Drax Group H1 2025 Earnings Report

Drax Group EPS Results

• Actual EPS: GBX 65.60
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Drax Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Drax Group Announcement Details

• Quarter: H1 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 4:00AM ET

Drax Group (LON:DRX), together with its subsidiaries, engages in renewable power generation in the United Kingdom. It operates through three segments: Pellet Production, Generation, and Customers. The Pellet Production segment produces and sells biomass pellets. The Generation segment provides renewable, dispatchable power, and system support services to the electricity grid. The Customers segment supplies electricity and gas to non-domestic customers. The company owns and operates Drax Power Station located in Selby, North Yorkshire; Cruachan Power Station, a pumped storage hydro station, with an installed capacity of 440 megawatts (MW) located in Argyll and Bute; and Lanark and Galloway hydro-electric power stations with an installed capacity of 126 MW located in southwest Scotland. It also owns and operates Daldowie fuel plant that processes sludge, a plant that converts it into dry low-odour fuel pellets. In addition, the company manufactures and sells compressed wood pellets; and supplies renewable electricity. Drax Group plc was incorporated in 2005 and is based in Selby, the United Kingdom.

Drax Group H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Drax delivered a strong operational performance in H1, producing 5 % more power—11 % of UK renewables—and a record 5 % increase in pellet output that boosted pellet EBITDA.
• Positive Sentiment: The company upholds a disciplined capital allocation policy with 1.1× leverage, an 11.5 % dividend uplift for 2025, and an additional £450 million buyback over three years.
• Positive Sentiment: Heads of terms for a low carbon dispatchable CFD through March 2031 are agreed, with legislation in place, CMA approval complete, and final contract talks on track for later this year.
• Positive Sentiment: Drax remains confident in post-2027 adjusted EBITDA of £600–700 million, underpinned by £2.1 billion of forward power sales hedges at an average £94/MWh.
• Neutral Sentiment: The group is exploring adjacent growth avenues—including pumped storage, open-cycle gas turbines, batteries, EV solutions, data centers, and carbon removals—to leverage energy transition trends.

Presentation

[Will Gardiner, Group CEO & Board Member at Drax Group]

Good morning, everyone, and thank you for joining the call. I will provide a short introduction and overview, and then I'll hand it over to Andy for the numbers and operations. And then I'll come back to talk more about our investment program and capital allocation, and then we'll take questions. You're all familiar with our purpose, which is to enable a zero carbon lower cost energy future. And I want to start with that as I always do as it guides everything about our company.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And critically, our people are at the heart of Drax, And I want everyone here to feel a valued member on a winning team with a worthwhile mission. We delivered a strong performance in the first half of the year. We produced more power than last year, reflecting a continued high demand for dispatchable renewable power and compensating for lower renewables elsewhere on the system. We accounted for 5% of UK power as we have for many, many years now and 11% of UK renewables. And importantly, in certain periods of peak demand, we have been over 50 of UK renewable generation.

[Will Gardiner, Group CEO & Board Member at Drax Group]

I'm very pleased also to say that we delivered a record level of pellet production, 5% higher than last year, which also drove increased EBITDA in our pellet business. We're very pleased with the progression of our CFD agreement with the government, and I'll come back to that in a minute. And we're continuing to target EBITDA of 600 to $700,000,000 from FlexGen pellet production and from the Brax Power Station post 2027. And we have strong confidence in the earnings and cash flow that we can generate from this high quality portfolio, which is critical to The UK power system both today, but well into the future. And delivery of that cash flow and associated earnings are a top priority for my group.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We're excited about the opportunities to continue to develop and grow that portfolio. It's well aligned to the energy transition and to providing security of supply. We believe we can continue to deliver value through discipline and capital allocation and a commitment to attractive returns for our shareholders. I wanted to emphasize our continued fundamental commitment to our capital allocation policy. It starts with our balance sheet, which is strong at about 1.1 times leverage.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We will continue to invest to maintain our existing assets and also invest in growth where we see attractive returns. We continue to grow our dividend and are proposing an 11.5% increase in dividends per share for 2025. And our current £300,000,000 share buyback program is £272,000,000 completed. And I would say importantly, today, we're announcing an additional £450,000,000 three year extension of the current buyback. And that extension is underpinned fundamentally by the working capital inflow associated with the end of the renewable obligation scheme.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Turning to the low carbon dispatchable CFD. Earlier this year, we agreed heads of terms with the UK government for a low carbon dispatchable CFD covering all four units at the Drax Power Station through March 2031. This was a strong endorsement of the contribution that the Drive Power Station and biomass make to energy security and decarbonization, as well as to the value for money proposition that we provide, saving bill payers billions of pounds over the terms of the agreement relative to the next best option. And we've been working with the government over the last six months and we're making very good progress. So importantly, the legislation enabling this agreement is now in place.

[Will Gardiner, Group CEO & Board Member at Drax Group]

The CMA has reviewed the subsidy regime and that is complete and I think in a good place. And we are making good progress on negotiating the final contract, which we expect to determine to conclude later this year. And this is a very critical turning point for our business as we are now comfortably expecting it to run this business through the 2020s and into the 2030s and beyond. If you look at our portfolio of businesses, we have a high quality portfolio of assets that support energy security in The UK. Our FlexGen business is doing very well, delivering the flexible generation and system supports services so critical to the current power system.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And as we recognize that opportunity, we continue to develop new abilities to deliver that through expanding our pump stores assets and building the open cycles, the latter of which we expect to be commissioning from later this year. And again, we continue to look opportunities to complement the portfolio with investment in adjacent technologies, including batteries and other forms of storage. In our Energy Solutions business, we've now successfully exited the SME space and are very excited about the I and C portfolio we have, our renewables business and our EV Solutions. As I mentioned, our pellet production business did very well in the first half, and we have confidence in its future, but we also recognize that we have work to do to continue to unlock its full potential. At the Drax Power Station, which continues to play a key role at the heart of The UK power system, we have strong visibility over contracted power sales and cash flows through 2027.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And those will be complemented or extended by the low carbon dispatchable CFD, during which which we believe will allow us to deliver between 100,000,000 and 200,000,000 of EBITDA per year. So reflecting all those factors, we're confident in the earnings and cash flow we can deliver from that portfolio and are focused on delivering that 600 to $700,000,000 of EBITDA post 2027. Just to be very clear, that target is stated before accounting for options for growth, the fourth column on this page, where we will continue to apply our disciplined capital allocation policy through opportunities which have the potential to deliver significant value. And I'll talk more about those later. I wanted to give you a bit of an update on sustainability, which again is critical to everything that we do.

