{ "documentInfo": { "documentType": "https://xbrl.org/2021/xbrl-json", "features": { "xbrl:canonicalValues": true }, "namespaces": { "draxgroupplc": "http://draxgroupplc.com/xbrl/2022", "ifrs-full": "http://xbrl.ifrs.org/taxonomy/2021-03-24/ifrs-full", "iso4217": "http://www.xbrl.org/2003/iso4217", "scheme": "http://standards.iso.org/iso/17442", "xbrl": "https://xbrl.org/2021", "xbrli": "http://www.xbrl.org/2003/instance" }, "taxonomy": [ "http://draxgroupplc.com/xbrl/2022/549300YPSNTXR4ZHSR98-2022-12-31.xsd" ] }, "facts": { "fact-1": { "value": "Drax Group plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-587": { "value": "Financial statements 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 operation\u2019s net assets, and its results for the year, are recognised in OCI. Climate change The impact of climate change has been considered throughout the preparation of the Annual report and accounts. In particular, in the Strategic report the TCFD disclosures contain information on the four recommendations and 11 recommended disclosures of the FCA LR 9.8.6(8). Consideration in respect of the Consolidated \ufb01nancial statements focused on: \u2022 Critical accounting judgements \u2022 Impairment of assets \u2022 Going concern and viability \u2022 Useful economic lives of \ufb01xed assets Further information on these areas can be found in note 3.8 to the Consolidated \ufb01nancial statements. Going concern The Group\u2019s business activities, along with future developments that may affect its \ufb01nancial performance, position and cash flows, are discussed within the Strategic report on pages 4 to 91 of this Annual report and accounts. The current energy market conditions and their impact on the Group are considered in the Financial review on page 20. In the Viability statement on pages 75 to 76, the Directors state 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 \ufb01ve years based on forecasts and projections that take into account reasonably possible changes in trading performance and other key assumptions. Consequently, the Directors also have a reasonable expectation that the Group will continue in existence for the next 12 months from the date of signing these Consolidated \ufb01nancial statements and have therefore adopted the going concern basis in preparing these Consolidated \ufb01nancial statements. Basis of consolidation These Consolidated \ufb01nancial statements incorporate the \ufb01nancial 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 of an entity 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 pro\ufb01ts 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. Introduction The Consolidated \ufb01nancial statements provide detailed information about the \ufb01nancial performance (Consolidated income statement and Consolidated statement of comprehensive income), \ufb01nancial 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 of the entities controlled by the Company (collectively, the Group). The notes to the Consolidated \ufb01nancial 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 \ufb01nancial 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 185 to 189, as well as voluntary information which management believe users of the accounts may \ufb01nd useful, in line with the principles of IFRS. Basis of preparation The Consolidated \ufb01nancial statements have been prepared in accordance with the United Kingdom adopted International Accounting Standards (as issued by the UK Endorsement Board) and in conformity with the requirements of the Companies Act 2006. The Consolidated \ufb01nancial statements have been prepared on the historical cost basis, except for certain assets and liabilities that are measured at fair value (principally derivative \ufb01nancial instruments) and the assets and liabilities of the Group\u2019s de\ufb01ned bene\ufb01t pension schemes (measured at fair value and using the projected unit credit method respectively). Foreign currency transactions Transactions in foreign currencies are translated into sterling 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 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 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 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 unless they relate to qualifying cash flow hedges. Foreign exchange gains and losses on qualifying cash flow hedges are recognised within the Consolidated statement of comprehensive income, within Other comprehensive income (OCI) and deferred within equity, to the extent the hedges are effective, until the hedged item impacts the Consolidated income statement. Financial statements 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 Income from associates in the Consolidated income statement. Accounting policies The signi\ufb01cant accounting policies for the measurement of an individual item in the Consolidated \ufb01nancial statements are described in the note to the Consolidated \ufb01nancial statements relating to the item concerned (see contents on page 166). The accounting policies adopted in the preparation of the Consolidated \ufb01nancial statements are consistent with those followed in the preparation of the Group\u2019s Consolidated \ufb01nancial statements for the year ended 31 December 2021, except for the change in accounting policy for Software as a Service (SaaS) costs (see Change in accounting policy section below for further details) and the adoption of new standards and amendments effective as of 1 January 2022. 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 \ufb01nancial statements is presented in note 8.2. The application of these new requirements has not had a material effect on the Consolidated \ufb01nancial statements. Change in accounting policy In 2021, the IFRS Interpretations Committee (IFRIC) \ufb01nalised its agenda decision regarding how to account for costs of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement that conveys to the customer the right to receive access to the supplier\u2019s application software over the contract term. The agenda decision concluded that the right to receive access does not provide the customer with a software asset and therefore, the access to the software is a service that the customer receives over the contract term. The agenda decision also concluded that often the con\ufb01guration and customisation costs do not result in an intangible asset belonging to the customer. Therefore, these costs should be recognised as an expense over the period to which they relate. In limited circumstances, certain con\ufb01guration and customisation activities may result in separate assets controlled by the customer. If this is the case the asset should be assessed to determine whether it is separately identi\ufb01able and if it meets the recognition criteria of IAS 38. Any changes resulting from this agenda decision are a change in accounting policy. Assessing the impact of the agenda decision on the Group required detailed analysis of the historical amounts capitalised. The Group has now concluded its analysis on the impact of this agenda decision and has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised as intangible assets by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. As the impact of this change in accounting policy is immaterial, and the new policy has been applied prospectively from 1 January 2022, no restatement of prior periods has been necessary. These assets have been written off in the current period as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. Non-controlling interests in subsidiaries are identi\ufb01ed separately from the Group\u2019s 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\u2019 proportionate share of the fair value of the acquiree\u2019s identi\ufb01able 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\u2019 share of subsequent changes in equity. Pro\ufb01t or loss and each component of OCI are attributed to the owners of the Parent Company and to the non-controlling interests. Pro\ufb01t or loss and each component of OCI of the subsidiaries is 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 de\ufb01cit balance. See note 4.5 for the accounting policy and further details on the Group\u2019s accounting for non-controlling interests. Joint arrangements are contractual arrangements where two or more parties have joint control over the arrangement. Joint arrangements are classi\ufb01ed 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 only 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. These amounts are recognised within the appropriate Consolidated \ufb01nancial statement line items in accordance with the IFRS applicable for that line item. Associates are those entities in which the Group has signi\ufb01cant influence, but not control or joint control, over the \ufb01nancial 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\u2019s share of after tax pro\ufb01t or loss and 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 \u00a3nil, the Group only recognises its share of losses of 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\u2019s 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.
Had the Group concluded biomass contracts were within the
scope of IFRS 9, a \u00a31 per tonne increase or decrease in the
market price of biomass purchases would result in a \u00a320.5 million
fair value gain or loss respectively being recognised. The Group
continues to assess developments in the biomass market on an
ongoing basis to identify any impact on this assessment.
Capitalisation of development project costs
As the Group executes its strategy, as outlined on page 16,
signi\ufb01cant investment is likely to be required in large development
projects, including bioenergy carbon capture and storage in the
UK (UK BECCS) and the development of Cruachan 2. 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 are based
around the expectation that it is probable that economic bene\ufb01t
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 \ufb01nance. At 31 December 2022 the Group had capitalised
\u00a324.5 million relating to the UK BECCS development project,
including \u00a319.1 million in 2022. Had it been judged that the
criteria for capitalisation had not yet been met, these costs would
have been expensed as incurred. The Group has not capitalised
any costs in relation to Cruachan 2 or any global BECCS projects
as the recognition criteria of IAS 16 have not been judged to have
been met.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that
carry a signi\ufb01cant risk of resulting in a material adjustment to the
carrying values of assets and liabilities within the next \ufb01nancial
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 \ufb01nancial statements.
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 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\u2019s
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. Once certainty over UK BECCS at
Drax Power Station is achieved, UELs will be reassessed. The net
book value of \ufb01xed assets being depreciated at Drax Power
Station at 31 December 2022 is \u00a3911.5 million and depreciation
on these assets in the year, based on the UELs disclosed in note
3.1, was \u00a374.6 million. If the UELs of assets, that are limited to the
current assumed end of station life of 2039, were to increase by
ten years the impact on the depreciation charge for the year
would be a reduction of approximately \u00a314.2 million.
