470.3 | 976.9

At 31 December 2024, the Group had no amounts receivable from significant counterparties which represented 10% or more of total
trade receivables and accrued income (2023: no significant counterparty).
Of total trade receivables and accrued income at 31 December 2024, £192.8 million (2023: £558.9 million) relates to the Energy
Solutions business, £145.1 million (2023: £164.8 million) relates to the Biomass Generation business, £19.9 million (20 23: £7.5 million)
relates to the Flexible Generation business, and £26.2 million (2023: £25.5 million) relates to the Pellet Production business.
Accrued income includes contract assets which relate to amounts for goods or services provided under customer contracts, where
the entitlement to consideration is contingent on something other than the passage of time. The Group has recognised a contract
asset for any services provided where the Group does not yet have the unconditional right to receive payment and the condition is
not solely the passage of time. Any amount previously recognised as a contract asset is reclassified to trade receivables at the point
at which the Group’s right to payment becomes unconditional. This is usually when an invoice is issued. Contract assets included in
accrued income at 31 December 2024 were £43.4 million (2 023: £ 8 9.1 million).
Included in the prepayments balance is an amount of £1.5 million (2023: £1.9 million) relating to the prepayment of a service contract
for services due to be received after more than one year. Prepayments also includes £2.7 million (2 023: £ 21.1 million) relating to broker
fees paid which have been capitalised as contract costs, of which £nil (2023: £8.6 million) are due to be recognised after more than
one year, in line with the recognition of the revenue to which the contract costs relate. See note 3.6 for further details.
The contingent consideration relates to the Group’s disposal of the CCGT generation portfolio in January 2021. Should the acquirer
satisfy certain triggers in respect of the option to develop the land at the Damhead Creek 2 site, which was disposed of as part of this
sale, £29.0 million of contingent consideration would become payable to the Group from the acquirer. The estimated fair value of this
contingent consideration is £9.4 million (2023: £9.2 million). Contingent consideration is disclosed within current assets; however, the
timing of receipt would be dependent on when a trigger was to occur, which may be in a period greater than 12 months from the end
of the reporting period. Changes in the fair value of the contingent consideration are recognised within the other gains and losses line
within the Consolidated income statement. See note 7.1 for further details on the contingent consideration.
The following table shows the movement in fair value of the Group’s trade and other receivables measured at FVTPL:

| As at 31 December |
| 2024 | 2023
Receivables measured at FVTPL: | £m | £m
At 1 January | 9.2 | 27.4
Fair value of transferred receivables at the date of transfer to EDF | 21.6 | –
Fair value losses recognised in operating and administrative expenses | (12.9) | –
Fair value gains/(losses) recognised in other gains and losses | 0.2 | (18.2)
Amounts received from EDF | (2.0) | –
Offset for credit balances transferred to EDF | (6.4) | –
At 31 December | 9.7 | 9.2
Of which relates to: |  |
Receivables sold to EDF | 0.3 | –
Contingent consideration | 9.4 | 9.2

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3.5 Trade and other receivables and contract assets continued
Impairment of financial assets
Accounting policy
The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group’s financial assets not measured
at FVTPL, including trade receivables, accrued income, contract assets and other financial assets. The provision for impairment of
trade receivables and accrued income (including contract assets) is measured at an amount equal to the lifetime expected credit loss.
Contract assets relate to amounts for goods or services provided under customer contracts and, therefore, have substantially the
same risk characteristics as trade receivables for the same types of contracts.
For other financial assets, the Group recognises a lifetime expected credit loss provision when there has been a significant increase
in credit risk since initial recognition. If the credit risk of the financial instrument has not increased significantly since initial recognition,
the Group recognises a 12-month expected credit loss provision.
The greatest concentration of credit risk exists in the Energy Solutions business. For all receivables in the current year, across all
businesses, a provision matrix method has been adopted. For the small and medium-sized enterprise (SME) consumers within the
Energy Solutions business, the risk is higher due to the wide range of customer characteristics within the portfolio. In the prior year,
due to the loss provisioning for these customers being more complex a combined probability method that was more dynamic than the
provision matrix method was applied. Due to the sale of the majority of the Group’s non-core SME customer meter points and transfer
of the related receivables balances to EDF (see note 2.7 for further details), the receivables balance and exposure to credit risk for
these customers has significantly reduced compared to the prior year. As such the use of the combined probability method was not
deemed appropriate and the provision matrix method has been applied to all customers.
Under the Group’s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally for
recovery of an outstanding balance. The Group considers a financial asset to be in default when the amount due from a debtor is
unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a financial asset when there
is no realistic prospect of recovery and all attempts to recover the balance have been exhausted. An indication that all credit control
activities have been exhausted is where the debt on an account is exclusively greater than 365 days past due and active recovery
attempts have failed, or where there are known insolvency issues relating to the customer.
Provision matrix method
Customers are grouped according to the age of the debt based on the number of days past due. The provision rates are based on
historical collection rates and an expectation of future cash collection.
The movement in the overall allowance for expected credit losses on trade receivables is presented in the following table.
This excludes £0.3 million (2023: £nil) of trade receivables measured at FVTPL:

|  | 2024 |  |  | 2023 |
| Combined | Provision |  | Combined | Provision |
| probability | matrix |  | probability | matrix |
| method | method | Total | method | method | Total
| £m | £m | £m | £m | £m | £m
At 1 January | 50.6 | 8.8 | 59.4 | 54.9 | 6.0 | 60.9
Amounts written off | (28.5) | (17.9) | (46.4) | (44.2) | (5.0) | (49.2)
Net additional amounts provided against | 28.0 | 20.9 | 48.9 | 39.9 | 7.4 | 47.3
Amounts added on acquisition | – | – | – | – | 0.4 | 0.4
Transfer of financial assets to FVTPL |  |  |  |  |  |
category | (19.5) | – | (19.5) | – | – | –
Change in provisioning methodology | (30.6) | 30.6 | – | – | – | –
At 31 December | – | 42.4 | 42.4 | 50.6 | 8.8 | 59.4
Gross trade receivables |  | 147. 5 | 147.5 | 155.8 | 239.6 | 395.4
Expected credit loss provision |  | (42.4) | (42.4) | (50.6) | (8.8) | (59.4)
Trade receivables subject to the IFRS 9 |  |  |  |  |  |
impairment model |  | 105.1 | 105.1 | 105.2 | 230.8 | 336.0
Average expected credit loss % |  | 29% | 29% | 32% | 4% | 15%

The provision in the table above relates primarily to trade receivables in the Energy Solutions business. The provision matrix method
has resulted in a £nil provision applied to both the Flexible Generation and Pellet Production businesses in both the current and prior
years and a £2.9 million (2023: £nil) provision in the Biomass Generation business.
The risk of default within the Biomass Generation, Flexible Generation and Pellet Production businesses is considered to be remote,
supported by strong historical collection rates, high credit quality counterparties and short payment terms with timely receipts
resulting in negligible aged debt.
The net charge to the Consolidated income statement in 2024 for impairment losses on financial assets was £40.0 million (2023:
£32.5 million). This is the net of the additional amounts provided against in relation to trade receivables of £48.9 million (2023:
£47.3 million (excluding £0.4 million added on acquisition)) less an £8.9 million (2023: £14.8 million) benefit in the period in respect
of the resolution of legacy credit balances. Of the net charge in the current year, £12.7 million has been recognised as exceptional
as part of the Opus Energy transaction (see note 2.7 for further details).
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Section 3: Operating assets and working capital cont inued
3.5 Trade and other receivables and contract assets continued
The value of provisions calculated using the combined probability method in the prior year is set out below for comparative purposes.
This shows the trade receivables balances for SME customers within the Energy Solutions business grouped by the combined
probability assigned by the model.
As explained above, the Group stopped using the combined probability model in the current year. As such, the following table shows
the comparative risk profile of amounts due based on the combined probability model at 31 December 2023 only:

|  | As at 31 December 2023
| Estimated gross | Lifetime
| carrying amount | expected
| at default | credit losses
Probability of default range % | £m | £m
80–10 0 | 42 .1 | 36.7
50–79 | 14.3 | 8.0
26–49 | 17.9 | 5.8
0–25 | 81.5 | 0 .1
Total | 155.8 | 50.6