[Will Gardiner, Group CEO & Board Member at Drax Group]

In addition to updating our biomass sourcing policy, we've launched a new climate transition plan as well as the new sustainability framework, which we discussed at the full year. And the transition plan provides more details on our decarbonization targets through 02/1940. I think we're making very good progress on delivering tangible results that improve our sustainability, and that's reflected in the ratings that I've included on the slide. There's always more to do, and we will continue to work on improving. We're not complacent.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We welcome the opportunity to engage with all of you as well as all other forms of stakeholders across civil society to make sure we're moving in the right direction. So I'm now gonna hand it over to Andy, and this is his final set of results as our CFO. And I do wanna thank him for his contribution over the last seven years, which has been tremendous. I think you all would recognize that the difference between our business between now and where it was when he started in 2019 is quite pronounced, and he's made a huge contribution to that positive change. He's built a strong finance team, and I look forward to continue to build on what he has achieved with Frank Lemmink, our new CFO, who's also a fabulous guy, who will start in September. So, Andy, for the last time, over to you.

[Andy Skelton, Group CFO & Director at Drax Group]

Good morning, everybody, and thank you, Will, for your kind words. It truly has been both a privilege and a pleasure to be the CFO of Draft for almost seven years, and I'm very grateful for the opportunity and thankful for the support, guidance, and encouragement that you personally and the board have given me. As I hope to demonstrate over the next few minutes, I believe Drax is very well placed with high quality assets, robust balance sheet, good visibility over our future cash flows, but not least a great team to deliver on our strategy. One of the first pieces of advice I received at Drax from Mark, our head of IR, was that when it comes to presenting results, it's good for CFOs to be boring. He said leave the excitement to the CEO, know your numbers, and stay scripted.

[Andy Skelton, Group CFO & Director at Drax Group]

So now before I make Mark too nervous, I will start with the financial summary on slide nine. Continued strong operational and financial performance and our robust balance sheet are supportive of options for growth and returns to shareholders. Adjusted EBITDA of $460,000,000 reflects strong delivery across all segments of our business. The reduction compared to the prior period primarily reflects an expected decrease in the all in achieved power price for biomass generation. Adjusted basic earnings per share, however, of 65.6p is in line with the prior period, and it benefits from a 5% reduction in the number of shares outstanding to $351,000,000 as a result of the ongoing share buyback.

[Andy Skelton, Group CFO & Director at Drax Group]

We recently published a company collected consensus for the full year. And reflecting strong first half performance and expectations for the second half, we're comfortable with consensus, subject as always to continued good operational performance. Our strong operational delivery is generating cash flows, which position us well to invest in our core business, take a disciplined approach to options for growth and support sustainable and growing returns to our shareholders in line with our capital allocation policy. During the period, cash generated from operations of three seventy eight million dollars includes a working capital outflow of $102,000,000 As in prior years, this reflects a buildup of rock assets in the first half of the year, which will reverse in the second half as those rocks from the last compliance period are settled. During the period, we further strengthened our balance sheet and extended the average maturity of our debt.

[Andy Skelton, Group CFO & Director at Drax Group]

Our net debt to last twelve months adjusted EBITDA ratio of 1.1x remains significantly below our long term target of around 2x. At the June 30, available cash and committed facilities of $726,000,000 provided substantial headroom over our short term liquidity needs. Consistent with our policy to pay a dividend, which is sustainable and expected to grow, the board has resolved to pay an interim dividend of 100 a 100 11.6p. That would have been exciting. 11.6p per share and expect this to be 40% of a full year dividend of £0.29 per share, an increase of 11.5%.

[Andy Skelton, Group CFO & Director at Drax Group]

As of July 29, we'd completed $272,000,000 of the existing $300,000,000 share buyback program and are announcing this morning an extension to the program to repurchase an additional $450,000,000 of shares over a three year period to follow on from the current program. So moving on to Slide 10 to look at performance by business. Overall, earnings of $460,000,000 reflects a strong renewable power generation and system support performance across the portfolio and further improvement in the pellet business. In FlexGen and Energy Solutions, earnings of $81,000,000 compared with 98,000,000 in the prior period. Our hydro business delivered $64,000,000 inclusive of the impact the planned outage at Kruken and reduced volume in our run of river assets, reflecting low rainfall in the period.

[Andy Skelton, Group CFO & Director at Drax Group]

The 40 megawatt expansion at Kruken is progressing and due to complete by 2027, with earnings underpinned by capacity market payments of around $16,000,000 per annum. And in the appendix on Page 34, we provide five reference points to illustrate the growing need for system support services and the growing opportunity for value from these assets. Reflecting further delays in national grid connection time lines, our first OCGT asset at Hawaan is expected to start commissioning towards the end of this year. Dates for progress in Millbrook have now moved to 2026. The OCGT earnings are also underpinned by long term capacity market contracts close to £19,000,000 per annum.

[Andy Skelton, Group CFO & Director at Drax Group]

The balance of earnings comes from systems support services and peak power generation, addressing the increasing need for flexible dispatchable power. In Energy Solutions, the adjusted EBITDA of $18,000,000 included $25,000,000 from our INC business and a loss of 7,000,000 in the SME business. During the first half, we completed the sale of the remaining SME meter points, and we expect the wind down to be substantially complete by the end of the year. Our I and C business continues to perform well with a focus on value from high quality and strategically aligned customers. In pellet production, performance continues to improve.

[Andy Skelton, Group CFO & Director at Drax Group]

Earnings of $74,000,000 grew 14% from the prior period, with production volumes increasing to 2,100,000 tonnes. And of this, 1,400,000 tonnes was sold to Drax Power Station. The margin achieved on our own use supply better reflects the current market value of long term large scale supply. The margin achieved on our legacy third party contracts is lower. Combined with a reduced cost of production, the achieved EBITDA margin of GBP 35 per tonne was up almost GBP 3 per tonne from the prior period.