See note 3.1 on page 211
Judgements and estimates
The preparation of these Consolidated \ufb01nancial statements
requires judgement to be made in selecting and applying the
Group\u2019s 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.
The judgements which have the most signi\ufb01cant effect on the
amounts recognised in the Consolidated \ufb01nancial statements,
and the key estimates and assumptions that have a signi\ufb01cant
risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next \ufb01nancial year, are set
out below. Further detail, including sensitivity analyses where
appropriate for the key estimates and assumptions, is included
in the related notes.
Critical accounting judgements
The critical judgements made in the process of applying the
Group\u2019s accounting policies during the year that have the most
signi\ufb01cant effect on the amounts recognised in the Consolidated
\ufb01nancial statements are set out below.
Certain remeasurements and exceptional items
Each year management con\ufb01rms the judgements made
regarding transactions to exclude from the Adjusted results
of the Group, as described under Alternative performance
measures below. The judgement as to whether a transaction
or group of transactions should or should not be classi\ufb01ed
as a certain remeasurement or an exceptional item can have
a signi\ufb01cant impact on the Adjusted results of the Group.
An internal policy governs the judgements made by management
and in all instances, these judgements are approved by the Audit
Committee as set out on page 120.
See note 2.7 on page 203
Accounting for biomass purchase and sale contracts
The Group buys and sells biomass for operational requirements
in its Pellet Production and Generation segments. The Group\u2019s
risk management policies also permit some flexibility in trading
activity to optimise the overall portfolio position and potentially
release value in certain circumstances. As such, the Group
undertook 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 would result
in these contracts being recognised at fair value as derivative
\ufb01nancial 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 \ufb01nancial
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 contracts cannot be readily
converted into cash. The lack of an active spot market means
market participants cannot readily seek to make trading pro\ufb01ts
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.
Adjusted basic earnings per share Adjusted basic earnings per share (Adjusted basic EPS) is Adjusted pro\ufb01t from continuing and discontinued operations attributable to the owners of the Parent Company divided by the weighted average number of shares outstanding. This is the same denominator used when calculating basic EPS. This metric is used in discussions with the investor community. Adjusted EBITDA Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, excluding the impact of exceptional items and certain remeasurements (de\ufb01ned in note 2.7). Adjusted EBITDA excludes gains or losses in disposal of \ufb01xed assets, income from associates and amounts directly attributable to non-controlling interests. Adjusted EBITDA is the primary measure used by Executive management and the Board to assess the \ufb01nancial performance of the Group as it provides a more comparable assessment of the Group\u2019s year-on-year trading performance. It is also a key metric used by the investor community to assess the performance of the Group\u2019s operations. 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. Presentation of a transaction as exceptional is approved by the Audit Committee in accordance with an agreed policy. There has been no change to the policy during the year ended 31 December 2022. During the year, the application guidance for this policy was enhanced, in particular setting de minimis thresholds for classifying items as exceptional. These enhancements would not have materially changed the transactions classi\ufb01ed as exceptional in the comparative period contained within these Consolidated \ufb01nancial statements. Certain remeasurements comprise fair value gains and losses on derivative forward 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 accounts with useful information as this removes the volatility caused by movements in 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 pro\ufb01ts 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), taking into account the impact of associated \ufb01nancial derivative contracts (such as forward foreign currency purchases), in Adjusted results at the time the transaction takes place. See note 2.7 on page 203 Pension liabilities The Group records a net surplus or liability in its Consolidated balance sheet for the fair value of assets held by the pension schemes, less its obligation to provide bene\ufb01ts under approved de\ufb01ned bene\ufb01t pension schemes. The actuarial valuations of the schemes\u2019 liabilities are performed annually by an independent quali\ufb01ed actuary and contain assumptions regarding interest rates, inflation, future salary and pension increases, mortality and other factors, any of which are subject to future change. Three of the key estimates within the valuation are the discount and inflation rates, and life expectancy. Sensitivities in the valuations are discussed in note 6.3. The value of the pension surplus recognised by the Group at 31 December 2022 in relation to the DPG ESPS scheme is \u00a332.4 million and the value of the pension surplus recognised in relation to the Drax 2019 scheme is \u00a36 .1 million. See note 6.3 on page 245 Derivative valuations Derivative \ufb01nancial instruments are recorded in the Group\u2019s Consolidated balance sheet at fair value. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third- party sources. However, any forward curve is based, at least in part, upon assumptions about future transactions and market movements. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. More detail on the assumptions used in the assessment of fair values is provided in note 7.1, and a range of sensitivities is provided in note 7.2. Alternative performance measures (APMs) The Group uses APMs throughout the Annual report and accounts that are not de\ufb01ned within IFRS but provide additional information about \ufb01nancial performance and position that is used by the Board to evaluate the Group\u2019s performance. These measures have been de\ufb01ned 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 de\ufb01ned by IFRS. Such measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure. De\ufb01ned below are the key APMs used by the Board to assess performance. The APMs glossary table on page 287 provides details of all APMs used, including the APM\u2019s closest IFRS equivalent, the reason why the APM is used by the Group and a de\ufb01nition of how each APM is calculated. Adjusted results The Group\u2019s \ufb01nancial 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\u2019s Adjusted results are consistent with the way Executive management and the Board assess the performance of the Group. Adjusted results are intended to reflect the underlying trading performance of the Group\u2019s businesses and are presented to assist users of the Consolidated \ufb01nancial statements in evaluating the Group\u2019s trading performance and performance against strategic objectives.
Prior to 2022, the Group\u2019s de\ufb01nition of Net debt did not include
translating borrowings denominated in foreign currencies,
for which the Group had entered into hedging arrangements
associated with the currency exposure at the hedged rate. The
impact of relevant hedging instruments was presented alongside
the Net debt \ufb01gures rather than being included in the de\ufb01nition.
In 2022, the Group has updated its de\ufb01nition of Net debt,
which now includes translating borrowings at the hedged rate.
This is deemed to provide more useful information and to better
reflect the economic reality, as it includes the sterling value
of borrowings that will ultimately be settled.
The table below shows Net debt calculated using both the
current and prior year de\ufb01nitions:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Current de\ufb01nition 1,206.0 1,10 8 .0
Previous de\ufb01nition 1,203.6 1,043.6
Net debt to Adjusted EBITDA ratio
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 Group\u2019s 2.0 times
target has not changed as a result of the update in the de\ufb01nition
of Net debt described above, nor has the Group\u2019s expectations
in regard to meeting this target.
The Net debt to Adjusted EBITDA ratio gives an indication of the
size of the Group\u2019s Net debt in relation to its trading performance.
Net debt
The Group de\ufb01nes Net debt as total borrowings less cash and
cash equivalents. Borrowings denominated in foreign currencies,
and where the Group has entered into hedging arrangements
associated with this currency exposure, are translated at the
hedged rate. This is to take into account the effect of \ufb01nancial
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. Total borrowings
includes external \ufb01nancial debt, such as loan notes, term loans
and amounts drawn in cash under revolving credit facilities
(RCFs) (see note 4.2) but excludes other \ufb01nancial liabilities
such as pension obligations (see note 6.3), trade and other
payables (see note 3.5) and lease liabilities calculated in
accordance with IFRS 16 (see note 3.2). Net debt excludes the
proportion of cash and borrowings in non-wholly owned entities
that would be attributable to the non-controlling interests.
As noted above, the Group does not include lease liabilities,
calculated in accordance with IFRS 16, in the de\ufb01nition of
Net debt. This reflects the nature of the contracts included in
this balance which are predominantly entered into for operating
purposes rather than as a way to \ufb01nance the purchase of an
asset. The exclusion of lease liabilities from the calculation
of Net debt is also consistent with the Group\u2019s covenant
reporting requirements.
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 current obligations.