The value of provisions calculated using the Group’s provision matrix method is set out below. This shows the ageing profile in 30-day
increments of the trade receivables and accrued income (including contract assets) of the Group at 31 December 2024 excluding
£0.3 million (2023: £nil) of trade receivables that are measured at FVTPL.
The comparative amounts show the same, apart from not including the Group’s SME customers within the Energy Solutions business,
that were previously calculated using the combined probability method and are included in the table above.

|  | As at 31 December 2024 |  |  | As at 31 December 2023 |
| Estimated |  |  | Estimated |  |
| total gross | Lifetime |  | total gross | Lifetime |
| carrying amount | expected | Expected | carrying amount | expected | Expected
| at default | credit losses | credit loss rate | at default | credit losses | credit loss rate
| £m | £m | % | £m | £m | %
Accrued income balances not yet due | 287.6 | 9.0 | 3% | 43 0 .1 | 9.4 | 2%
Trade receivables days past due: |  |  |  |  |  |
Balances not yet due | 81.6 | 4.0 | 5% | 183.6 | 2 .1 | 1%
Between 0–30 days | 5.2 | 0.8 | 15% | 32.6 | 0.9 | 3%
Between 31–60 days | 2.5 | 0.7 | 28% | 7.1 | 0.7 | 9%
Between 61–90 days | 2.1 | 0.8 | 38% | 2.7 | 0.5 | 19%
Over 90 days | 56.1 | 36 .1 | 64% | 13.6 | 4.6 | 34%
Trade receivables subject to the IFRS 9 |  |  |  |  |  |
impairment model total | 147. 5 | 42.4 | 29% | 239.6 | 8.8 | 4%
Total | 435.1 | 51.4 | 12% | 669.7 | 18.2 | 3%

The expected credit loss provision of £51.4 million (2023: £18.2 million) in the table above primarily relates to the Energy Solutions
business. The expected credit loss rates above are expressed as a percentage of the gross carrying amount of all of the Group’s trade
receivables and accrued income balances that are subject to the provision matrix method.
The expected credit loss provision calculated for other financial assets of the Group was negligible.
Credit and counterparty risk are disclosed in further detail in note 7.2.
3.6 Contract costs
The Group incurs costs of obtaining contracts in the Energy Solutions business.
Accounting policy
Management expects that incremental broker fees paid to intermediaries as a result of obtaining electricity and gas contracts are
recoverable. The Group has therefore capitalised them as contract costs at the point the fee is paid. The fees are amortised over the
contract period in line with the recognition of revenue and are charged to cost of sales. The balance is included within prepayments
in note 3.5. This amount includes both current and non-current balances. The reconciliation from opening to closing contract costs
is as follows:

| Year ended 31 December |
| 2024 | 2023
| £m | £m
At 1 January | 21.1 | 29.8
Additions | 19.2 | 17.6
Amortisation | (21.5) | (26.3)
Accelerated amortisation – customers sold | (10.6) | –
Impairment – customers retained | (5.5) | –
At 31 December | 2.7 | 21.1

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3.6 Contract costs continued
During the year the Group sold the majority of its non-core SME customers in Opus Energy to EDF (see note 2.7 for further details).
The amortisation of the commissions relating to the customers sold was accelerated due to the future cash flows from those
customers’ contracts being received as part of the consideration for the sale of the customer meters. This accelerated charge was
recognised as exceptional within the Consolidated income statement. The remaining commissions relating to the customers retained
by Opus Energy were impaired due to those customer contracts being onerous following the sale (see note 5.3).
3.7 Trade and other payables and contract liabilities
Trade and other payables represents amounts the Group owes to its suppliers for trade purchases and ongoing costs, taxes and social
security amounts due in relation to the Group’s role as an employer, and other creditors that are due to be paid in the ordinary course
of business. The Group makes accruals for amounts that will fall due for payment in the future as a result of the Group’s activities in
the current period (e.g. fuel received but for which the Group has not yet been invoiced). Contract liabilities represents the Group’s
obligation to transfer goods and services to its customers whereby the Group has already received the consideration in advance or
where the amount is due from the customer at the reporting date.
Accounting policy
Trade and other payables are financial liabilities that are initially measured at fair value. Trade and other payables are subsequently
measured at amortised cost using the effective interest method. Financial liabilities are derecognised when the contractual
obligations are discharged, cancelled or expire. If the terms of a financial liability are significantly modified, the existing financial
liability is derecognised and a new financial liability based on the modified terms is recognised at fair value. The difference between
the carrying value of the financial liability based on the terms pre-modification and post-modification is recognised in the Consolidated
income statement.

| As at 31 December |
| 2024 | 2023
| £m | £m
Trade payables | 134.8 | 145.2
Fuel accruals | 67.9 | 71.4
Energy supply accruals | 473.2 | 587.4
Other accruals | 319.5 | 306.6
Other payables | 264.4 | 389.6
Contract liabilities | 29.3 | 39.4
Total trade and other payables and contract liabilities | 1, 289.1 | 1,539.6

Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying amounts of trade and other payables
approximates their fair values, due to their short-term nature.
The Group facilitates a supply chain finance scheme under which certain suppliers can obtain early access to payments from a bank
and the Group pays the bank based on the original payment terms. The Group has assessed the supply chain finance arrangement,
considering the nature and specific terms of the arrangement and has determined that it is appropriate for the amount to continue
to be recognised within trade payables. This conclusion is based on the fact that there are no changes to the Group’s payment terms
under this arrangement, nor would there be if the arrangement was to cease. Trade payables includes £38.4 million (2023: £48.6 million)
relating to supply chain finance. Cash flows relating to supply chain finance, being the Group’s payment to the bank, are included within
net cash from operating activities. See note 4.3 for further details.
The Group also has access to deferred letter of credit payment facilities under which the Group benefits from an extension to invoice
payment terms of less than 12 months for a fee. The original liability is derecognised from trade payables once the deferred letter of
credit has been issued and drawn, this is normally at the point that the original liability is due for payment in accordance with invoice
payment terms. The amount due to the facility provider is recognised in other payables. Fees are either recognised in the Consolidated
income statement, or capitalised if they are directly attributable to the construction of a qualifying asset and meet the criteria for
capitalisation, in the period incurred. Other payables includes £150.3 million (2023: £224.7 million) related to deferred letters of credit.
Of the total deferred letters of credit, £92.8 million (2 02 3: £155.1 million) were utilised for capital expenditure and £57.5 million (2023:
£69.6 million) were utilised for trade payables. Cash flows relating to deferred letters of credit, being the Group’s payment to the bank,
are included within net cash from operating activities where utilised for biomass purchases or net cash used in investing activities for
capital expenditure. See note 4.3 for further details.
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Section 3: Operating assets and working capital cont inued
3.7 Trade and other payables and contract liabilities continued
The tables below detail the amount of trade and other payables and contract liabilities that relate to financial liabilities that are part
of supplier finance arrangements, such as supply chain finance and deferred letters of credit, and how much of these amounts have
already been paid out by the finance providers at the reporting date.

|  | As at 31 December |  |
|  |  | 2024 | 2023
|  |  | £m | £m
Supply chain finance scheme |  |  |  |
Carrying amount of financial liabilities that are part of the arrangement: |  |  |  |
Presented within trade payables |  |  | 38.4 | 48.6
– Of which represents the value of accelerated payments to suppliers |  |  | 11.8 | 47.6
Range of payment due dates: |  |  | 45 to 65 days | 45 to 65 days
|  |  | after invoice | after invoice
Liabilities that are part of the arrangement |  |  | date | date
|  |  | 3 to 60 days | 3 to 60 days
|  |  | after invoice | after invoice
Comparable trade payables that are not part of the arrangement |  |  | date | date
Deferred letters of credit – biomass purchases |  |  |  |
Carrying amount of financial liabilities that are part of the arrangement: |  |  |  |
Presented within other payables |  |  | 57. 5 | 69.6
– Of which represents the value of accelerated payments to suppliers |  |  | 56.6 | 68.5
Range of payment due dates: |  |  | 80 to 117 days | 80 to 117 days
|  |  | after invoice | after invoice
Liabilities that are part of the arrangement |  |  | date | date
|  |  | 3 to 25 days | 3 to 25 days
|  |  | after invoice | after invoice
Comparable trade payables that are not part of the arrangement |  |  | date | date
Deferred letters of credit – capital expenditure |  |  |  |
Carrying amount of financial liabilities that are part of the arrangement: |  |  |  |
Presented within other payables |  |  | 92.8 | 155.1
– Of which represents the value of accelerated payments to suppliers |  |  | 90.3 | 146.8
Range of payment due dates: |  | Extension of | Extension of |
|  | invoice | invoice |
|  | payment terms | payment terms |
|  | by 329-36 0 | by 329-364 |
Liabilities that are part of the arrangement |  | days | days |
| 30 to 42 days | 30 to 42 days |  |
| after invoice | after invoice |  |
Comparable trade payables that are not part of the arrangement | date | date |  |
Non-cash movements in the period: |  |  |  |
Derecognition of amounts owed to the supplier and recognition of amounts owed to the facility |  |  |  |
provider – supply chain finance scheme | 219.5 | 213.1 |  |
Derecognition of amounts owed to the supplier and recognition of amounts owed to the facility |  |  |  |
provider – deferred letters of credit | 316.9 | 411.7 |  |
Effect of changes in foreign exchange rates – supply chain finance scheme | 1.9 | 1.0 |  |
Effect of changes in foreign exchange rates – deferred letters of credit |  | 5.7 | 2.2 |