[Andy Skelton, Group CFO & Director at Drax Group]

We believe that the current level of earnings in pellet production is well underpinned by the low carbon dispatchable CFD at Drax Power Station. In biomass generation, output increased to 7.1 terawatt hours. The reduction in earnings to $332,000,000 primarily reflects, as expected, a lower all in achieved power price. This was partially offset by a reduction in amounts due to the Energy Generators Levy or EGL. And further details are included in the appendix on Page 25.

[Andy Skelton, Group CFO & Director at Drax Group]

In options for growth, development expenditure of $27,000,000 included 16,000,000 related to Elimini, our carbon removals business. As we noted in our last trading update, we won't participate in the first phase of the cap and floor scheme for the 600 megawatt expansion of Kukan, but we do retain the option for potential future development subject to an appropriate balance of risk and return. We will continue to be disciplined with development expenditure. So turning to Slide 11 and the balance sheet. We maintain a strong focus on cash flow discipline and maintenance of a robust balance sheet.

[Andy Skelton, Group CFO & Director at Drax Group]

In the second quarter, our corporate credit ratings were reaffirmed as BB plus by BICH and S and P and as BBB low by DBRS, and there was a stable outlook in each case. Over the last eighteen months, we've moved the balance of maturity significantly. During the period, we extended the maturity of our committed $450,000,000 revolving credit facility to 2028 with an option to extend further to 2029. And no cash has been drawn on this facility since its inception. In addition, during July, we extended the maturity of our £50,000,000 and €135,000,000 term loan facilities to 2028.

[Andy Skelton, Group CFO & Director at Drax Group]

We expect to repay the outstanding Eurobond and CAD term loan balances during the second half with surplus cash flow. As already noted, the available cash and committed facilities at the June provided substantial headroom over our short term liquidity needs. So moving on to Slide 12 and strong visibility free cash flow. We continue to believe that there's growing value from dispatchable renewable generation assets, which can complement intermittent renewables and inflexible nuclear and enable the energy transition. Our portfolio of high quality assets are well placed to deliver the flexible generation and system support services, which the power system needs, and we're increasingly confident in the visibility of the cash flows that they can produce.

[Andy Skelton, Group CFO & Director at Drax Group]

So I'll step through the building blocks of these cash flows through 02/1931. As already noted, we're comfortable that current consensus expectations for the full year provide a good starting point. We have a strong forward power sales book. We're fully hedged on the rock units in '25 and '26, and we're well hedged for the '27 with almost £2,100,000,000 of forward sales at an average price of £94 a megawatt hour. Since our trading update in May, we've added 1.4 terawatt hours of hedges at GBP 102 a megawatt hour.

[Andy Skelton, Group CFO & Director at Drax Group]

And further details of the current forward power sales book are included in the appendix on Page 22. Beyond the 2027 through the 2031, we're targeting an average of 100,000,000 to $200,000,000 of adjusted EBITDA through the low carbon dispatchable CFD with upside potential from merchant generation. This represents less than 30% of our 600,000,000 to $700,000,000 target, which also includes FlexGen and Energy Solutions and pellet production. And as well as noted, the legislation is now in place, the CMA review is complete and contract negotiation is progressing. Our FlexGen earnings have a strong underpin from capacity market payments.

[Andy Skelton, Group CFO & Director at Drax Group]

And again, in the appendix on Page 33, there's detail of almost $600,000,000 of index linked capacity market agreements for this portfolio through 02/1942. That total value grows to $1,200,000,000 if you apply the latest capacity market price to future auctions. The addition of the 900 megawatts of new OCGTs and the 40 megawatt expansion at Kruken also provide further opportunity to capture value from flexibility and system support services. In our Energy Solutions business, we've exited the SME business, and we're focused on I and C, renewables and EV solutions. This provides us with high credit quality customers and a longer duration of contracting.

[Andy Skelton, Group CFO & Director at Drax Group]

In our pellet business, performance continues to improve. And as I noted, we believe the current level of earnings is underpinned through the low carbon dispatchable CFD. In addition, we believe there are opportunities for sales in existing and new markets such as sustainable aviation fuels. So together, post 2027, we're targeting 600,000,000 to 700,000,000 of adjusted EBITDA from FlexGen and Energy Solutions, pellet production and biomass generation before any development expenditure. With the end of the renewable obligation scheme in 2027, we expect around $500,000,000 from the sale of rock assets generated in previous periods.

[Andy Skelton, Group CFO & Director at Drax Group]

We see this working capital inflow as supporting the buyback extension of four fifty million dollars which we've announced today. If you take an estimated maintenance investment of 100,000,000 to $150,000,000 across our portfolio and together with reasonable assumptions on interest and tax, it will point you towards a very attractive level of free cash flow before dividends through 02/1931. We're focused on delivering these cash flows, and we'll be disciplined in how we use them to maintain a strong balance sheet, support options for growth, pay a sustainable and growing dividend and deliver additional returns to shareholders. And with that, I'm back to it.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So thank you for that, Andy. And I guess it's now my job to get you all excited. Let me start with why I'm excited because I am absolutely excited about the opportunity that we have at Fracs, and then I was gonna highlight four different things. So first is really what we've talked about so far, which is the operational excellence that we have within the business to deliver the cash flows that we have so far and that we expect to continue to do well into the future. It's operational excellence.