Section 2: Financial performance The \ufb01nancial performance section gives further information about the items in the Consolidated income statement. It includes a summary of \ufb01nancial performance by each of the Group\u2019s businesses (see note 2.1), analysis of certain Consolidated income statement items (notes 2.2\u20132.6) and information regarding the Adjusted and Total results, dividends and retained pro\ufb01ts (notes 2.7\u20132.10). Further commentary on the Group\u2019s trading and operational performance during the year can be found in the Strategic report on pages 1 to 91, 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. The Group is organised into three businesses, with a dedicated management team for each. Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s positions. The Board reviews the performance of each of these businesses separately, and each represents a reportable segment: \u2022 Pellet Production: production and subsequent sale of biomass pellets at the Group\u2019s processing facilities in North America; \u2022 Generation: power generation activities in the UK; and \u2022 Customers: supply of electricity and gas to non-domestic customers in the UK. Operating costs are allocated to the reportable segments to the extent they are directly attributable to the activities of that segment. Central corporate function costs that are not directly attributable to the activities of a reportable segment are included within Innovation, capital projects and other costs. Innovation, capital projects and other costs is not a reportable segment as it does not earn revenues. When de\ufb01ning gross pro\ufb01t within the Consolidated \ufb01nancial statements, the Group follows the principal trading considerations applied by its Pellet Production, Generation and Customers businesses when making a sale. In respect of the Pellet Production business, this reflects the direct costs of production, being \ufb01bre, fuel and drying costs, direct freight and port costs, or third-party pellet purchases. In respect of Generation, this reflects the direct costs of the commodities to generate the power and the relevant grid connection costs that arise. In respect of Customers, 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 in inventories. Seasonality of trading The primary activities of the Group are affected by seasonality. Demand in the UK for electricity and gas is typically higher in the winter period (October to March) when temperatures are lower, and thus drives higher prices and higher generation. Conversely, demand is typically lower in the summer months (April to September) when temperatures are milder, and therefore prices are generally lower. This trend is experienced by all of the Group\u2019s UK-based businesses, as they operate within the UK electricity and gas markets. It is most notable within the Generation business due to its scale and the flexible operation of its thermal generation plant. The Pellet Production business incurs certain costs that are higher in winter months due to the impact of weather conditions, such as \ufb01bre drying costs and heating costs. Production volumes and margins are typically higher in the summer months. The business is protected from demand fluctuations as a result of 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\u2019s performance by reportable segment for the year ended 31 December 2022. 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 adjustment required for unrealised pro\ufb01ts. The \ufb01nancial information in these tables is comprised solely of results from continuing operations. There were no amounts attributable to discontinued operations in the year ended 31 December 2022. Adjusted EBITDA by reportable segment is presented in note 2.7. Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 377.2 3,638.9 4,143.1 \u2013 \u2013 8,159. 2 (383.9) 7,7 75.3 Inter-segment sales 425.4 3,719.3 \u2013 \u2013 (4,14 4 .7 ) \u2013 \u2013 \u2013 Total revenue 802.6 7,358.2 4 ,143.1 \u2013 (4 ,14 4.7 ) 8 ,159. 2 (383.9) 7,775.3 Cost of sales (501.9) (6,479.2) (3,985.0) \u2013 4,128 . 4 (6, 837.7 ) 85.7 (6,752.0) Segment gross pro\ufb01t/(loss) 300.7 879.0 158 .1 \u2013 (16.3) 1,321.5 (298.2) 1,023.3 Operating and administrative expenses (167.3) (183.5) (84.3) (113.6) 5.9 (542.8) \u2013 (542.8) Impairment losses on \ufb01nancial assets \u2013 \u2013 (48.0) \u2013 \u2013 (48.0) \u2013 (48.0) Depreciation and amortisation (119.9) (98.6) (25.5) (3.3) 7.9 (239.4) \u2013 (239.4) Impairment of non-current assets \u2013 (16.6) \u2013 \u2013 \u2013 (16.6) (24.9) (41.5) Other losses (2.0) (3.8) \u2013 \u2013 \u2013 (5.8) \u2013 (5.8) Income from associates 0.5 \u2013 \u2013 \u2013 \u2013 0.5 \u2013 0.5 Operating pro\ufb01t/(loss) 12.0 576.5 0.3 (116.9) (2.5) 469.4 ( 323.1) 146.3 Further information on the main revenue streams of each segment is presented in note 2.2. The impact of exceptional items and certain remeasurements is set out in note 2.7. The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2021: Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 163.1 2,651.2 2,359.6 \u2013 \u2013 5,173.9 (85.9) 5,088.0 Inter-segment sales 286.7 2 , 031.1 \u2013 \u2013 (2,317.8) \u2013 \u2013 \u2013 Total revenue 449.8 4,682.3 2,359.6 \u2013 (2 ,317. 8) 5,173.9 (85.9) 5,088.0 Cost of sales (267.0) (4 ,131. 9) (2,255.9) \u2013 2,323.7 (4, 331.1) 134.3 (4 ,19 6 . 8) Segment gross pro\ufb01t 182.8 550.4 103.7 \u2013 5.9 842.8 48.4 891.2 Operating and administrative expenses (96.9) (198.9) (81.7) (70.9) \u2013 (448.4) (21.5) (469.9) Impairment losses on \ufb01nancial assets \u2013 \u2013 (16.3) \u2013 \u2013 (16.3) \u2013 (16.3) Depreciation and amortisation (61.4) (103.4) (30.5) (3.6) \u2013 (198.9) (0.5) (199.4) Other losses (1.0) (7.8) (0.4) (0.2) \u2013 (9.4) \u2013 (9.4) Income from associates 0.3 \u2013 \u2013 \u2013 \u2013 0.3 \u2013 0.3 Operating pro\ufb01t/(loss) 23.8 240.3 (25.2) (74.7) 5.9 170 .1 26.4 196.5 Adjusted operating pro\ufb01t from discontinued operations for the year ended 31 December 2021 was \u00a320.3 million. This amount was attributable entirely to the Generation segment and is described in further detail in note 5.4. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements. 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 reportable segment. Year ended 31 December Additions to intangible assets Additions to property, plant and equipment 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Pellet Production \u2013 8.2 66.0 108.6 Generation 2.8 3.4 171.5 103.2 Customers 2.3 8.9 0.3 0 .1 Innovation, capital projects and other 4.3 1.8 8.2 3.6 Total 9.4 22.3 246.0 215.5 Total cash outflows in relation to capital expenditure during the year for continuing operations were \u00a3174.7 million (2021: \u00a3209.7 million). In 2022, the cash outflow in relation to property, plant and equipment is lower than the cost capitalised in property, plant and equipment (see note 3.1) predominantly as a result of \u00a364.6 million (2021: \u00a3nil) of deferred letters of credits issued in relation to the construction of the OCGT assets. Intra-group trading Intra-group transactions are carried out at management\u2019s best estimate of arm\u2019s-length, commercial terms that, where possible, equate to market prices. During 2022, the Pellet Production segment sold biomass pellets and provided associated services with a total value of \u00a3425.4 million (2021: \u00a3286.7 million) to the Generation segment and the Generation segment sold electricity, gas and renewable energy certi\ufb01cates with a total value of \u00a33,719.3 million (2021: \u00a32,031.1 million) to the Customers segment. The impact of all intra-group transactions, including any unrealised pro\ufb01t arising, is eliminated on consolidation. Major customers There was no individual customer, in either the current or previous \ufb01nancial year, that represented 10% or more of total revenue. Geographical analysis of revenue and non-current assets The geographic information analyses the Group\u2019s revenue and non-current assets by the entity\u2019s 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\u2019s revenue and non-current assets for the Generation and Customers segments are all UK based. The Group\u2019s Pellet Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s non-current assets are located in North America, in both Canada and the US. Revenue from continuing operations (based on location of customer) 31 December 2022 \u00a3m 31 December 2021 \u00a3m North America (Canada and US) 10.6 11.5 Europe 27.6 39.1 Asia 275.4 93.0 UK 7,4 61.7 4,944.4 Total 7,775. 3 5,088.0 Non-current assets (1) (based on asset\u2019s location) 31 December 2022 \u00a3m 31 December 2021 \u00a3m Canada 542.6 513.6 US 502.6 473.8 UK 2,054.5 2,053.5 Total 3,099.7 3,040.9 (1) Non-current assets comprise goodwill, intangible assets, property, plant and equipment, right-of-use assets and investments. 2.2 Revenue The majority of the Group\u2019s revenue is within the scope of IFRS 15. The other sources of the Group\u2019s revenue outside the scope of IFRS 15 comprise certain remeasurements, amounts reclassi\ufb01ed to revenue for gains and losses on UK CPI inflation swaps and income from the Government\u2019s Energy Bill Relief Scheme (EBRS). See note 2.7 for further details of certain remeasurements and note 7.2 for inflation risk management. Year ended 31 December 2022 Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue from contracts with customers 7,882.5 \u2013 7,882.5 5,170 .3 \u2013 5,170 . 3 Other revenue 276.7 (383.9) (107.2) 3.6 (85.9) (82.3) Total revenue 8 ,159. 