In the supply chain finance scheme, the payable to the original supplier and the payable owed to the facility provider (once the payable
owed to the original supplier has been derecognised) are both presented within trade payables as the payable remains operating in
nature and there is no extension to the Group’s payment terms under this arrangement.
The Group does not include trade and other payables and contract liabilities in its definition of borrowings or Net debt where they
are linked to a specific payable and give an extension in payment terms of less than 12 months (see note 2.7).
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3.7 Trade and other payables and contract liabilities continued
Energy supply accruals includes £347.7 million (2023: £444.4 million) in relation to the Group’s obligation to deliver renewable
certificates arising from activities in the Energy Solutions business. The decrease is due to the lower value of REGOs compared
to the prior year. The remaining balance principally comprises third-party grid charge accruals of £65.5 million (2023: £75.1 million)
and Feed-in-Tariff accruals of £25.3 million (2023: £19.4 million).
Contract liabilities primarily relate to the advance consideration received from customers for fixed price electricity and gas contracts,
for which revenue is recognised based on the stage of completion of the contract. The balance reduces as revenue is subsequently
recognised in the following periods, offset by further advanced consideration received. Contract liabilities at 31 December were
£29.3 million (2023: £39.4 million). The movement in the period includes a release of £4.2 million as a result of the Opus Energy
transaction. See note 2.7 for further details.
3.8 Climate change
Climate change, and tackling it, is closely linked to the Group’s purpose, as set out in the Strategic report on pages 1 to 85.
The Sustainable development report, starting on page 30, sets out how the Group’s ambition is to be climate positive and the
TCFD disclosures, starting on page 56, set out the Group’s approach to managing climate risks and opportunities, including scenario
analysis. The Group aims to be a leader in the UK’s transition to net zero and its strategy is aligned to this purpose. Climate change
is factored into short, medium and long-term forecasts and estimates used by the Group. In the Viability statement on page 84
and the TCFD report on page 56, quantitative risk analysis on the Group’s operational Biomass Generation, Flexible Generation and
Pellet Production assets indicates that asset exposure to impacts arising from transitional and physical climate-related risks currently
remains low.
Climate change and the transition to net zero have been considered in the preparation of these Consolidated financial statements.
The impact of future climate change regulation could have a material impact on the currently reported amounts of the Group’s assets
and liabilities. In preparing these Consolidated financial statements, the following climate change-related risks have been considered:

Area | Description | Page reference
Critical accounting | Impairment of assets, UELs of property, plant and equipment and capitalisation of | 163 and 164
judgements and key | development project costs are all sensitive to climate change. For capitalisation of |
sources of estimation | development project costs these costs may not be recoverable if there is a change in the |
uncertainty | UK Government’s approach to combatting climate change which means that the |
| development of UK BECCS does not progress. However, the Group considers that the |
| only way to achieve current UK Government targets for greenhouse gas removals is |
| through having at least one BECCS unit at Drax Power Station by 2030. This is consistent |
| with the National Energy System Operator for Great Britain (NESO) Clean Power 2030 |
| report published in November 2024, which assumes one biomass unit is converted to |
| BECCS in their pathways. |
| Impairment of assets and UELs of property, plant and equipment are detailed separately |
| below. |
Impairment of assets | The Group’s expectations around the impacts of climate change, and in particular the |
| requirements of the UK Government’s commitment to reach net zero by 2050, are |
| integral to the forecasts used in the Group’s impairment analysis. For example, the |
| forward power price curves used take into account expectations regarding the impact of |
| climate change and the changing mix of generating assets on the UK power system. This |
| could lead to lower average power prices as the proportion of intermittent renewables |
| increases, but this would be tempered by increased structural volatility, meaning a need |
| for biomass and other dispatchable generation. |
| Government and societal responses to climate change are still developing, and therefore |
| financial forecasts cannot capture all potential future scenarios. This presents |
| uncertainty around future cash flows from an IAS 36 perspective. Sensitivities modelled, |
| including those around biomass acceptability and changes in regulation, seek to capture |
| and assess some of these potential scenarios. Consideration was given to assumptions |
| around biomass generation and biomass prices when current renewable schemes for |
| biomass generation at Drax Power Station are due to end from March 2027, along with |
| the potential extension to 2031 through the agreed heads of terms for a low-carbon |
| dispatchable CfD agreement signed in February 2025. See note 2.4 for further details. |
| Sensitivities modelled in the impairment testing also included operational outages at |
| both the generation and pellet production facilities, which could be caused by extreme |
| weather conditions as a result of climate change or other factors. |

164 and 181
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|  | Section 3: Operating assets and working capital cont inued |
Impairment of assets | Following the announcement in 2023 to exit the gas supply market, to support the |
(continued) | Group’s ambition to decarbonise, in the current year the Group sold the majority of its |
| non-core small and medium-sized enterprise (SME) customer meter points from Opus |
| Energy to EDF. As explained in note 2.7 a subsequent restructuring commenced to |
| reflect the reduced size of the Opus Energy business and the focus on industrial and |
| commercial (I&C) customers and renewables services within the Energy Solutions |
| business. This has resulted in a number of non-current asset impairments. See note 2.4 |
| for further details. |  |
| The impact of climate change on the OCGT assets has also been considered. Whilst there |
| is a risk of legislative change relating to unabated gas, the assets’ carrying values are |
| underpinned by long-term, Government-backed contracts. When they are operational |
| these assets will be amongst the newest on the system. The NESO Clean Power 2030 |
| pathways report states gas generation will remain critical for security of supply. The |
| Group continues to consider options for these assets. |
| Climate change could have an impact on weather patterns and the supply of renewable |
| energy generation, affecting energy prices. Sensitivities for these scenarios were run |
| on the run-of-river hydro and pumped storage assets and did not indicate any potential |
| impairments. |  |
Going concern and | As above, forecast power prices and potential operational outages are also incorporated | 21 and 161 for
viability | into the going concern and viability assessments. | going concern
|  |  | and 84 for
|  |  | viability
Useful economic lives of | The potential impact of climate change is one of the factors assessed in determining | 164 | and 200
fixed assets | how long the Group anticipates both new and existing assets will operate for. For |
| example, the OCGT assets under development will be given a UEL in line with the Group’s |
| expectations around the UK’s transition to a net zero position by 2050. |
| As outlined in the key sources of estimation uncertainty section, UELs at Drax Power |
| Station may be lengthened or shortened as a result of future decisions, that may be |
| directly or indirectly linked to climate change. Were UELs to be shortened by 12 years |
| to 2027 | , in line with the end of the current renewables schemes, and if a decision was |
| taken not to develop UK BECCS or other opportunities (such as data centres), at the site, | the impact on the annual depreciation charge would be an increase of approximately |
| £183.8 million. See further details in note 3.1. |
Present value of | As described in note 5.3, the decommissioning provision in relation to Drax Power | 228
decommissioning | Station, the OCGTs and certain pellet plants has been assessed with the support of a |
provisions | third-party expert. |  |
| The third-party analyses specifically considered potential impacts of climate change, |
| both physical and transitional, extending over the medium term, and concluded that |
| direct effects were unlikely to have a significant impact over this time horizon. |  |
| If Drax Power Station or the OCGT sites closed sooner than indicated by their current |  |
| UELs, for reasons explained above, then the decommissioning provision would increase |  |
| as the cash outflows would occur earlier; however, this would not have a material impact |  |
| on the provision. |  |
| Legislation and regulatory requirements could have an impact on the UELs of the OCGTs. |  |
| If a law was enacted that could result in early closure of unabated gas generation this |  |
| would result in an earlier utilisation of the provision. |  |
Fair value of contingent | Future regulatory changes in relation to the type of assets that can be built in the UK, |  | 241
consideration | in response to climate change, could lead to the project at Damhead Creek 2 not |  |
| progressing as currently assumed. This could lead to an adverse impact on the fair value |  |
| of the contingent consideration which the Group has recognised. This would not lead to |  |
| a material reduction in the fair value. |  |
Defined benefit pension | The Group operates one defined benefit pension scheme. The trustees of the scheme |  | 234
scheme | have an investment strategy that seeks to diversify its risk exposures. The investment |  |
| policy requires investment managers to take climate risk into account. The impact |  |
| of climate change is relatively low due to the risk profile of the assets held under |  |
| the scheme. |  |