[Will Gardiner, Group CEO & Board Member at Drax Group]

It's also built on a strong combination of balance sheets, compliance, and sustainability. The second thing is how well positioned the business is strategically to actually respond to the opportunities being created by the energy transition, and I'll talk more about that in a second. And the third thing is really the the discipline with which we expect to go about doing that. Right? And I'll talk a little bit about our capital allocation policy to demonstrate that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So as you know, we have a four stage policy. It's been in place since 2017, and we stick to it rigorously. We maintain a strong balance sheet, currently defined as our current credit rating and two times net debt to EBITDA. We invest in the core business, both to make sure that we maintain our high quality asset base as well as invest in opportunities around our core to extend and expand in areas where we have competitive advantage. We pay a sustainable and growing dividend, which Andy has highlighted, which we've been doing since 2017.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And lastly, to the extent there is residual capital beyond our investment requirements, we would look to return those to shareholders. Right? And I would highlight that all of these objectives are complementary. I. E, we're doing all of them, frankly, at the same time.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So if we turn to the next page. So I wanted to just remind you of the framework of how we look at the investment opportunities in front of us. Of all, the energy transition is creating a wealth of opportunities over different timescales for investments that have the opportunity or the potential to deliver attractive returns aligned with our capabilities and strategies. And this is no this is no accident because while I've been at Drax, we've been positioning the company to frankly be you know, to have opportunities to invest in the growing need for volatility, for flexibility and to complement intermittent renewables and inflexible nuclear. And with the retirement of dispatchable fossil fuel plants, the deployment of more renewables as well as the expected future increase in demand for power, we're seeing this play out.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So let me give you a couple of examples. So over the last six years, we've seen a 50% increase in the terawatt hours of energy or power generated by wind. We've seen a 500% increase in periods of negative pricing, and we've seen a doubling of system costs. And we can see that in action because Kruken is now operating about twice as often or twice as much as it did at the beginning of that period. So we're already taking advantage of these opportunities by building the peaking plants, the open cycles, which will begin to commission later this year by investing in the 400 in the sorry, 40 megawatt expansion of Kurokan.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So how can we capitalize further on this trend? So the first thing I would say is, again, our current portfolio is increasingly valuable and will be as this volatility in the system continues to change. Right? We like batteries as a potential attractive addition as we've demonstrated by, you know, we're looking to buy the Height portfolio. But, again, as we we demonstrated then, we will be disciplined in how we approach those investments.

[Will Gardiner, Group CEO & Board Member at Drax Group]

In pellets, we're not looking at least currently to expand our capacity there until we have clear visibility on additional demand. But we are working hard and looking at ways to make sure that new markets, which we think will happen, like sustainable aviation fuel fuels, you know, we're doing our part to see those come to fruition. So as you know, we have the MOU with Pathway Energy, which has the potential to lead to a 1,000,000 times per annum of sales in The US by the end of this decade. At the Braxton Power Station, we see opportunities to create value from sort of small incremental opportunities. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

So for example, we established a small state small JV to sell the ash that is built up at the power station. We have tens of millions of tons of that ash. We believe that JV could deliver 5,000,000 of additional EBITDA per year over the next twenty years. That investment does not require any capital from us, and it sells into a market very much structurally aligned with the energy transition and is a great example of how we can create value from our existing assets. Longer term, we're very focused on creating a definitive future for Direct Power Station beyond the extended CFD.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We're working on data centers, which we'll come back to. But clearly, with four gigawatts of grid connection, we think we have a lot of value, and we're looking to monetize that. We're looking at carbon removals. You know, Elimini has recently signed a deal with Hoford, a Danish utility, where effectively Elimini will participate in the development of a BEX project in Denmark. We'll lend our expertise to that project.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We'll also lead on the marketing of the associated CDRs, and we'll have the option to invest in that project to the extent it does get to FID. And to be clear, there's no requirement of capital from us, but it's an opportunity. Let's take a closer look at FlexGen. The first piece of it, long duration story. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

As I mentioned, Kruken is running at twice as much as it did six years ago, which reflects greater demand associated with more intermittent renewables and more balancing actions from the system operator. As you know, we are expanding that by about 40 megawatts. It's an 80,000,000 program underpinned by more than £220,000,000 of capacity market revenue, adding visibility to that business out through 2040 and beyond with returns expected in excess of 20%. And we look at we continue to look at other ways to invest to maximize value from that side. As a reminder, we continue to have the option to actually expand it much more significantly by 600 megawatts, but we'll only do that to the extent we're comfortable with the risk return balance on that investment.

[Will Gardiner, Group CEO & Board Member at Drax Group]

The open cycle is expected to come on later this year or to begin coming on later this year. We'll we'll provide power at times of peak demand. They are again underpinned by capacity market investments. And finally, in that space, we have demand side flexibility from our IMC business customers, which gives us another ability to create value for ourselves, for our customers, and to support the system. Finally, in terms of in the battery space, you know, we're looking carefully at that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

There's a very large pipeline, as you all know, of batteries that are, you know, waiting to be built in The UK. We're looking at where there might be opportunities there for us to invest, but, again, on the right terms and things like access to the grid, clear grid connections. There are a bunch of risks that need to be managed there properly before we can get comfortable with those investments. Let me give you a short update on the data center possibility. So, clearly, AI is changing the world in many ways.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Right? And in order for that to happen, there's a huge need for data center capacity, which has an attendance or complimentary need for huge amounts of additional power. So again, we know the the production power station, to the extent we can participate in that, it's a great possible opportunity. The way we think about it is before 02/1930, there's likely to be something like a 100 megawatt development that could ultimately scale to greater than a gigawatt through the thirties through a long term behind the meter power offtake agreement with the power station. And it also could be complemented by VEX.

[Will Gardiner, Group CEO & Board Member at Drax Group]

It's very much aligned with the 2027 CFD agreement, so we need to make sure that that's consistent, and we think we can do that. But even beyond the data center or sorry. Beyond the biomass units, the access to the grid we have there, we have 1.2 gigawatts of grid access from the coal units, again, that we're looking at ways that that could be monetized. One thing that's happened recently is we partnered with the North Yorkshire County Council and other organizations in the region as part of an AI growth zone application, which, again, if successful, could help accelerate planning for all of those developments. There are other contenders for that, like T side, for example, but nothing has happened yet, and we believe we have a compelling case.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We expect to hear more on that in the second half of the year. So maybe in honor of Andy's last meeting, I we thought we would do a little bit of a recap of what's happened over the last few years. So, again, I think we've done a pretty good job. So the excellence of our operating folks and how well they've delivered has meant we've generated significant earnings and cash flow. And as the market as demand grows for that, we think that will continue to be, in fact, become more important over the coming years.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And the second thing we've done is we've allocated that capital, I think, effectively through our capital allocation policy. What have we done? We've delivered about $5,000,000,000 of EBITDA since 2017 with an average cash conversion of about 98%. We've invested about $3,000,000,000 in the business. We've grown our dividend every year since 2017 at a rate that's now greater than 11% per year.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And with our focus on shareholder value, we've returned significant capital to shareholders through by buying back shares to the tune of about $472,000,000. And that's about 83,000,000 shares at £5.68 pounds per share. And as I've already described, we think there's more opportunity for us to do the same given the energy transition and where we positioned our business. I think it's important to note that we think The UK is an attractive market for investment in the energy transition, especially relative to some of our global peers. But again, being disciplined and focused on investing where we can add value and earn returns is central to our approach.