2 (383.9) 7,775.3 5,173 .9 (85.9) 5,088.0 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 speci\ufb01ed good or service prior to the transfer to the customer. A summary of the Group\u2019s 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 below. Further details on signi\ufb01cant elements of revenue, principally how the Contract for Difference (CfD) and Renewable Obligation (RO) schemes operate and the related accounting, are provided below the table. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties Pellet sales (Pellet Production) The Group produces biomass pellets which are sold to external customers. Customers generally obtain control of the pellets at the point the pellets are loaded onto the shipping vessel for freight on board (FOB) sales. Where freight is also arranged for the customer, these sales are known as Cost, insurance and freight (CIF) sales. The freight component is considered a separate performance obligation. Invoices are raised in line with contractual terms and are usually payable within four-10 days. Revenue is recognised at the point that the pellets are loaded onto the shipping vessel. The amount of revenue recognised is based on the contracted price of the pellets. For CIF sales, revenue for the freight portion is recognised over the period the vessel sails. Electricity sales (Generation) The Group\u2019s Generation business has contracts for wholesale electricity sales. Performance obligations for these contracts are deemed to be a series of distinct goods that are substantially the same and transfer consecutively. Control is deemed to have passed to the customer at the point that the electricity has been supplied. This is measured based on energy supplied to the customer with the amount billed based on the units of electricity supplied. Invoices are raised in line with the Grid Trade Master Agreement (GTMA) contractual terms and are payable on the \ufb01fth banking day following the date of invoice. Revenues are measured based upon metered output at rates speci\ufb01ed under contract terms or prevailing market rates as applicable. These are recognised under the output method, whereby revenue is recognised based on the value transferred to the customer. Renewable certi\ufb01cate sales (Generation) Renewable Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origins (REGOs) are sold to counterparties at a point in time. ROCs sold to optimise working capital are invoiced in line with contractual terms and are usually payable within two days. Invoices for ROC sales to third parties are raised when the ROCs are transferred, typically four-\ufb01ve months following the end of the compliance period in which they were generated. Invoices are usually payable within seven days. External ROC and REGO sales are recognised at the point the relevant certi\ufb01cates are transferred to the counterparty. See below for further details.
Revenue stream
(Segment)
Nature and timing of performance obligations,
including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties
CfD income/payment
(Generation)
The Group is party to a CfD with the Low Carbon
Contracts Company (LCCC), a Government-
owned entity responsible for delivering elements
of the Government\u2019s Electricity Market Reform
Programme. Under the contract, the Group
makes or receives payments in respect of
electricity dispatched from a speci\ufb01c biomass-
fuelled generating unit.
Invoices are raised seven days following the date
of supply and are settled within 10-28 days.
The Group recognises the income or costs arising
from the CfD in the Consolidated income statement
as a component of revenue at the point the Group
meets its performance obligation under the CfD
contract. This is considered to be the point at which
the relevant generation is delivered and the payment
becomes contractually due.
See below for further details.
Ancillary services
(Generation)
Ancillary services refers to the provision of a
range of system support services to National Grid.
Most contracts are for the delivery of a speci\ufb01c
service either continually or on an ad-hoc basis
over a period of time.
Invoices are raised and subsequently settled in
line with National Grid Company Ancillary
Services settlement calendar, typically monthly.
Revenue is recognised by reference to the stage
of completion of the contractual performance
obligations, which are calculated by reference to
the amount of the contract term that has elapsed.
Depending on contract terms, this approach
may require judgement in estimating probable future
outcomes.
Other income
(All segments)
Other income is derived from the sale of goods
(for example, by-products from electricity
generation such as ash and gypsum) or the
provision of services. The customer obtains
control typically at the point of delivery to their
premises or upon collection.
Revenue is recognised at the point the control of the
goods is transferred to the customer.
Electricity and gas sales
(Customers)
The Group\u2019s Customers business sells electricity
and gas directly to business customers.
Energy supplied is measured based upon metered
consumption and contractual rates.
The Customers business also has long-term
contracts for the sale of electricity and gas,
which are deemed as being satis\ufb01ed over time in
line with the progress of the contracts.
Invoices are raised in line with contractual terms.
For small and medium-sized enterprise (SME)
customers, payment is generally due within
10-14 days . For Industrial and Commercial (I&C)
customers, payment is generally due between
28-90 days.
Revenue is recognised on the supply of electricity or
gas when a contract exists, supply has taken place,
a quanti\ufb01able price has been established or can be
determined and the amounts receivable are expected
to be recovered.
Where supply has taken place but has not yet been
measured or billed, revenue is estimated based on
consumption statistics and selling price estimates
and is recognised as accrued income. This estimate
is not considered to be a key source of estimation
uncertainty because historical experience has
demonstrated that these estimates are materially
accurate based on the subsequent billings
and settlements.
Where contracts for the sale of electricity and gas are
held, revenue is recognised in line with the progress
of the contracts.
The revenue recognised per unit of energy supplied is
based on the total estimated revenue and cost inputs
for \ufb01xed price contracts and contracted prices for
variable price contracts. Assumptions are applied
consistently but third-party costs can vary, therefore
actual outcomes may vary from initial estimates.
EBRS income
(Customers)
The UK Government introduced the EBRS,
running from 1 October 2022 to 31 March 2023.
Energy supplied to non-domestic customers in
this period will have a discount applied for the
customer under the scheme to cap their energy
tariff. The Customers business is claiming this
discount back from the Government.
Payment is due 10 days post submission
of a claim, which typically occurs monthly.
The discounted price of electricity and gas supplied
under the EBRS is recognised in revenue as it is
supplied. The discount amount claimed back from
the UK Government is recognised within revenue
over the same period as the underlying discounted
revenue it relates to is recognised.
The revenue received from the UK Government is
included within EBRS income in the table on page
192. The Group does not recognise any additional
revenue from the scheme than it would have done
if it were not introduced.
2.2 Revenue continued
2.2 Revenue continued
Renewable certi\ufb01cate sales
The generation and sale of renewable certi\ufb01cates, primarily ROCs and REGOs, is a key driver of the Group\u2019s \ufb01nancial performance.
The Renewable 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 certi\ufb01cates issued to generators of renewable electricity
which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have ful\ufb01lled 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 2022 the Group is operating in CP21.
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 CP21 is \u00a352.88 (2021: CP20 \u00a350.80). ROCs are typically procured
in arm\u2019s-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 a CP.
The \ufb01nancial bene\ufb01t of a ROC recognised in the Consolidated income statement at the point of generation is comprised of two parts:
the expected value to be obtained in a sale transaction with a third-party supplier relating to the buy-out price, and the expected value
of the recycle fund bene\ufb01t to be received at the end of the CP. During the year, the Group also made sales and related purchases of
ROCs to help optimise its working capital position.
External sales of ROCs in the table below includes \u00a3604.5 million of such sales (2021: \u00a3339.8 million), with a similar value reflected
in cost of sales.
REGOs are certi\ufb01cates 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 energy they generate.
See note 3.3 for further details of ROCs and REGOs generated and sold by the Generation business and those utilised by the
Customers business during the year.
CfD income/payment
The 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 2022
was \u00a3126.37 per MWh (2021: \u00a3118.54).
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 are in addition to amounts received from the
sale of the associated power in the wholesale market.
Gas sales
To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas
supply contracts in the Opus Energy part of the Customers business. Having already ceased acquiring new gas customers, following
internal processes and a regulatory driven 60-day grace period, no renewal contracts will be offered after May 2023. It is anticipated
that the portfolio will reduce by over 50% by the end of 2023 and be almost entirely gone by the end of 2024.