3.8 Climate change continued
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Renewable certificates | As demand for renewable electricity is growing, the long term trend in the value of | 205
| Renewable Energy Guarantees of Origin (REGO) certificates has increased due to the |
| higher demand. This is in part due to the need for organisations to decarbonise and |
| promote their corporate social responsibility and environmental social governance. |
| The run-of-river hydro assets and biomass assets are eligible to claim REGOs on the |
| electricity they produce. Certificates are utilised by the Energy Solutions segment, |
| who submit them to Ofgem on behalf of their customers. |
| Further stabilisation and correction of REGO prices in the future could impact the value |
| of renewable certificates held, in turn impacting future revenues. |
| ROC valuations 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. The recycle fund |
| provides a benefit where supplier buy-out charges are redistributed to the suppliers who |
| presented ROCs in a compliance period on a pro-rata basis. One of the key estimates of |
| the recycle value are assumptions about the expected levels of renewable generation, |
| which is largely dependent on weather. Climate change could have an impact on weather |
| patterns and therefore the supply of ROCs, which would impact the recycle value. |
Sustainable financing | During the year, the Group has entered into various new facilities (see note 4.2), some | 216
| of which have embedded aspects of the Group’s climate targets and commitments. |
| These new facilities and new sustainability-linked £450 million RCF have a customary |
| margin grid referenced over SONIA or EURIBOR with adjustments linked to certain Scope |
| 1, 2 and 3 carbon emissions which are based on the Group’s 2030 Science Based Targets |
| initiative (SBTi) targets. The CAD term loan has an ESG adjustment based on carbon |
| emissions from generation. |
| Should the Group not meet the targets the Group would be liable to increased finance |
| costs prospectively. |
Deferred tax assets | Deferred tax assets are recognised to the extent that it is probable that future taxable | 181
| profits will be available against which deductible temporary differences can be utilised. |
| The Group currently has deferred tax assets related to its US and Canadian businesses. |
| The estimates used when assessing the future profitability of the US and Canadian |
| businesses have been approved by the Board and are consistent with estimates used |
| in the going concern and impairment assessments. As discussed above, the impairment |
| assessment factors in climate change risks in the forecasts. See note 2.4 for further |
| details on how climate change has been factored into the forecasts. |

3.8 Climate change continued
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This section provides further information about the Group’s capital structure (equity and debt financing) and cash generated from
operations during the year.
4.1 Cash and cash equivalents
Accounting policy
Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity of three months or less, and money
market funds. Cash equivalents are highly liquid low-risk investments and are readily convertible into known amounts of cash with
a maturity of three months or less, as such there is an insignificant risk of a change in value. The carrying amount of these assets is
approximately equal to their fair value. It is the Group’s policy to deposit available cash in low-risk bank accounts or short-term deposit
accounts.

| As at 31 December |
| 2024 | 2023
| £m | £m
Cash at bank | 73.5 | 7 7.5
Short-term deposits | 179.4 | 130.9
Money market funds | 103.1 | 171.1
Total cash and cash equivalents | 356.0 | 379.5

4.2 Borrowings
Accounting policy
The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration received,
net of transaction costs that are directly attributable to the debt issuance. Subsequent to initial measurement, debt instruments
are measured at amortised cost using the effective interest method. Transaction costs (any such costs incremental and directly
attributable to the issue of the financial instrument) are included in the calculation of the effective interest rate and are amortised
over the expected life of the instrument.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. Loan commitment fees may be payable to the lender to entitle the Group to draw down
at any time over a fixed period. Where there is a fixed repayment date, regardless of when the loan is drawn down, the commitment
fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same fixed term,
regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawdown and are
recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment
fees are recognised on a systematic basis over the period the Group is able to draw down.
Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group’s discretion,
such as under a revolving credit facility (RCF), are recognised on a systematic basis over the life of the facility.
Debt instruments denominated in foreign currencies are revalued using the period-end exchange rates, with any exchange gains
and losses being recognised as a component of foreign exchange gains or losses in the period they arise. The Group hedges foreign
currency risk and interest rate risk in accordance with the policies set out in note 7.2. Where hedging instruments are used to fix
cash flows associated with debt instruments, the debt instrument and the hedging instrument are measured and presented separately
on the Consolidated balance sheet. Where hedge accounting is applied to foreign exchange risk and interest rate risk on debt
instruments, gains and losses are recycled to the Consolidated income statement within either foreign exchange gains or losses or
interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings amounts disclosed
in the tables below exclude any impact of hedging instruments.
Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt
instrument are significantly modified, the existing liability is derecognised and a new liability based on the modified terms is recognised
at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modification and post-
modification is recognised in the Consolidated income statement.
Section 4: Financing and capital structure
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4.2 Borrowings continued
The Group’s borrowings at each reporting date were as follows:

|  |  | As at 31 December 2024 |  |  |  | As at 31 December 2023 |
| Effective |  |  |  | Effective |  |  |
| sterling |  |  | Amortised | sterling |  |  | Amortised
| interest rate (1) | Principal | Year of | cost | interest rate (1) | Principal | Year of | cost
| % | m | maturity | £m | % | m | maturity | £m
Non-current secured borrowings: |  |  |  |  |  |  |  |
2.625% EUR loan notes 2025 (2) | – | – | n/a | – | 4.6% | €250.0 | 2025 | 215.7
6.625% USD loan notes 2025 (3) | – | – | n/a | – | 6 .1% | $500.0 | 2025 | 391.5
5.875% EUR loan notes 2029 | 7.5% | €350.0 | 2029 | 289.5 | – | – | n/a | –
UK infrastructure private |  |  |  |  |  |  | 2025 – |
placement facility (2019) | 3.0% | £50.0 | 2029 | 49.5 | 3.3% | £252.5 | 2029 | 251.4
UK infrastructure private |  | €101.5 + | 2026 – |  |  | €101.5 + | 2026 – |
placement facility (2020) | 2.5% | £98.0 | 2030 | 181.0 | 2.6% | £98.0 | 2030 | 184.7
CAD term loan facility | 6 .1% | C$200.0 | 2026 | 111.0 | 7.1% | C$200.0 | 2026 | 117. 8
GBP and EUR term loan facility |  | €185.0 + | 2027 – |  |  |  |  |
(2024) | 5.5% | £100.0 | 2029 | 251.9 | – | – | n/a | –
|  |  | 2027 – |  |  |  |  |
£125m GBP term loan facility (2024) | 6.2% | £125.0 | 2029 | 124.9 | – | – | n/a | –
£50m GBP term loan facility (2024) | 5.5% | £50.0 | 2028 | 49.9 | – | – | n/a | –
Current secured borrowings: |  |  |  |  |  |  |  |
2.625% EUR loan notes 2025 (2) | 4.6% | €143.8 | 2025 | 119.0 | – | – | n/a | –
UK infrastructure private |  |  |  |  |  |  |  |
placement facility (2019) | – | – | n/a | – | 3.3% | £122.5 | 2024 | 122.5
UK infrastructure private |  |  |  |  |  |  |  |
placement facility (2020) | – | – | n/a | – | 2.6% | €25.0 | 2024 | 21.7
Current unsecured borrowings: |  |  |  |  |  |  |  |
Collateral facility | – | – | n/a | – | 7.1% | £120.0 | 2024 | 120.0
Total borrowings |  |  |  | 1,176.7 |  |  |  | 1,425.3
Current |  |  |  | 119.0 |  |  |  | 264.2
Non-current |  |  |  | 1,057.7 |  |  |  | 1,161.1