[Will Gardiner, Group CEO & Board Member at Drax Group]

As our capital allocation policy requires, we'll look at that all in the context of how does that compare to the value we see in our own shares, which again is why we're announcing today the additional $450,000,000 buyback program, which again is underpinned by the working capital inflow associated with the end of the RO scheme. Just to be clear, that doesn't mean we're going to wait until 2027 to begin buying back the shares. That program will begin as soon as the current one finishes. So finally, in terms of the summary and the outlook. We're delivering attractive returns for shareholders as a result of strong operational and financial discipline and performance, substantial dividend growth, disciplined capital allocation and a major multiyear share buyback program.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Important to us also is that we're delivering for all of our stakeholders, delivering energy security, decarbonization and operating in a sustainable compliant way. The heads of terms for a CFD at the Drax Power Station is a very important inflection point, taking away all mention of a 2027 cliff around our business. We continue to have a post 2027 adjusted EBITDA target of $600 to $700,000,000 and we have increasing confidence in our ability to deliver that. We expect to generate strong cash flow. We expect to invest that in attractive growth opportunities, and we will do that in the context of our capital allocation policy.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So thank you. And with that, we'll take any questions that you might have. Thank you.

[Operator]

We will now begin the question and answer session. The first question is from Pavan Mahbhani, JPMorgan. Please go ahead.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Hi, team. Good morning. Thank you for the presentation and for taking my questions. And before I ask, I'd also like to congratulate Andy on his work as CFO over the last seven years. And thank you, Andy, being patient with our questions on the exciting topics, including receivables, factoring, working capital, unwind and pellet margins.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Really appreciate it. I have two questions for you, Tim. Even with today's buyback, you still have substantial headroom to your two times net debt to EBITDA target with a lot of growth options. Can you give us a bit of color over which options you maybe see materializing over the nearer term if we think on a twelve to eighteen month view? And then my second but related question is how you're thinking about Drax Power Station with two parts.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Firstly, how is the development of UK back progressing? And what if any conversations are you having with the government there? And then maybe some color on where you see the post 2031 future of Drax Power Station, whether you would expect an extension of the bridge or otherwise, how you see that power the future of the power station post March 2031? Thank you.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Thanks, Balan. I appreciate that. And I also appreciate your appreciation for Andy, which we all share. So I think I can take those as sort of as maybe in a combination and sort of maybe a little bit of a preview of where we think we'll get to when we have our Capital Markets Day, which we expect to have in the autumn. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

So I think the the way we're thinking about it is that the first most important thing we are doing as company is delivering the cash flow which we described between now and 2031. Right? Which I'm probably not supposed to say this, but if you do the math, it probably gives you about 3,000,000,000 available for dividends, capital allocation, and investment. Right? So making sure we do that, I wanna sort of emphasize this takes a lot of hard work and a lot of operational excellence from the guys, and we're very confident we can do it.

[Will Gardiner, Group CEO & Board Member at Drax Group]

But I don't wanna overlook the fact that that's really important. Right? That's the first thing we're gonna do. Right? And I also have to say that there's, you know, there's work to be done to adjust the way we run the business in the context of the bridge because, again, we're gonna be running significantly fewer hours than we have currently, and we and we are we have plans for doing that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We need to make sure we're ready for that. But if we then look at the sort of the the three areas really that I think of that are interesting or important for us to focus on strategically. Right? So the first one is, you know, where is the most proximate or immediate opportunity to allocate capital? And, again, it's really, you know, the first one is really in the flex gen space in The UK.

[Will Gardiner, Group CEO & Board Member at Drax Group]

There's lots of opportunities in the battery space, you know, finding ways to expand what we do in other types of storage is also interesting. Growing and sort of investing in our in our in the desk, with the energy solutions business, again, something we're looking at, EV charging business. So there's I think there's an interesting opportunities to do that, and we're that's probably the first place that I would think it it tends to the first part of your question. The next twelve to eighteen months is probably where you might see us doing some things. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

But I also wanna emphasize it, you know, it's it's one of those things that, you know, it's interesting. It's attractive, but a lot of other people see it that way as well. Right? So we gotta make sure that we do things that we can deliver distinct additional value, and we are excited about doing that. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

The second area of really interesting opportunity is the draft power station, as you say. And really, the question is how, you know, how can we build, and we will build, a future for the draft power station that goes well into the thirties and beyond. Right? So if you look at various scenarios that, you know, the system operator develops, etcetera, you know, the draft power station is still in those scenarios. It has, you know, some units with VEX, some units without VEX, and we absolutely will work to keep those options attractive and exciting and make sure that we work, I would say, in conjunction with the UK government.

[Will Gardiner, Group CEO & Board Member at Drax Group]

But also, I think importantly, in conjunction with private sector counterparties who are looking to access high quality CDRs because I think you do think about the hope for deal that we're looking at or the work we're doing with them, the Danish market has attracted, I think, quite an attractive model where the the so the developers sort of put their pro put their products together. They get private sector park systems participants to effectively buy the carbon removals, and then the government's role is to then be the last sort of the last piece of the puzzle, and people bid for the subsidies from them and sort of the one who's got the most attractive project, either one that requires the least support wins. And I think that's an interesting model to think about in terms of how you combine sort of private public capital in delivering both, you know, renewable power, but also carbon removal. Right? So, again, working on long term future for the power station, whether that's through a data center, whether that's through, you know, other forms of generation using the 1.2 gigawatts of tech that's available, whether that's through extension of, you know, some sort of bridge like mechanism work through that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So all of those things are important activities that we're undergoing. I I would say less likely that we would do we would be allocating significant capital in that space over the next twelve to eighteen months. Right? But we will do a lot of development work, a lot of intellectual work there. And the third area is really carbon removals and and the future of biomass, the future of pellets.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And I think of that as sort of one world where, you know, we have a very significant capability in accessing sustainable fiber and, you know, turning that into in the current states into pellets and turning that into power. We have, you know, excellent experience in that space probably more than anyone. But our our expectation is that the uses for those pellets and that fiber will be changing over time. You know, unabated power generation, yes, you know, may continue. Carbon removal is probably more interesting.