2.2 Revenue continued Further analysis of revenue for the year ended 31 December 2022 is provided in the table below: Year ended 31 December 2022 External \u00a3m Inter-segment \u00a3m Total \u00a3m Pellet Production Pellet sales 369.3 425.2 794.5 Other income 7.9 0.2 8 .1 Total Pellet Production 377.2 425.4 802.6 Generation Electricity sales 2, 633.1 3,293.3 5,926.4 Renewable certi\ufb01cate sales 851.5 426.0 1,27 7. 5 CfD payment (45.7) \u2013 (45.7) Ancillary services 73.0 \u2013 73.0 Other income 127. 0 \u2013 127. 0 Total Generation 3,638.9 3,719.3 7,358.2 Customers Electricity and gas sales 3, 853.1 \u2013 3, 8 53.1 EBRS income 289.2 \u2013 289.2 Other income 0.8 \u2013 0.8 Total Customers 4,143.1 \u2013 4 ,143.1 Elimination of inter-segment sales \u2013 (4,14 4.7) (4,14 4 .7 ) Total consolidated revenue in Adjusted results 8,159.2 \u2013 8,159. 2 Certain remeasurements (383.9) \u2013 (383.9) Total consolidated revenue in Total results 7,775. 3 \u2013 7,775. 3 Certain remeasurements losses of \u00a3383.9 million (2021: \u00a385.9 million) is comprised of gains and losses on derivative contracts that are used to manage risk exposures associated with the Group\u2019s 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 \u00a36.6 million (2021: \u00a35.4 million). See note 3.7 for further details on contract liabilities. Revenue recognised in the period from performance obligations satis\ufb01ed or partly satis\ufb01ed in the previous period was \u00a3nil in the current and previous \ufb01nancial year. Electricity sales in the Generation segment were net of a \u00a36.1 million payment to a Voluntary Energy Redress Fund. The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2021: Year ended 31 December 2021 External \u00a3m Inter-segment \u00a3m Total \u00a3m Pellet Production Pellet sales 157. 4 286.5 443.9 Other income 5.7 0.2 5.9 Total Pellet Production 163.1 286.7 449.8 Generation Electricity sales 1,790.2 1,688.5 3,478.7 Renewable certi\ufb01cate sales 538.6 342.6 881.2 CfD income 234.9 \u2013 234.9 Ancillary services 50.6 \u2013 50.6 Other income 36.9 \u2013 36.9 Total Generation 2,651.2 2 ,031.1 4,682.3 Customers Electricity and gas sales 2,358.9 \u2013 2,358.9 Other income 0.7 \u2013 0.7 Total Customers 2,359.6 \u2013 2,359.6 Elimination of inter-segment sales \u2013 (2,317. 8) (2 ,317. 8) Total consolidated revenue in Adjusted results 5,173.9 \u2013 5,173.9 Certain remeasurements (85.9) \u2013 (85.9) Total consolidated revenue in Total results 5,088.0 \u2013 5,088.0
2.2 Revenue continued
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 a customer is at an amount
that corresponds directly with the value to the customer of the Group\u2019s performance completed to date.
For accounting policies and other disclosures related to contract assets and liabilities, please see notes 3.5 and 3.7.
For accounting policies and other disclosures related to costs incurred to acquire customer contracts, please see note 3.6.
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\u2019s external auditor, Deloitte LLP, in respect of services they provided to the Group during
the year:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
The following expenditure has been charged in arriving at operating pro\ufb01t:
Staff costs (note 6.1) 248.9 218.6
Repairs and maintenance expenditure on property, plant and equipment 110.3 10 9.1
Other operating and administrative expenses 183.6 142.2
Total operating and administrative expenses 542.8 469.9
Auditor\u2019s remuneration
Year ended 31 December
2022
\u00a3\u2019000
2021
\u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements 1375.0 1,250.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts 40.0 40.0
Total audit fees 1,415.0 1,290.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements 115.0 110.0
Assurance services provided to non-material af\ufb01liates 18.0 16.4
Other services 46.2 42.3
Total audit and audit-related fees 1,594.2 1,458.7
Other assurance services 65.0 469.0
Total non-audit fees 65.0 469.0
Total auditor\u2019s remuneration 1,659.2 1,927.7
The fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements above relates to the audit of all of the Group\u2019s
subsidiaries to a statutory materiality. In addition, certain head of\ufb01ce companies are not required for the Group audit opinion, the
allocation of which is included in the fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above.
During 2022 there was a decrease in the level of non-audit services provided by Deloitte LLP in 2022. 2021 fees included agreed upon
procedures and other assurance services provided in connection with the acquisition of Pinnacle Renewable Energy Inc. (Pinnacle).
See note 5.1 for more information on the acquisition. See the Audit Committee report on page 116 for further details on other
assurance services provided by Deloitte LLP.
Section 2: Financial performance continued 2.4 Impairment review of \ufb01xed 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\u2019s cash-generating units (CGUs) or group of CGUs expected to bene\ufb01t from the synergies of the business combination. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGUs) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at least annually. 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 market participant (fair value less costs to sell). The initial assessment of the recoverable amount is normally based on value in use. The assessment of future cash flows is based on the approved long-term forecasts used to support the Board\u2019s strategic planning process. It includes all of the necessary costs expected to be incurred to generate the cash inflows from the CGU\u2019s 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\u2019s cash flow hedging activities and as a result the carrying amount of each CGU includes the mark-to-market value of those cash flow 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, electri\ufb01cation and the impact of relevant policies on longer-term supply and demand pro\ufb01les. As required by IAS 36, the additional value that could be obtained from enhancing the Group\u2019s assets and the potential bene\ufb01t of any future restructuring or reorganisation that the Group is not yet committed to, is not reflected in the value in use calculation. In determining value in use, the estimate of future cash flows is discounted to present value using a pre-tax nominal discount rate reflecting the speci\ufb01c risks attributable to the asset or CGU in question. The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell, based on its value in use and what a market participant would pay. If the recoverable amount is less than the current carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recorded 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. An impairment loss relating to a CGU is allocated \ufb01rst to reduce the carrying amount of any goodwill allocated 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 will be limited to reducing the assets, 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-\ufb01nancial 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 identi\ufb01ed, this is reversed immediately in the Consolidated income statement. CGUs Year ended 31 December 2022 Segment name CGUs contained within segment Goodwill \u00a3m Pellet Production Northern Operations and Southern Operations 176.0 Generation Drax Power Station (biomass) \u2013 Lanark 11.3 Galloway 4 0.1 Cruachan 26.9 OCGTs \u2013 Daldowie \u2013 Customers Drax Energy Solutions 10.7 Opus Energy 159.2 424.2 Financial statements
The Pellet Production business consists of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill recognised on the
acquisition of Pinnacle was allocated to the Pellet Production segment due to the pellet operations as a whole being expected to
bene\ufb01t from the synergies of the larger, combined pellet operations.
In respect of the Generation business, 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. Drax Power Station is comprised of two
separate CGUs, one for biomass generation assets and one for coal generation assets. The coal CGU was previously fully written down
following the decision to cease commercial coal generation. At the request of the UK Government, the Group has entered into an
agreement with National Grid to keep its two coal units available to provide a \u201cwinter contingency\u201d service to the UK power system
from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and will
only operate if, and when, instructed to do so by National Grid. Had no impairment loss been previously recognised on the coal assets,
they would have already been fully depreciated at the time the contract with National Grid was agreed. As such, management have
assessed the impact of this agreement on the coal CGU and determined no reversal of any prior impairment is required.
In respect of the Customers business, the Group considers the smallest groups of assets that generate independent cash inflows to be
equivalent to the operating entities within those businesses.
The OCGT development projects are considered one CGU due to the intention to operate and contract the plants using a portfolio
approach, resulting in forecast cash inflows that are interdependent.
The Innovation, capital projects and other function does not have any external cash inflows and therefore does not meet the de\ufb01nition
of a CGU and so is not included in the assessment below.
Assessment of indicators of impairment
CGU Goodwill? Impairment indicators identi\ufb01ed? Impairment review required?
Northern Operations and Southern Operations Y N Y
Drax Power Station (biomass) N N N
Lanark Y N Y
Galloway Y N Y
Cruachan Y N Y
OCGTs N Y Y
Daldowie N Y Y
Drax Energy Solutions Y N Y
Opus Energy Y N Y
A review of the Group\u2019s CGUs gave rise to an indicator of impairment for two CGUs: the Daldowie fuel plant, due to the increase
in energy prices resulting in a signi\ufb01cant increase in input costs, and the OCGTs, due to a strategic review conducted during the year
concluding that it was unlikely the Group\u2019s fourth OCGT project at Abergelli would be developed.