(1) The effective sterling interest rate includes the impact of any interest rate and cross-currency interest rate swaps.
(2) In May 2024, the Group completed a tender offer on €106.2 million of the principal.
(3) These loan notes were due to mature in 2025 but were fully redeemed in May 2024.
The effective sterling interest rate gives the rate that the Group has fixed to pay on each of the facilities, using a combination of
interest rate swaps and cross-currency interest rate swaps. These instruments as well as foreign currency forward contracts are
used to fix the sterling repayment of the principal. See note 7.2.2 for further details on the Group’s hedging of borrowings.
During the year, the Group has refinanced a number of existing facilities to extend the Group’s average debt maturity profile.
Further details of this refinancing activity is provided below and in the Financial review starting on page 18.
In January 2024, £122.5 million of the UK infrastructure private placement facility (2019) was repaid, as well as €25.0 million of the
UK infrastructure private placement facility (2020).
In February 2024, the Group signed a new secured committed sustainability-linked GBP and EUR term loan facility (2024) for
£258.0 million (sterling equivalent). This comprised €135.0 million and £50.0 million due to mature in 2027 and a further €50.0 million
and £50.0 million due to mature in 2029. The €135.0 million due to mature in 2027 contains options to extend for up to a further two
years, subject to lender approval. These amounts were fully drawn in April 2024. Interest on the term loans is set at a margin over the
Euro Interbank Offered Rate (EURIBOR) or the Sterling Overnight Index Average (SONIA) with adjustments linked to certain Scope 1, 2
and 3 carbon emissions which are based on the Group’s 2030 Science Based Targets initiative (SBTi) targets.
In April 2024, the Group signed a new secured committed £125.0 million term loan facility (2024) comprising of £95.0 million due to
mature in 2027 and £30.0 million due to mature in 2029. These amounts were fully drawn in May 2024. Interest on the term loans
is set at a margin over SONIA. The agreement includes an option to establish an incremental facility for up to £25.0 million, if agreed
between the Group and its lenders.
In April 2024, the Group completed a €350.0 million offering of senior secured loan notes. The loan notes mature in 2029 and have
a coupon rate of 5.875%. These loan notes were fully drawn in May 2024. On the same date, the Group elected to redeem in full the
$500.0 million 6.625% loan notes due to mature in 2025 at 100% of the principal value.
In May 2024, the Group completed a tender offer on €106.2 million of the principal of the 2.625% EUR loan notes due to mature in
2025 at 97.875% of the principal value (€103.9 million). Following completion of this offer in May 2024, the remaining principal of
these notes outstanding is €143.8 million. A gain on extinguishment of £1.7 million was recognised within interest receivable and
similar gains in relation to this partial repayment (see note 2.5).
In May 2024, the Group chose to make early repayments of £122.5 million and £80.0 million of the UK infrastructure private placement
facility (2019), with maturities in 2025 and 2026 respectively.
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Section 4: Financing and capital structure continued
4.2 Borrowings continued
In July 2024, the £120.0 million outstanding on the short-term collateral facility was repaid.
In August 2024, the Group signed a new secured committed £50.0 million GBP term loan facility (2024) due to mature in 2028 with
a margin over SONIA. The term loan was fully drawn in September 2024.
In August 2024, the Group secured a new sustainability-linked £450.0 million RCF which matures in 2027, with options to extend by
two years, subject to lender approval. The facility, which provides additional liquidity, replaced the £300.0 million RCF which was due
to mature in 2026. The facility has a customary margin grid referenced over SONIA with adjustments linked to certain Scope 1, 2 and 3
carbon emissions which are based on the Group’s 2030 SBTi targets. No cash has been drawn since its inception and it remained
undrawn as at 31 December 2024. See note 2.7 for further details on the Group’s cash and committed facilities. See note 3.8 for
further details on climate change considerations related to borrowings.
In December 2024, the Group agreed with the lenders of a £50.0 million tranche of the UK infrastructure private placement facility
(2019) and a £53.0 million tranche of the UK infrastructure private placement facility (2020) to reprice the interest rates at no cost to
reflect current market rates available to the Group. This was assessed to be a substantial modification to the terms of the borrowings
in accordance with IFRS 9 and therefore the previous borrowings have been derecognised and new borrowings have been recognised.
No gains or losses have been recognised in respect of the transaction.
The Group’s secured borrowings are secured by a charge over a number of the Group’s assets. See note 3.1 for details of the assets
pledged as security.
The weighted average interest rate payable, at the reporting date, on the Group’s borrowings was 5.39% (2023: 4.79%).
Reconciliation of borrowings
The table below shows the movement in borrowings during the current and prior year:

|  |  |  |  | Year ended 31 December 2024 |  |
| Opening | Amounts | Transaction | Amounts | Cash interest | Non-cash | Closing
| amortised cost | drawn | costs | repaid | payments | movements | amortised cost
| £m | £m | £m | £m | £m | £m | £m
2.625% EUR loan notes 2025 | 215.7 | – | – | (88.7) | (4.4) | (3.6) | 119.0
6.625% USD loan notes 2025 | 391.5 | – | – | (393.9) | (13.0) | 15.4 | –
5.875% EUR loan notes 2029 | – | 298.8 | (4.4) | – | ( 7.8) | 2.9 | 289.5
UK infrastructure private placement |  |  |  |  |  |  |
facility (2019) (1) | 373.9 | – | – | (325.0) | (10.9) | 11.5 | 49.5
UK infrastructure private placement |  |  |  |  |  |  |
facility (2020) (1) | 206.4 | – | (0.8) | (21.6) | (11.5) | 8.5 | 181.0
CAD term loan facility | 117. 8 | – | (0.1) | – | (6.6) | (0.1) | 111.0
GBP and EUR term loan facility (2024) | – | 258.0 | (2.0) | – | (9.9) | 5.8 | 251.9
£125m GBP term loan facility (2024) | – | 125.0 | (1.3) | – | (3.7) | 4.9 | 124.9
£50m GBP term loan facility (2024) | – | 50.0 | (0.4) | – | (0.6) | 0.9 | 49.9
Collateral facility | 120.0 | – | – | (120.0) | (6.4) | 6.4 | –
Total borrowings | 1,425.3 | 731.8 | (9.0) | (949.2) | (74.8) | 52.6 | 1,176.7

(1) The repricing of £50.0 million and £53.0 million tranches of these facilities constituted an extinguishment of previous borrowings and the recognition of new borrowings.
No gains or losses on extinguishment were recognised. No cash payments were made between the Group and the lenders and therefore all movements in respect of the
repricings have been presented in the non-cash movements column.
Non-cash movements in borrowings comprises foreign exchange gains of £30.7 million, interest costs of £85.0 million and gains on
extinguishment of £1.7 million.
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4.2 Borrowings continued

|  |  |  |  | Year ended 31 December 2023 |  |
| Opening | Amounts | Transaction | Amounts | Cash interest | Non-cash | Closing
| amortised cost | drawn | costs | repaid | payments | movements | amortised cost
| £m | £m | £m | £m | £m | £m | £m
2.625% EUR loan notes 2025 | 219.8 | – | – | – | (5.8) | 1.7 | 215.7
6.625% USD loan notes 2025 | 412.8 | – | – | – | (26.1) | 4.8 | 391.5
UK infrastructure private placement |  |  |  |  |  |  |
facility (2019) | 372.5 | – | – | – | (25.5) | 26.9 | 373.9
UK infrastructure private placement |  |  |  |  |  |  |
facility (2020) | 207.9 | – | – | – | (11.3) | 9.8 | 206.4
CAD term loan facility | 183.6 | – | (0.2) | (6 0.1) | (13.6) | 8 .1 | 117. 8
Uncommitted short-term loan facility |  |  |  |  |  |  |
€50m | 44.3 | – | – | (43.4) | (0.2) | (0.7) | –
Borrowings acquired in business |  |  |  |  |  |  |
combinations | – | 1.8 | – | (1.8) | – | – | –
Collateral facility | – | 140.0 | – | (20.0) | (0.3) | 0.3 | 120.0
Total borrowings | 1,440.9 | 141.8 | (0.2) | (125.3) | (82.8) | 50.9 | 1,425.3