[Will Gardiner, Group CEO & Board Member at Drax Group]

The stable aviation fuel, another exciting opportunity in the future. And so, again, we're doing lots of what I would call business development work, looking at other ways of using that fiber, looking at carbon removals through eliminate, looking at biochar, for example, looking at effects. So, again, but probably more in this space, again, business development, not large scale capital deployment. And I think the hope, for example, is a good way to think of the way we are approaching that space. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

So lots of opportunities and lots of interesting things for us to do. As I said, I think we're very well aligned with the way the energy transition is going. And hopefully, that gives you a sense of our priorities.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

That's great. Thank you very much.

[Operator]

The next question from Dominic Nash, Barclays. Please go ahead.

[Dominic Nash, Head of European Utilities Research at Barclays]

Good morning, everyone. And again, I'd like to reiterate wishing the best for Andean on his next adventure. Can I ask three questions, please? The first one is on the GBP 600,000,000 to 700,000,000 EBITDA split post 2027, which is no change from previous numbers. But previously, you gave us some granularity.

[Dominic Nash, Head of European Utilities Research at Barclays]

Think I $150,000,000 is hydro, 50,000,000 retail, 50,000,000 ACTTs, 100,000,000 to 200,000,000 for DPS, and then you've got the $250,000,000 which I think is a swing factor for pellets. So the question I've got here is, are you still confident that, that's broadly going to be the mix? And or do you think that pellets are probably going to be under pressure? And then that leads on to the second question, which is the pellets. Could you just remind us again that you're producing, I think you're going to be producing 5,000,000 tons of pellets, of which I think I believe 2,000,000 tons goes to Drax power station.

[Dominic Nash, Head of European Utilities Research at Barclays]

What does it look like for pellet demand coming from sort of like Asia and European and other markets? And as we go to 2027, what do you think the pellet production profile of Drax will do when step down from your sort of 15 terawatt hours to six terawatt hours in Drax? And then the third one, you sort of piqued my interest a little bit on what to do with the coal units and or potentially other biomass units. You've crossed the Rubicon a little bit by I think historically, you always wanted to be a zero fossil fuel company. The OCTGs are clearly here to stay.

[Dominic Nash, Head of European Utilities Research at Barclays]

Can you convert your coal units to gas? And or could they be run like inertial products? Or what sort of options could we actually see with those two units? Thank you.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Maybe I'll take those back to front. So in terms of the sort of how we will best make use of the grid connections, used to be effectively in sort of putting bringing coal onto the system, I think I'm I'm gonna hold fire on answering that question, Dominic, because we're doing a lot of work on that area, and we probably can give you a better answer come later in the year when we have a capital markets day. I would say I mean, yes, I think it's more likely than not that we keep the open cycles. But if you actually I I know you've read our climate transition plan in some detail. And in there, we have commitments that effectively you know, if we do keep them, we need to make sure that it's aligned with that program.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Right? So that's work that we will be doing to make sure that we keep, we maintain our commitments to sustainability, which are as strong as they ever have been. If I think about the pellet business, right, I mean, the first thing I would say is that, you know, we did about 4,000,000 tons last year. We did about we're expecting to do, you know, a bit more than that this year. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

But one of the things we're doing now is that in the context of timing of bridge, which frankly is quite a bit less generation that we do now, and in the context of which basically means that just from ourselves, the demand goes from about 8,000,000 tons to about 3,000,000 tons. You know, there's 5,000,000 tons of pellets that will be coming into the market on a global basis. There are other generators around Europe that also will be coming off. So I think our own view is that the 2020 well, 2028 market will be probably long pellets. Right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

And we need to make sure we're ready for that. Right? So we're looking carefully at our own portfolio. I think I think getting to 5,000,000 tons is now less likely unless we see additional demand coming on stream in that time period. So so we're looking at what we're investing in now.

[Will Gardiner, Group CEO & Board Member at Drax Group]

We're looking at sort of where we get those pellets. I think it it creates both a risk and an opportunity for us. Right? So the million tons of third party pellets we plan to buy, again, that's what yeah. We'll have we have good options for that, and we think we feel pretty good about that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

But in terms of, producing more pellets, relatively unlikely, but also in terms of actually being able to reprice some of our contracts, we're trying to do that now in a world where there's probably more clarity that the market is long pellets than, there was before. So very comfortable with the $600 to $700,000,000 If I were to sort of say directionally, feel comfortable about how the hydro is doing. I think there's probably sort of good opportunities there. I think on the pellet side, we're going have to work hard to hit that number. But as a portfolio, I think we're in good shape.

[Dominic Nash, Head of European Utilities Research at Barclays]

Thank you. And on the split for the EBITDA?

[Will Gardiner, Group CEO & Board Member at Drax Group]

I think, again, I think we'll stick to the 600 to $700,000,000 and I think sort of directionally, I think we're, you know, we're comfortable with the broad picture. But as I sort of said, as I described sort of risk on the one side on pellets probably and maybe more downside risk on the pellets, upside risk on the others. But overall, that's basically where we are.

[Dominic Nash, Head of European Utilities Research at Barclays]

Okay. Thank you very much.

[Operator]

The next question is from Alex Wheeler, RBC. Please go ahead.

[Alexander Wheeler, Equity Analyst at RBC Capital Markets]

Good morning. Thanks for the presentation. Two from me, please. Both, I think, for Andy, fitting for the Swanson. First one, how should we think about the timing of the €450,000,000 buyback?

[Alexander Wheeler, Equity Analyst at RBC Capital Markets]

Is it fair to assume a linear profile here as you've been pretty quick on the current buyback? And does the €500,000,000 ROC cash inflow in 2027 have a part to play here? And then my next question is just on the EBITDA and how we should think about that for H2 given the strong H1 and a run rate that probably puts you a bit ahead of the current consensus, you've confirmed you're comfortable with. So any thoughts there, I appreciate it.