In determining that no indicators of impairment existed in respect of the remaining 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 the impact of such changes on the Group\u2019s long-term planning
models and future forecast cash flows. In particular, consideration was given to the impact of higher commodity prices and the
changes in the economic environment, including market interest rates and inflation.
Whilst higher commodity prices (e.g. power, gas and \ufb01bre) were an impairment indicator for Daldowie, they were not deemed an
impairment indicator for other CGUs which are less exposed to the impact of these higher prices. This is due to the nature of the
industries in which they operate and the corresponding impact on revenues. In the Generation and Customers businesses, higher
energy costs are an input cost but these are offset by higher revenues. Additionally, in the Pellet Production segment, higher \ufb01bre
costs and energy prices have been offset by increased revenues, reflecting strong demand for biomass pellets.
In considering the economic environment, management concluded the Group\u2019s CGUs tend to be less sensitive to changes in the economy,
as energy and pellet production are required to power and heat homes and businesses in the UK and abroad, which are generally
considered essential spend. The Generation, Pellet Production and Drax Energy Solutions CGUs also contract with high quality, stable
counterparties. For the Opus Energy CGU, customers are typically in the SME sector and therefore the impact of the economic
environment, combined with higher market prices could potentially impact the recoverability of debt. However this impact is offset by
the work done to improve the average credit quality of customers, along with achieved operational ef\ufb01ciencies and so was not deemed
to be an impairment indicator.
Higher interest rates were also considered, including their impact on discount rates. In the prior year, only the Galloway CGU was
sensitive to changes in the discount rate. Therefore, whilst interest rates have increased, any impact on discount rates was not
considered to be an impairment indicator. For the Galloway CGU, the impact of increases to power prices during 2022 would more
than offset the impact of a higher discount rate and therefore this was not considered to be an impairment indicator.
2.4 Impairment review of \ufb01xed assets and goodwill continued Consideration was also given to assumptions regarding biomass generation and biomass prices post-2027, when current subsidies for biomass generation at Drax Power Station are due to expire, and whether that was an indicator of impairment (See the Principal risks section starting on page 77 for further details on biomass acceptability). The Group aims to reduce biomass costs over time, as part of a strategy to secure a long-term future for biomass generation. Whilst management\u2019s forecasts extend beyond 2027, they indicate that a majority of the carrying amount of the Drax Power Station (biomass) CGU is supported by pre-2027 cash flows. Accordingly, the end of current subsidies in 2027 was not deemed to be an indicator of impairment. Drax Power Station is currently deemed to have a useful life until at least 2039 and an expectation of continuing to be in operation until that time. Impairment review For the purpose of impairment reviews the recoverable amounts of these CGUs, or groups of CGUs, were measured based on value in use calculations using the Group\u2019s established planning models. These calculations depend on a broad range of assumptions, the most signi\ufb01cant of which are outlined below for each CGU, or Group of CGUs, to which an impairment test has been performed in the current year. Management\u2019s bases for these estimates are also outlined below. CGUs Signi\ufb01cant assumptions for value in use calculation Management\u2019s bases for determining estimates used in value in use calculation Northern Operations and Southern Operations \u2022 Production costs \u2022 Production volumes \u2022 Sales prices \u2022 Discount rate \u2022 Future production costs are estimated based on current year actual production costs plus in\ufb02ation. \u2022 Production volumes are estimated based on the current capacity of the Group\u2019s pellet plants and the historical operational performance of the plants. \u2022 Sales prices are estimated based on contractual sales agreements. \u2022 See below for details of the basis used to estimate discount rates. Drax Energy Solutions and Opus Energy \u2022 Customer margins \u2022 Supply volumes \u2022 Collection rates \u2022 Power prices \u2022 Third party cost estimates \u2022 Discount rate \u2022 Customer margin estimates are based on previously achieved pro\ufb01tability. \u2022 The expectation of future organic volumes is based on past performance and management\u2019s expectations of market development. \u2022 Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are liquid), gas market prices as a proxy for power for another two years, then the Group\u2019s long-term power price forecast, which is prepared using externally provided gas price forecast and demand inputs. \u2022 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. \u2022 Collection rates are estimated based on historical data and adjusted for expected changes in future circumstances. \u2022 See below for details of the basis used to estimate discount rates. OCGTs, Lanark, Galloway and Cruachan \u2022 Power prices \u2022 Sources of stability income \u2022 Volume of generation (hydros only) \u2022 Construction cost (OCGTs only) \u2022 Discount rate \u2022 Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are liquid), gas market prices as a proxy for power for another two years, then the Group\u2019s long term power price forecast, which is prepared using externally provided gas price forecast and demand inputs. \u2022 Stability income assumptions are based on past performance and current agreed prices with National Grid. \u2022 Volume of generation for the hydro assets is derived from historical rainfall averages. \u2022 Construction costs are estimated based on agreed contracted prices and obtained quotes. \u2022 See below for details of the basis used to estimate discount rates. Daldowie \u2022 Gas prices \u2022 Estimated contract end date \u2022 Discount rate \u2022 Future wholesale gas price estimates are based on market traded prices for around \ufb01ve years (the period they are liquid). \u2022 The end date of the current contract is based on the contractual term and expectations about future extensions or changes to the contract term. \u2022 See below for details of the basis used to estimate discount rates. For each group of CGUs, management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the industries in which the Group operates. These longer-term structural changes are mainly linked to climate change and the transition to more renewable forms of energy and net zero. They are explained in more detail in each section below. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2% in all models. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for each of the industries in which the Group operates.
2.4 Impairment review of \ufb01xed assets and goodwill continued
The discount rates used 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 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.
As the Group does not believe that any reasonably possible change in the key assumptions would result in an impairment it is not
considered a key source of estimation uncertainty and therefore any sensitivities provided below are for additional information only.
Further details on the assessments for each group of CGUs are given below.
Pellet Production
The recoverable amount of the Pellet Production group of CGUs, consisting of the Northern Operations and Southern Operations
CGUs, is measured at least annually due to the goodwill allocated to the group of CGUs. These CGUs are principally engaged in the
production and sale of biomass pellets. Management has projected detailed cash flows based on a period of 15 years, reflecting
consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by
IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning,
which is relevant to take into account future structural changes forecast within the pellet industry such as climate change and the
expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Cash flows beyond
the 15 year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market
share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning
model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate
for the pellet industry.
Group of CGUs
Carrying
amount
(including
allocated
goodwill)
\u00a3m
Discount
rate
Pellet Production 1,024.7 10.5%
The pre-tax nominal discount rate of 10.5% (2021: 8.5%) was calculated based on independent analysis commissioned by the Group.
The value in use for the Pellet Production group of CGUs was signi\ufb01cantly in excess of its carrying amount. An increase in production
costs of $20 per tonne in the calculation would reduce the headroom by \u00a3711.4 million and a 15% decrease in production volumes
would reduce the headroom by \u00a3572.3 million. Neither scenario would result in an impairment. No reasonably possible change in the
key assumptions would result in a recoverable amount that was lower than its carrying amount.
Drax Energy Solutions and Opus Energy
The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured annually due to the existence of goodwill
allocated to these CGUs. These businesses are principally focused on renewable electricity sales and therefore consideration of
climate and environmental impacts are already a key feature of the business models. Management has projected detailed cash flows
based on a period of \ufb01ve years, consistent with the period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the
Viability statement. Cash flows beyond the \ufb01ve-year period are inflated into perpetuity using a growth rate of 2%. This growth rate is
based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were
obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not
exceed the relevant long-term average growth rate for the energy supply industry.
The carrying amounts and discount rates applied to each CGU are set out in the table below:
CGU
Carrying
amount
(including
allocated
goodwill)
\u00a3m
Discount
rate
Drax Energy Solutions 25.7 10.3%
Opus Energy 230.5 10.3%
The expected future cash flows of the Drax Energy Solutions CGU were discounted using a pre-tax nominal discount rate of 10.3%
(2021: 8.7%), calculated based on independent analysis commissioned by the Group, adjusted to the speci\ufb01c circumstances and risk
factors affecting the Group\u2019s Customers business. The Group believes that this rate reflects the prospects for a well-established
Customers business, reflecting the comparatively long trading record and customer bases the business holds.