Non-cash movements in borrowings comprises foreign exchange gains of £35.4 million and interest costs of £86.3 million.
As disclosed above, the Group has a number of cross-currency interest rate swaps that fix the sterling value of the principal repayment
of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2023: gains) on borrowings disclosed
above have been offset by £32.5 million of foreign exchange losses (2023: £29.5 million) on cross-currency interest rate swaps that
have been recycled to profit and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group’s
cash flow hedging relationships on Net debt. See note 7.2.2 for further details of the Group’s cash flow hedging relationships on
borrowings.
Compliance with loan covenants
The Group has customary financial covenants, principally in relation to consolidated Adjusted EBITDA and the consolidated net
leverage ratio. The consolidated net leverage ratio broadly equates to a Net debt to Adjusted EBITDA ratio calculation (see note 2.7),
and is calculated in line with the Group’s financial covenant requirements in the loan facility agreements
(1)
. The Group also has
conditions placed on its dividend payments as a result of the financing facilities. The Group is required to test its financial covenants
every six months at financial full-year and half-year reporting periods, and has complied with all financial covenants during the current
and prior year. The Group has significant headroom and expects to continue to comply with these financial covenants for the
foreseeable future, including the five-year viability period. See the Viability statement on page 84 for further details on the scenarios
considered.
(1) The net debt calculation for financial covenants is based on Net debt including cash, borrowings and lease liabilities attributable to non-controlling interests, but excludes
the impact of hedging.
Letters of credit and surety bonds
As at 31 December 2024, the Group had issued letters of credit totalling £56.8 million (2023: £180.3 million), of which £14.5 million
(2023: £14.5 million) were utilised to cover commodity trading collateral requirements and £nil (2023: £120.0 million) were utilised to
cover the collateral facility described above. As at 31 December 2024, the Group had surety bonds with a number of insurers totalling
£89.0 million (2023: £119.0 million), of which £30.0 million (2023: £70.0 million) were utilised to cover commodity trading collateral
requirements.
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Section 4: Financing and capital structure continued
4.3 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 on page 171. The table below
makes adjustments for any non-cash accounting items to reconcile the Group’s net profit for the year to the amount of cash generated
from the Group’s operations.

| Year ended 31 December |
| 2024 | 2023
| £m | £m
Profit for the year | 525.5 | 560.9
Adjustments for: |  |
Interest payable and similar charges | 107.5 | 115.2
Interest receivable and similar gains | (2 0.1) | (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 inflow
of £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.
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4.3 Notes to the Consolidated cash flow statement continued
The Group has had a net cash inflow of £83.7 million from derivative-related collateral during the year, as trades have matured and
mark-to-market positions have reduced (2023: £155.4 million). As at 31 December 2024, the Group held £9.8 million in cash collateral
receipts (2023: £20.3 million) recognised in payables, and had posted £4.7 million (2023: £98.9 million) of cash collateral payments
recognised in receivables. The Group had also utilised £14.5 million (2023: £14.5 million) of letters of credit and £30.0 million (2023:
£70.0 million) of surety bonds to cover commodity trading collateral requirements. Letters of credit and surety bonds utilised at the
reporting date have reduced the requirement for cash collateral payments, which has increased the amount by which receivables
have decreased .
The Group has a strong focus on cash flow discipline and managing liquidity. The Group enhances its working capital position by
managing payables, receivables, inventories and renewable certificate assets to make sure the working capital committed is closely
aligned with operational requirements. The impact of these actions on the cash flows of the Group is included within the further detail
explained below.
The table below sets out the key arrangements utilised by the Group to manage elements of its working capital:

| As at | As at |
| 31 December | 31 December | Inflow/
| 2024 | 2023 | (outflow)
| £m | £m | £m
Receivables monetisation | 400.0 (1) | 400.0 | –
ROC monetisation sales | – | 298.4 | (298.4)
Supply chain finance scheme | (38.4) | (48.6) | (10.2)
Deferred letters of credit | (150.3) | (224.7) | (74.4)

(1) As at 31 December 2024 the Group had sold £386.3 million of receivables under this facility (see note 3.5). 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 2.7 for further
details on Net debt and note 4.2 for further details on borrowings). 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. See note 3.7 for further disclosures relating to supplier finance arrangements. 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 (2 023: £ 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 3.3. 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).
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Section 4: Financing and capital structure continued
4.3 Notes to the Consolidated cash flow statement continued
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:

|  |  | Hedging |
| Borrowings | Lease liabilities | instruments | Total
| £m | £m | £m | £m
At 1 January 2024 | 1,425.3 | 135.8 | 32.5 | 1,593.6
Cash flows from financing activities | (226.4) | (27.4) | (31.5) | (285.3)
Effect of changes in foreign exchange rates | (30.7) | 1.1 | 18.3 | (11.3)
Other movements | 8.5 | 7.0 | 21.7 | 37. 2
At 31 December 2024 | 1,176.7 | 116.5 | 41.0 | 1,334.2

|  |  | Hedging |
| Borrowings | Lease liabilities | instruments | Total
| £m | £m | £m | £m
At 1 January 2023 | 1,440.9 | 153 .1 | (2.2) | 1,591.8
Cash flows from financing activities | 14.5 | (25.8) | – | (11.3)
Effect of changes in foreign exchange rates | (35.4) | (6.7) | 29.8 | (12.3)
Other movements | 5.3 | 15.2 | 4.9 | 25.4
At 31 December 2023 | 1,425.3 | 135.8 | 32.5 | 1,593.6

Other movements on borrowings principally relate to interest. Other movements on lease liabilities principally relate to discounting
and additions in the year. Other movements on hedging instruments include cross-currency interest rate swaps that are hedging both
principal and interest payments on borrowings. Interest payments are classified as operating cash flows in the Consolidated cash flow
statement, as such fair value movements and cash settlements relating to the interest payments on these hedges are recognised
within the other movements line above.
4.4 Equity and reserves
The Group’s ordinary share capital reflects the total number of shares in issue, which are publicly traded on the London Stock
Exchange.
Accounting policy
Ordinary shares are classified as equity as evidenced by their residual interest in the assets of the Company after deducting its
liabilities. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Issued equity

| As at 31 December |
| 2024 | 2023
| £m | £m
Issued and fully paid: |  |
427,770,766 ordinary shares of 11 16 ⁄29 pence each (2023: 424,923,406) | 49.4 | 49.1

The movement in allotted and fully paid share capital of the Company during the year was as follows:

| Year ended 31 December |
| 2024 | 2023
| (number) | (number)
At 1 January | 424,923,406 | 414,872,491
Issued under employee share schemes | 2,847,360 | 10,050,915
At 31 December | 427,770,766 | 424,923,406

The Company has only one class of shares, which are ordinary shares of 11
16
⁄29 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 (see note 6.2).
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. See note 2.11 for further details on the share
buyback programme.
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4.4 Equity and reserves continued
Share premium
The share premium account reflects amounts received in respect of issued share capital that exceeds the nominal value of the shares
issued, net of incremental transaction costs and tax, that are directly attributable to the issue of new shares. Movements in the share
premium reserve during the year reflect amounts received above the nominal value on the issue of shares under employee share schemes.

| Year ended 31 December |
| 2024 | 2023
| £m | £m
At 1 January | 441.2 | 433.3
Issue of share capital | 2.6 | 7.9
At 31 December | 443.8 | 441.2