[Andy Skelton, Group CFO & Director at Drax Group]

So on the buyback, I think you can assume a relatively even spread across the three years. And a couple of reasons for that. One, as you know, we have our AGM approvals we need to renew each year that give us up to 10% of our share count. But two, also the liquidity on the on the stock as the number of shares continues to reduce. We do intend to run that from the end of the existing program, which should come to a completion during the second half of this year.

[Andy Skelton, Group CFO & Director at Drax Group]

And the way I think about the Rock and Wind is that that surplus working capital that's been on the balance sheet for a number of years and will come come out in 2027. But as Will said, we're not we're not waiting to start the buyback until that comes. So we will we will start as soon as the existing one finishes. On the on the second half numbers, if if you if you look in the appendix at the hedge book and the the details of sort of average price achieved for this year, you'll see that, you know, when I explained them, the actual results were lower as we expected because the captured price is lower than it had been in the prior period. The second half of the year, our locked in hedge book is at a lower rate compared to the first half.

[Andy Skelton, Group CFO & Director at Drax Group]

So that that simply means it will you you shouldn't take the first half volume and rates and and and double it, and that means us comfortable with where where consensus is.

[Operator]

The next question from Hamed Harman, Jefferies. And

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

firstly, Andy, thank you, and congratulations from my side as well. I just have sort of two quick questions. Firstly, on balance sheet capacity. So a lot of you've talked a lot about the work that you have done to build the visibility to 2027 and beyond. And there's also sort of the points about the value of the site with four gigawatts of sort of grid connections.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

I'm just wondering, does that have you had any conversations with rating agencies about whether the two times net debt to EBITDA is still the appropriate target? Or actually, could you support a higher leverage factor as a company given how visibility and sort of some of the sort of the outlook has emerged? So that's my first question. My second question is on for Will on the data center opportunity. I wanted to come back to the 100 megawatt potential behind the meter opportunity, which we have discussed before.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

I'm just wondering if there has been any progress on that, that you could share with us? And if not, maybe sort of talk a little bit about what are the constraints that need to be solved to sort of commercialize that opportunity? Thank you.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Yeah. Well, why don't I take both of those? I think on the balance sheet question, it's it's a very fair question, because as you described, the business is changing. I think what we need what we're gonna do is as part of this, again, sort of look at our strategy in the context of the bridge. Again, we'll come back to that probably again with the Capital Markets Day and confirm where we are.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And I think I guess, I would say that I think that target has served us well, and sort of in absence of sort of a strong view that either a, there's a strategic reason to have a different target, I. E, that the sort of having either, you know, a different credit rating would be beneficial and or a strong view that the sort of nature of the cash flows is fundamentally different. I think we would but but one of those two things we have to change in order for us to make that change on that. But we'll come back to you on that, I would say, the fall. In terms of the data center, you know, we continue to a lot of work on that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

I guess the thing for me, which is the the different things that have to line up are, you know, what types of data centers are people building in The UK? I mean, my sense of it is that most of the the the larger data centers, you know, training the large language models probably are not gonna be in The UK. Most of those will be probably US, China, maybe some in The Middle East. You will need edge data centers that sort of actually are the ones that sort of respond to queries, and those will will be more national. Generally useful for those to be near customers or less historic trends, so we need to get people comfortable with that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Clearly, you know, biomass power, getting people comfortable with that. You know, the cost base, I either sort of get yes, we think behind the meter power from biomass is attractive relative to wholesale prices, but you have other options for behind the meter power. So we need to make sure we get people comfortable with that. So there's a bunch of things that have to go into it. And then I guess the final point is that in order to actually make it happen, it's a very significant capital capital commitment.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So making sure that you've got the right partners ready to commit capital is something we're also looking at doing. Right? So, again, I would say, a bunch of things need to line up. There's lot of work still happening on that. And so, again, as as we learn more, we'll make sure that we, share that with you.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Okay. Thank you.

[Operator]

The next question from Jenny Ping, Citi. Please go ahead.

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

Hi, thanks very much. A couple of questions from me, please. Just following on Amit's question on data centers, I also wanted to just check-in terms of some of the progress and challenges that you just outlined. I presume this is something that you're going to be working on over the next couple of years. Obviously, the bridge gives you the time to do that.

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

But I just wondered, are you really going to have anything concrete to share with us by four? Or is this really kind of like a three year view just to give us some sense of whether we should really be looking to sort of looking at the financials of some of these opportunities now? Secondly, I wanted to ask about bridge itself. Obviously, FX was the only piece in the heads of terms that the government had left open for margin to market. If I look at what the FX was at the time of the heads of terms versus where it is now, it shaves off around GBP 5, GBP $4.05 per megawatt hour to the headline price.

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

I wondered what you can comment around that and whether there's any other elements which could potentially offset that we should be taking into account? And then thirdly, just on Longview, some of the pellet growth, I just technical point, but obviously that's one that has been under construction, but now paused because of some of the permitting admission permitting delays. If that project doesn't get the permit to go ahead, is there any write off that's coming from that investment? Thank you very much.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So on the data centers, I think I think your question, Jenny, is focused on whether we see any sort of near term milestones or things that we would explicitly wanna lay out as sort of points where we would come back to you explicitly. I think the answer to that is no. I mean,

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

you know Okay.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Sort of sort of complex negotiation discussions, multiple people involved. And so I think the best thing that you know, I I don't wanna sort of put specific dates on that where we actually expect to come back to you. And so, I mean, you know, I think the best way to think about that is as and when things happen that we think are important to share with the market or, ultimately, we'll we'll bring those back, but not tied to any specific dates. In terms of FX on the bridge, the way that the heads of terms are structured is that those changes in FX rates, you know, before the actual signing of the final contract will will effectively go into determining what the final strike price will be. So we're still in that phase.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And the third one on Longview, effectively where we are on that is that the sort of the permitting process continues. But as you would expect, we're sort of looking carefully at that at that project to determine whether we need those pellets. And, when you we have a decision on that, we will let you know whether that's going to continue or how we plan to handle that. So that one's yet to come.

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

Thank you. Can you say at this stage how much you've invested on Longview?