The value in use of the Drax Energy Solutions CGU was signi\ufb01cantly in excess of its carrying amount. An increase in the discount
rate to 11.4% combined with factoring in 0% growth in the calculation would reduce the headroom by \u00a336.0 million, which would not
result in an impairment. Reflecting the signi\ufb01cant headroom in the analysis, the Group does not believe that any reasonably possible
change in the key assumptions would result in a recoverable amount for the Drax Energy Solutions CGU that was lower than its
carrying amount.
2.4 Impairment review of \ufb01xed assets and goodwill continued The expected future cash flows of the Opus Energy CGU were also discounted using a pre-tax nominal discount rate of 10.3% (2021: 8.7%). The forecast future cash flows of the CGU are adjusted to reflect the relative risk pro\ufb01le of its customer base compared to Drax Energy Solutions, for example by incorporating higher levels of expected credit losses. Opus Energy operates in the same industry, under the same macro-economic conditions and is impacted by the same commodity prices and impacts of climate change as Drax Energy Solutions. As such, it is considered appropriate to use the same discount rate for both CGUs, supported by independent analysis. The value in use of the Opus Energy CGU was signi\ufb01cantly in excess of its carrying amount. An increase in the discount rate to 11.4% combined with factoring in 0% growth in the calculation would reduce the headroom by \u00a357.9 million. This would not result in an impairment. Reflecting the signi\ufb01cant headroom in the analysis and sensitivities performed, the Group does not believe that any reasonably possible change in the key assumptions would result in a recoverable amount for the Opus Energy CGU that was lower than its carrying amount. Lanark, Galloway and Cruachan The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment annually due to the existence of goodwill allocated to these CGUs. These CGUs are engaged in hydro and pumped storage power generation. Management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the generation industry in the models used, such as climate change, changing weather patterns, and the continued transition to renewable forms of energy and net zero. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the generation industry. CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Lanark 49.9 8.5% Galloway 169.8 8.5% Cruachan 250.6 8.5% The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 8.5% (2021: 7.3%) The discount rates were calculated based on independent analysis commissioned by the Group, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s hydro and pumped storage generation operations. The value in use for all three CGUs (Lanark, Galloway and Cruachan) was in excess of their carrying amounts. An increase in the discount rate to 15% in each of the calculations would reduce the headroom for Lanark, Galloway and Cruachan by \u00a326.0 million, \u00a387.2 million and \u00a3257.6 million respectively. A decrease in power prices of 25% in each of the calculations would reduce the headroom for Lanark, Galloway and Cruachan by \u00a328.9 million, \u00a3 101.1 million and \u00a3154.4 million respectively. None of these changes would result in an impairment. No reasonably possible change in the key assumptions would result in a recoverable amount that was lower than their carrying amount. Daldowie The Daldowie CGU does not have any goodwill allocated to it but in the current year had an indicator of impairment present. The impairment indicator was due to higher energy input costs resulting in a reduction in the forecast earnings. A full impairment review was carried out as a result of this impairment indicator. This CGU is engaged in processing wastewater sludge into biomass pellets. Management has projected detailed cash flows based on a period of three years, reflecting the expected contract end date. The carrying amount and discount rate applied to the CGU is set out in the table below: CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Daldowie 8.9 8.9% An independent analysis commissioned by the Group calculated a pre-tax nominal discount rate of 8.9% which was applied to the expected future cash flows to determine the value in use of the fuel plant. The carrying amount of \u00a316.9 million was higher than the value in use calculation and so an impairment charge was therefore recorded. As there is no goodwill associated with the Daldowie fuel plant, this charge of \u00a38.0 million was applied to its \ufb01xed assets on a pro rata basis as described in the accounting policy section of this note. An increase in estimated energy input costs of 25% in the value in use calculation would increase the impairment by \u00a34.2 million.
2.4 Impairment review of \ufb01xed assets and goodwill continued
OCGTs
The OCGT CGU does not have any goodwill allocated to it but in the current year had an indicator of impairment present. Following a
strategic review during the year, it was concluded that it was currently unlikely that the Group would develop its fourth OCGT project
at Abergelli. The Abergelli OCGT development does not hold a Capacity Market contract. As a result of this strategic review, the Group
has recognised an impairment charge of \u00a38.6 million, representing the previously capitalised development costs for the individual
project. The impairment indicator was speci\ufb01c to the Abergelli assets with the CGU. No impairment indicators were identi\ufb01ed in
relation to the other assets within the CGU, or the CGU as a whole, and therefore a full impairment assessment was not required.
Impairment of non-current assets
Due to a change in accounting policy in the current year an impairment charge has been recognised on intangible assets relating to
SaaS costs previously capitalised (See Change in accounting policy section in the Basis of preparation on page 177 for further details).
An impairment charge has also been recognised on a billing system where the Group has stopped development and is engaged in
active discussion with the supplier reflecting the supplier\u2019s failure to perform under this contract. See note 5.2 for further details.
The Group has incurred impairment losses in the year. It is the Group\u2019s policy that any impairments of assets that have not yet been
brought into use and depreciated or amortised are reflected in the cost of the asset being impaired. For impairments of assets that
have already been brought into use, the impairment is reflected as an accelerated charge in the accumulated depreciation or
amortisation of the asset.
Impairment
Daldowie
\u00a3m
OCGTs
\u00a3m
Customers
billing system
\u00a3m
SaaS
assets
\u00a3m
Total
\u00a3m
Property, plant and equipment \u2013 cost \u2013 6.9 \u2013 \u2013 6.9
Property, plant and equipment \u2013 accumulated
depreciation 8.0 \u2013 \u2013 \u2013 8.0
Intangible assets \u2013 cost \u2013 1.7 19.2 \u2013 20.9
Intangible assets \u2013 accumulated amortisation \u2013 \u2013 \u2013 5.7 5.7
Total impairment of non-current assets 8.0 8.6 19.2 5.7 41.5
The total impairments for the year of \u00a341.5 million are recognised in the impairment of non-current assets line in the Consolidated
income statement. The impairment of SaaS intangible assets and the Customers billing system, totalling \u00a324.9 million, have been
treated as exceptional items. See note 2.7 for further details.
2.5 Net \ufb01nance costs
Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign
exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful
lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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.