Other reserves

| Capital |  |  |  |
| redemption | Translation | Merger | Treasury shares | Total other
| reserve | reserve | reserve | reserve | reserves
| £m | £m | £m | £m | £m
At 1 January 2023 | 1.5 | 85.8 | 710.8 | (50.4) | 747.7
Exchange differences on translation of foreign operations | – | (10.3) | – | – | (10.3)
Repurchase of own shares (see note 2.11) | – | – | – | (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 (see note 2.11) | – | – | – | (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 (see note 2.11 for further details). 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
Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative financial
instruments designated into hedge accounting relationships in accordance with IFRS 9 and related deferred tax, are set out in notes
7.3 and 7.4.
4.5 Non-controlling interests
Accounting policy
In accordance with IFRS 3, the Group elects on an acquisition-by-acquisition basis whether to measure non-controlling interests (NCIs)
at their proportionate share of the identifiable net assets of the acquiree at the acquisition date, or at fair value. The Group treats
transactions with NCIs that do not result in a loss of control as transactions with equity owners of the parent company. A change in
ownership interest results in an adjustment between the carrying amounts of the controlling interests and NCIs to reflect their relative
interests in the subsidiary. Any difference between the amount of the adjustment to NCIs and the fair value of any consideration paid
or received is recognised in equity, within retained profits.
At 31 December 2024, the Group has two (2023: two) subsidiary undertakings with NCIs. These subsidiaries were acquired during
2021 as part of the acquisition of Pinnacle.
Summarised financial information
The summarised financial information disclosed is shown on a 100% basis. It represents the results of each entity below that would be
shown in the subsidiaries’ own financial statements prepared in accordance with IFRS, modified for Group-level fair value adjustments
at acquisition, and gains or losses on translation of the entities’ financial statements into the Group’s presentational currency, which are
recognised through the Consolidated statement of comprehensive income. All amounts are presented before intercompany eliminations.

|  |  | As at 31 December 2024 |  | As at 31 December 2023
|  | Non-controlling | Non-controlling | Non-controlling | Non-controlling
| Principal place | interest | interests | interest | interests
| of business | % | £m | % | £m
Lavington Pellet Limited Partnership | North America | 25% | 5.9 | 25% | 6.5
Smithers Pellet Limited Partnership | North America | 30% | 3.9 | 30% | 5.5
Total |  |  | 9.8 |  | 12.0

Distributions of £0.4 million (2023: £nil) were paid to non-controlling interests during the year.
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Section 4: Financing and capital structure continued
4.5 Non-controlling interests continued
Summarised statement of total comprehensive income

|  |  |  | Year ended 31 December 2024 |  |  |  |  | Year ended 31 December 2023 |
|  |  |  |  | Total |  |  |  |  | Total
|  |  | Loss |  | comprehensive |  |  | Loss |  | comprehensive
|  |  | attributable | loss |  |  | attributable | loss
|  |  | to the |  |  |  |  | attributable to the | attributable
|  |  | non- | Total | to the |  |  | non- | Total | to the
|  |  | controlling | comprehensive | non-controlling |  |  | controlling | comprehensive | non-controlling
| Revenue | Loss | interests | loss | interests | Revenue | Loss | interests | loss | interests
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Lavington Pellet |  |  |  |  |  |  |  |  |  |
Limited Partnership | 27.6 | (0.1) | – | (1.8) | (0.6) | 31.6 | (1.7) | (0.4) | (2.5) | (0.5)
Smithers Pellet Limited |  |  |  |  |  |  |  |  |  |
Partnership | 12.3 | (3.6) | (1.1) | (4.5) | (1.3) | 14.5 | (2.8) | (0.9) | (3.3) | (1.2)
Total | 39.9 | (3.7) | (1.1) | (6.3) | (1.9) | 4 6 .1 | (4.5) | (1.3) | (5.8) | (1.7)

Summarised balance sheet

|  |  |  | As at 31 December 2024 |  |  |  |  | As at 31 December 2023 |
| Non-current | Current | Current | Non-current |  | Non-current | Current | Current | Non-current |
| assets | assets | liabilities | liabilities | Net assets | assets | assets | liabilities | liabilities | Net assets
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m
Lavington Pellet |  |  |  |  |  |  |  |  |  |
Limited Partnership | 22.0 | 7.6 | (2.8) | ( 3.1) | 23.7 | 24.9 | 4.5 | (2.0) | (1.4) | 26.0
Smithers Pellet Limited |  |  |  |  |  |  |  |  |  |
Partnership | 13.9 | 3.3 | (4.3) | – | 12.9 | 15.8 | 3.1 | (1.5) | – | 17.4
Total | 35.9 | 10.9 | (7.1) | (3.1) | 36.6 | 40.7 | 7.6 | (3.5) | (1.4) | 43.4

Summarised cash flows

|  |  | Year ended 31 December 2024 |  |  |  | Year ended 31 December 2023 |
|  |  |  |  | Net cash |  | Net cash |
| Net cash inflow | Net cash | Net cash |  | inflow/(outflow) | Net cash | (outflow)/inflow |
| from | outflow from | inflow from |  | from | outflow from | from |
| operating | investing | financing | Net | operating | investing | financing | Net cash
| activities | activities | activities | cash inflow | activities | activities | activities | outflow
| £m | £m | £m | £m | £m | £m | £m | £m
Lavington Pellet |  |  |  |  |  |  |  |
Limited Partnership | 2.2 | (0.7) | 0.3 | 1.8 | 2.2 | (1.3) | (2.3) | (1.4)
Smithers Pellet Limited |  |  |  |  |  |  |  |
Partnership | 1.4 | (1.1) | – | 0.3 | (2.2) | (0.7) | 2.7 | (0.2)
Total | 3.6 | (1.8) | 0.3 | 2 .1 | – | (2.0) | 0.4 | (1.6)

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Section 5: Other assets and liabilities
This section provides information on the assets and liabilities in the Consolidated balance sheet that are not covered in other
sections, including goodwill, other intangible assets and provisions.
5.1 Business combinations
Accounting policy
Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business
combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group
obtains control of the acquiree (the acquisition date). The consideration transferred, the identifiable assets acquired, and the
liabilities assumed are measured at their fair value on the acquisition date. Amounts relating to the settlement of pre-existing
relationships are recognised in the Consolidated income statement with a corresponding adjustment to the consideration transferred
to reflect the fact that part of the consideration is deemed to relate to the settlement of the pre-existing relationship.
From the acquisition date, the assets and liabilities of acquired businesses are recognised in the Consolidated balance sheet, and the
revenues and profits or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related
costs are recognised as an expense in the Consolidated income statement in the period that they are incurred.
Goodwill is measured as the excess of the:
– consideration transferred; less
– amount of any non-controlling interest in the acquired entity; and
– acquisition date fair value of any previous equity interest in the acquired entity;
over the fair value of the identifiable net assets acquired.
Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment
post acquisition are treated as post-acquisition remuneration.
Acquisition of BMM
On 31 August 2023, Drax Energy Solutions Limited, a wholly-owned subsidiary of the Group, acquired 100% of the issued share
capital of BMM Energy Solutions Limited (BMM). BMM specialises in the installation and maintenance of electric vehicle charge
points and has been the Group’s primary installation partner since 2018. The acquisition strengthened the Group’s end-to-end
electric vehicle charging proposition to UK businesses.
The acquisition accounting has been finalised in the current financial year following the one-year measurement period from the
acquisition date. Total consideration payable was £8.8 million reflecting a £0.2 million adjustment to the consideration recognised
in the prior year. This resulted in the final goodwill reducing by £0.2 million to £5.8 million. There were no changes to the initial
identifiable net assets of £3.0 million.
5.2 Goodwill and intangible assets
Intangible assets are not physical in nature but are identifiable from other assets. Goodwill arises on the acquisition of a business
when the consideration paid exceeds the fair value of the identifiable net assets acquired. Intangible assets other than goodwill
can be acquired in business combinations, acquired separately or internally generated.
Accounting policy
Goodwill is measured as the excess of the:
– consideration transferred; less
– amount of any non-controlling interest in the acquired entity; and
– acquisition date fair value of any previous equity interest in the acquired entity;
over the fair value of the identifiable net assets acquired.
Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the
functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated
at the rate prevailing at each reporting date. Foreign exchange differences arising on retranslation are recognised in the Consolidated
statement of comprehensive income.
Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies
of the acquisition. If one or more CGUs, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is
reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an indefinite useful life, is not amortised, and
is assessed annually for impairment (see note 2.4 for further details). Any impairment charge is recognised against the carrying
amount of goodwill in accumulated amortisation and impairment.
Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets
are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs
of preparing the asset for use in the manner intended by management.
The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group’s policy
is to recognise an impairment charge through accumulated amortisation and impairment .
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Section 5: Other assets and liabilities continued
5.2 Goodwill and intangible assets continued
Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each financial
year end. When reviewing UELs the assessment takes into account regulatory changes, climate change, and commercial and
technological changes. Any changes to estimated UELs are applied prospectively. During the prior year this review resulted in a
change to the UELs of the Opus Energy customer-related asset and brand asset to December 2024 to reflect the estimated period
over which the value from these assets was expected to be realised. During the current year these assets were fully impaired as
part of the Opus Energy transaction. See note 2.7 for further details.