[Will Gardiner, Group CEO & Board Member at Drax Group]

Yes, I think that's about GBP 150,000,000 on the balance sheet for that, yes.

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

Okay. Thank you very much.

[Operator]

The next question is from Charles Schwabe, HSBC. Please go ahead.

[Charles Swabey, Associate Director, Clean Energy & Utilities, Equity Research at HSBC]

Hi, good morning, everyone. And yes, adding congratulations, Andy, for all your achievements and wishing you all the best. Just a quick follow-up on the data centers. Just in terms of the commercial terms you're discussing at the moment, could you provide an update on the ballpark figure for long term PPA prices you're discussing with developers and the duration of the contracts under discussion?

[Will Gardiner, Group CEO & Board Member at Drax Group]

I don't want to be too direct, but unfortunately, the direct answer to your question is no. We can't really provide that, but I think I think maybe a bit more color. I mean, I guess the simple answer is that in order for us to maybe I guess the first way to think about this is that in order for us to enable or develop a data center, there's gonna be quite a significant amount of investment required both in the data center itself, but also in our own infrastructure to enable us to connect it. Right? And in order for us to do that, we need to have a high level of confidence in the earnings that we would generate from that.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And so I think the sort of foundational part of your question is, you know, will there be a long term PPA with a reasonable price? Then the answer is there would we believe there would need to be in order for this to work. So we're working on that. That's the best way to think about it, Charles.

[Charles Swabey, Associate Director, Clean Energy & Utilities, Equity Research at HSBC]

Thank you.

[Operator]

The next question from Harrison Williams, Morgan Stanley. Please go ahead.

[Harrison Williams, VP - Equity Research at Morgan Stanley]

Hi, there. Good morning. Thanks for taking my questions. Firstly, I just wanted to ask on Calkin. I know you walked away from the first round, and we've seen some of your peers do similar on the terms.

[Harrison Williams, VP - Equity Research at Morgan Stanley]

Can I ask about what the conversations have been with OpGen since then? Are they receptive to your concerns with how the initial framework was designed? And I guess there as a follow-up, yes, if that was to be developed, when could we expect to hear on that one? And then the second question I had was, we saw recently that The UK ETF scheme was going to allow carbon removals. How significant could this be in terms of making BECCS a more feasible option?

[Harrison Williams, VP - Equity Research at Morgan Stanley]

And maybe just to help us understand if we are seeing there's an linkage between The UK and European ETF schemes. Is it feasible for The UK only to allow carbon removals? Or do we need to see some of movement in Europe as well?

[Will Gardiner, Group CEO & Board Member at Drax Group]

So on the sort of expansion of Kruken, I guess the way I would respond to that, I think there's a series of different things that are sort of part of our decision making there. I mean, one is the duration of the project. Another one is the cap and floor. Another one is the sort of the timing of how it sort of worked for us. So for example, you know, the second round might be more effective for us.

[Will Gardiner, Group CEO & Board Member at Drax Group]

But the third one for me is also the the sort of fundamental fact that that project sort of would change the duration of the power station or reduce the duration of the storage we could provide quite significantly. So all of those come into it and sort of, again, we'll continue to look and see whether we can get comfortable with that. And, you know, I'm not, I think that sort of the off term piece is one part of it, and I'm sure they're looking at how to make that more attractive, but I don't think that's the only issue for us. Right? In terms of the ETS, I think the answer to that is including carbon removals in European and or UK ETS and or a combined system is fundamental, right?

[Will Gardiner, Group CEO & Board Member at Drax Group]

It actually will make significantly change ability of those projects to go forward. I mean, it provides a much bigger pool of buyers for carbon removals and becomes a compliance issue as opposed to a voluntary one. So I think that's a very, very significant development. How it actually plays out, where the carbon price is, what the format of it is, what the structure of it is, obviously, very important. But, again, we're we're very involved in those both of those processes, I think they're both quite fundamental.

[Will Gardiner, Group CEO & Board Member at Drax Group]

So but but but also not immediate. Right? I mean, they they need to be determined. They need to work through, and anything that comes into play there is probably not until near the end of the decade.

[Operator]

At the moment, there are no Okay. Open

[Will Gardiner, Group CEO & Board Member at Drax Group]

I'll take one more, and then I think we'll wrap up with this last question. So I'll read it out from the webcast. First, it says, I want to say a big thank you to Andy and wish him all the very best. Secondly, with zonal pricing rightly abandoned as a option, reformed national pricing is now the preferred option. Could you share some high level thoughts as to possible risk to to new ops charges for your assets coming from Martin Young?

[Will Gardiner, Group CEO & Board Member at Drax Group]

Right? So, again, again, I think it's nice that we have more clarity, nice that we have more certainty around that. And, again, I I clearly, you're you're right. They are gonna be reviewing Kanuas charges as part of this. And I think our own position is that we have a quite a good geographic spread of assets.

[Will Gardiner, Group CEO & Board Member at Drax Group]

Some in Scotland, obviously, some in Yorkshire, some across the Midlands in terms of the open cycles. And so, actually, I think we believe we have a quite a good balance in terms of the risks, any movements in grid access costs. Right? And we we won't know definitively until it all happens, but currently, our expectation is it's it's a reasonably balanced position for us. I hope that helps.

[Will Gardiner, Group CEO & Board Member at Drax Group]

And maybe I'll just wrap up by one more time. So thanking Yandy for all his good work. Really, it's gonna be a it'll be a different set of results next time. Different in based on nostalgia, I'm sure it'll be a good one as well. But, thank you all for your questions, and I hope everybody has a good day.

[Operator]

Ladies and gentlemen, the conference call is now over. Thank you for participating. Goodbye.

Participants

Executives

• Will Gardiner, Group CEO & Board Member
• Andy Skelton, Group CFO & Director

Analysts

• Pavan Mahbubani, Vice President - Equity Research at JP Morgan
• Dominic Nash, Head of European Utilities Research at Barclays
• Alexander Wheeler, Equity Analyst at RBC Capital Markets
• Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group
• Jenny Ping, MD - Utilities and New Energy Equity Research at Citi
• Charles Swabey, Associate Director, Clean Energy & Utilities, Equity Research at HSBC
• Harrison Williams, VP - Equity Research at Morgan Stanley