|  | Average UEL
| Method of amortisation | (years)
At 31 December 2024 |  |
Customer-related assets: |  |
Pinnacle | Straight line | 6
BMM | Straight line | 8
Other Computer software and licences: | Straight line | 9
Internally generated | Straight line | 3
Acquired separately | Straight line | 8
Other intangibles | Straight line | 1

Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to
the Pellet Operations CGU following the acquisition of Pinnacle and the Drax Energy Solutions CGU following the acquisition of
BMM. During the current year the Opus Energy CGU customer-related asset was disposed of and the brand asset impaired to £nil net
book value (see below for further details). Details of the impairment assessments relating to these CGUs are included in note 2.4.

|  |  | Software and | Software and |  |  |
| Customer- |  | licences | licences |  |  |
| related |  | – internally | – acquired | Other |  |
| assets | Brand | generated (1) | separately (1) | intangibles | Goodwill | Total
| £m | £m | £m | £m | £m | £m | £m
Cost and carrying amount: |  |  |  |  |  |  |
At 1 January 2023 (2) | 25 7.6 | 11.3 | 130.2 | 18.5 | 2.0 | 424.2 | 843.8
Additions at cost | – | – | 7.7 | 2.2 | – | – | 9.9
Acquired in business combinations | 5.0 | – | – | – | – | 6.0 | 11.0
Transfers from property, plant and equipment |  |  |  |  |  |  |
(see note 3.1) | – | – | 0.6 | – | – | – | 0.6
Effect of changes in foreign exchange rates | (1.5) | – | – | (0.2) | – | 1.0 | (0.7)
At 1 January 2024 (2) | 261.1 | 11.3 | 138.5 | 20.5 | 2.0 | 431.2 | 864.6
Additions at cost | – | – | 6.9 | – | – | – | 6.9
Adjustment related to business combinations |  |  |  |  |  |  |
(see note 5.1) | – | – | – | – | – | (0.2) | (0.2)
Disposals | (211.1) | – | – | – | – | – | (211.1)
Transfers between categories | – | – | 0.7 | (0.9) | 0.2 | – | –
Transfers from property, plant and equipment |  |  |  |  |  |  |
(see note 3.1) | – | – | 2.9 | 0.3 | – | – | 3.2
Effect of changes in foreign exchange rates | (2.8) | – | – | 0 .1 | (0 .1) | (1.4) | (4.2)
At 31 December 2024 | 47. 2 | 11.3 | 149.0 | 20.0 | 2 .1 | 429.6 | 659.2
Accumulated amortisation and impairment: |  |  |  |  |  |  |
At 1 January 2023 (2) | 170.6 | 6.8 | 86.5 | 11.7 | 1.7 | – | 27 7.3
Charge for the year | 17. 2 | 1.1 | 10.2 | 0.8 | 0 .1 | – | 29.4
Impairment | 31.5 | 3.0 | 11.1 | – | – | 14.5 | 60.1
Effect of changes in foreign exchange rates | (0.3) | – | – | (0 .1) | – | – | (0.4)
At 1 January 2024 (2) | 219.0 | 10.9 | 107. 8 | 12.4 | 1.8 | 14.5 | 366.4
Charge for the year | 6.7 | 0.2 | 8.7 | 1.4 | – | – | 17. 0
Disposals | (209.2) | – | – | – | – | – | (209.2)
Impairment | – | 0.2 | 2.4 | – | – | – | 2.6
Transfers between categories | – | – | 0.3 | (0.3) | – | – | –
Effect of changes in foreign exchange rates | (0.8) | – | – | – | – | – | (0.8)
At 31 December 2024 | 15.7 | 11.3 | 119.2 | 13.5 | 1.8 | 14.5 | 176.0
Net book value: |  |  |  |  |  |  |
At 31 December 2023 | 42.1 | 0.4 | 30.7 | 8 .1 | 0.2 | 416.7 | 498.2
At 31 December 2024 | 31.5 | – | 29.8 | 6.5 | 0.3 | 415.1 | 483.2

(1) Comparative amounts have been re-presented to separate software and licences between those internally generated and those acquired separately.
(2) Impairments previously presented through cost on non-amortising assets have been re-presented through accumulated amortisation and impairment.
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5.2 Goodwill and intangible assets continued
The Group has incurred research and development expenditure of £26.2 million (2023: £22.8 million), which is included within
operating and administrative expenses in the Consolidated income statement.
Customer-related assets
Customer-related assets reflects the value of customer contracts acquired on the acquisition of Pinnacle in April 2021, the Pacific
BioEnergy sales contracts purchased by the Pellet Operations CGU in December 2021, and the customer-related asset acquired
on acquisition of BMM in August 2023.
The Opus Energy customer-related asset was disposed of as part of the sale of non-core small and medium-sized enterprise (SME)
meter points to EDF (see note 2.7 for further details).
The Pinnacle customer-related asset recognised on the acquisition of Pinnacle relates to the fair value of contracted cash flows from
Pinnacle’s existing customer base. The Pinnacle customer-related asset is being amortised on a straight-line basis to reflect that the
majority of the value from the contracted cash flows is expected to be realised evenly over the contract terms, as most contracts
have similar end dates and contracts with earlier end dates are generally offset by increasing volumes on longer dated contracts.
At 31 December 2024, the Pinnacle asset had a carrying amount of £21.7 million (2023: £26.8 million) and a remaining UEL of
approximately six years (2023: seven years).
On acquisition of BMM in August 2023 a customer-related asset with a fair value of £5.0 million was recognised reflecting the
estimated future cash flows from existing customer relationships that were not yet contracted. The fair value was estimated based
upon a multi-period excess earnings method. At 31 December 2024, the BMM customer-related asset had a carrying amount of
£4.3 million (2023: £4.8 million) and a remaining UEL of eight years (2023: nine years).
The other customer-related asset relates to pellet sales contracts acquired from Pacific BioEnergy on 31 December 2021. At
31 December 2024 this asset had a carrying amount of £5.5 million (2023: £6.7 million) and a remaining UEL of nine years (2023:
10 years).
Opus Energy brand
The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017. During the year the Opus Energy
brand was fully impaired due to the sale of the majority of the non-core SME energy supply customer meter points to EDF Energy
Customers Limited and the commencement of a restructuring of the Opus Energy business to reflect its reduced customer base
and the Group’s focus on core industrial and commercial (I&C) customers and renewables services. See note 2.7 for further details
of this transaction.
Computer software and licences
Additions in the year include those in the ordinary course of business, which principally reflect ongoing investment in business
systems to support the Energy Solutions segment. Software assets are amortised on a straight-line basis over their estimated UELs
ranging from 2–10 years.
As at 31 December 2024, computer software assets under the course of construction amounted to £12.5 million (2023: £19.7 million).
A £2.4 million impairment in respect of software specific to the Opus Energy business has been recognised in the current year as
it is no longer considered to have future value following the Opus Energy transaction and the related restructuring of the Opus Energy
business. See note 2.7 for further details. See note 2.4 for a summary of impairment charges recognised on non-current assets during
the year.
Goodwill
The table below shows the carrying amount of goodwill by CGU:

| Drax Energy |  |  |  | Pellet |
| Solutions | Lanark | Galloway | Cruachan | Operations | Total
| £m | £m | £m | £m | £m | £m
Goodwill |  |  |  |  |  |
At 1 January 2024 | 161.4 | 11.3 | 4 0 .1 | 26.9 | 177.0 | 416.7
Acquisition adjustment (see note 5.1) | (0.2) | – | – | – | – | (0.2)
Effect of changes in foreign exchange rates | – | – | – | – | (1.4) | (1.4)
At 31 December 2024 | 161.2 | 11.3 | 4 0.1 | 26.9 | 175.6 | 415.1

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