A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Interest payable and similar charges:
Interest payable on borrowings measured at amortised cost (68.6) (59.2)
Interest on lease liabilities (6.8) (4.9)
Unwinding of discount on provisions (1.1) (0.6)
Amortisation of deferred \ufb01nance costs (6.1) (5.7)
Other \ufb01nancing charges (0.5) (0.5)
Total interest payable and similar charges included in Adjusted results (83.1) (70.9)
Interest receivable:
Interest income on bank deposits 3.3 0.1
Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3
Total interest receivable included in Adjusted results 4.3 0.4
Foreign exchange gains included in Adjusted results 14.8 0.9
Net \ufb01nance costs included in Adjusted results (64.0) (69.6)
Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4)
Net \ufb01nance costs in Total results (68.2) (75.0)
2.5 Net \ufb01nance costs continued Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. 2.6 Current and deferred tax The tax credit or charge includes both current and deferred tax. It reflects the estimated tax on the pro\ufb01t before tax for the Group for the year ended 31 December 2022 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 pro\ufb01t or loss for the year in the relevant jurisdiction. Taxable pro\ufb01t or loss differs from pro\ufb01t 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\u2019s 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 independent tax advice. No uncertain tax provisions have been recognised in the current or prior year. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 . The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime, research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against total corporation tax payable. 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total tax credit/(charge) from continuing operations comprises: Current tax \u2013 Current year (66.0) (7.7) \u2013 Adjustments in respect of prior periods 1.9 (1.4) Deferred tax \u2013 Before impact of tax rate changes 61.9 (7.3) \u2013 Adjustments in respect of prior periods (0.1) (1.0) \u2013 Effect of changes in tax rate 6.7 (49.0) Total tax credit/(charge) 4.4 (66.4) 2.6 Current and deferred tax continued Year ended 31 December 2022 \u00a3m 2021 \u00a3m Tax credited/(charged) on items recognised in other comprehensive income: Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme 6 .1 (7.2) Deferred tax on share-based payments \u2013 5.4 Deferred tax on cash \ufb02ow hedges (5.6) 41.2 Deferred tax on cost of hedging 2.2 (7.7) Total tax credit 2.7 31.7 Year ended 31 December 2022 \u00a3m 2021 \u00a3m Tax credited/(charged) on items released directly from equity: Deferred tax on cost of hedging 7.2 5.4 Deferred tax on cash \ufb02ow hedges 4.8 ( 7.5) Deferred tax on share-based payments 7.4 \u2013 Total tax credit/(charge) 19.4 (2.1) UK corporation tax is the main income tax for the Group and is calculated at 19% (2021: 19%) of the assessable pro\ufb01t or loss for the year. Due to the Group\u2019s overseas operations, the US income tax rate of 21% (2021: 21%) and the Canadian corporate income tax rate of 27% (2021: 27%) are also relevant to the Group\u2019s tax charge. The tax rate for the full year, before the impact of changes in tax rates, is lower than the standard corporation tax rate applicable in the UK, principally due to the tax bene\ufb01t arising from UK Patent Box claims and the UK super-deduction introduced in the Finance Act 2021, which allows for a 130% in-year deduction for tax purposes against the cost of qualifying capital expenditure on plant and machinery incurred between 1 April 2021 and 31 March 2023. 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% to pro\ufb01ts derived from utilisation of the patented technology. The Finance Act 2021 also contained legislation to increase the main rate of UK corporation tax from 19% to 25% with effect from 1 April 2023. The impact of this rate increase is a net \u00a36.7 million deferred tax credit through Total results in the Consolidated income statement (2021: \u00a349.0 million charge). The Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows: Year ended 31 December 2022 Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Pro\ufb01t/(loss) before tax from continuing operations 405.4 ( 327.3) 78.1 100.5 21.0 121.5 Pro\ufb01t/(loss) before tax multiplied by the rate of corporation tax in the UK of 19% (2021: 19%) 7 7. 0 (62.2) 14.8 19.2 4.0 23.2 Effects of: Adjustments in respect of prior periods (1.8) \u2013 (1.8) 2.4 \u2013 2.4 Expenses not deductible for tax purposes 4.5 \u2013 4.5 2.8 1.7 4.5 Impact of tax rate change 2.9 (9.6) (6.7) 0.4 48.6 49.0 Difference in overseas tax rates (1.3) \u2013 (1.3) (1.1) \u2013 (1.1) Patent Box bene\ufb01t (9.6) \u2013 (9.6) (8.0) \u2013 (8.0) Tax effect of RDEC credit (0.8) \u2013 (0.8) (0.9) \u2013 (0.9) UK super-deduction (3.5) \u2013 (3.5) (2.7) \u2013 (2.7) Total tax charge/(credit) 67.4 (71.8) (4.4) 12.1 54.3 66.4 2.6 Current and deferred tax continued The movements in deferred tax assets and liabilities during each year are shown below. Financial instruments \u00a3m Accelerated capital allowances \u00a3m Non-trade losses \u00a3m Intangible assets \u00a3m Trade losses \u00a3m Other liabilities \u00a3m Other assets \u00a3m Total \u00a3m At 1 January 2021 13.0 (183.0) 2.3 (15.7) 33.5 (23.3) 16.5 (156.7) (Charged)/credited to the income statement (5.6) (64.4) \u2013 (3.5) 11.7 5.4 (0.9) (57. 3) Charged to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.2) (7.2) Credited to other comprehensive income in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 5.4 Credited to other comprehensive income in respect of cash \ufb02ow hedges 41.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 41.2 Charged to other comprehensive income in respect of cost of hedging ( 7.7) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.7) Charged to equity in respect of cash flow hedges (7.5) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.5) Credited to equity in respect of cost of hedging 5.4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 Impact of acquisition \u2013 (44.7) \u2013 (0.6) 14.4 (0.8) 19.6 (12.1) Effect of changes in foreign exchange rates \u2013 (0.5) \u2013 (0.1) 0.4 \u2013 0.1 (0.1) At 1 January 2022 38.8 (292.6) 2.3 (19.9) 60.0 (18.7) 33.5 (196.6) Credited/(charged)to the income statement 77.3 (24.9) (1.8) 7.0 15.7 (20.7) 16.0 68.6 Credited to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 6 .1 \u2013 6.1 Charged to other comprehensive income in respect of cash \ufb02ow hedges ( 5.6) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (5.6) Credited to other comprehensive income in respect of cost of hedging 2.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 2.2 Credited to equity in respect of cash flow hedges 4.8 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4.8 Credited to equity in respect of cost of hedging 7. 2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7. 2 Credited to equity in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7.4 7.4 Impact of acquisition \u2013 (0.8) \u2013 \u2013 \u2013 \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates \u2013 (3.0) \u2013 \u2013 4.4 \u2013 1.0 2.4 At 31 December 2022 124.7 (321.3) 0.5 (12.9) 8 0 .1 (33.3) 57.9 (104.3) Deferred tax balances (after offset) for \ufb01nancial reporting purposes: Net Canadian deferred tax asset at 31 December 2022 \u2013 (49.6) \u2013 0.2 27.1 (1.0) 32.7 9.4 Net US deferred tax asset at 31 December 2022 \u2013 (30.6) \u2013 \u2013 53.0 \u2013 5.5 27.9 Net UK deferred tax liability at 31 December 2022 124.7 (241.1) 0.5 (13.1) \u2013 (32.3) 19.7 (141.6) Net Canadian deferred tax asset at 31 December 2021 \u2013 ( 3 8 .1) \u2013 (0.2) 17.5 (0.4) 26.6 5.4 Net US deferred tax asset at 31 December 2021 \u2013 (27.6) \u2013 \u2013 42.5 (0.3) 8.7 23.3 Net UK deferred tax liability at 31 December 2021 38.8 (226.9) 2.3 (19.7) \u2013 (18.0) (1.8) (225.3) 2.6 Current and deferred tax continued Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so, otherwise they are shown separately in the Consolidated balance sheet. Within the above trade losses deferred tax asset of \u00a380.1 million (2021: \u00a360.0 million) there is \u00a353.0 million (2021: \u00a342.5 million) in relation to losses in the US Pellet Production business. The remaining \u00a327.1 million relates to losses of the Canadian Pellet Production business (2021: \u00a317.5 million). The future expected reversal of accelerated capital allowances and other timing differences, coupled with the pro\ufb01tability (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 suf\ufb01cient pro\ufb01ts in the short to medium term against which to utilise the deferred tax assets. The estimates used when assessing the future pro\ufb01tability of the US and Canadian businesses have been approved by the Board and are consistent with estimates used in the going concern assessment and in the Viability statement on page 75. As at 31 December 2022 the Group held \u00a379.2 million (2021: \u00a379.2 million) of 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. 2.7 Alternative performance measures The APMs glossary to these Consolidated \ufb01nancial statements on page 287 provides details of all APMs used, each APM\u2019s closest IFRS equivalent, the reason why the APM is used by the Group and a de\ufb01nition of how each APM is calculated. The Group presents Adjusted results in the Consolidated income statement. The Directors believe that this approach is useful as it provides a clear and consistent view of underlying trading performance. Certain remeasurements and exceptional items are excluded from Adjusted results and presented in a separate column. The Group believes that this presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way Executive management and the Board assess the performance of the business. The Group has a policy and framework for the determination of transactions to present as exceptional. All transactions presented as exceptional are approved by the Audit Committee. See the Audit Committee Report on page 116 for further details. In these Consolidated \ufb01nancial statements, the following transactions have been designated as exceptional items and presented separately: \u2022 Impairment charges incurred on the application of the Group\u2019s new accounting policy for SaaS costs, consistent with the IFRIC agenda decision (see Change in accounting policy section in the Basis of preparation on page 177) (2022, All segments), and on costs associated with the Customers billing system (2022, Customers). See note 5.2 for further information. \u2022 Costs associated with the acquisition and integration of Pinnacle (2021, Pellet Production). \u2022 Costs relating to the restructuring of the Customers business (2021, Customers). \u2022 Operating expenditure which was incurred as a direct result of the decision to cease commercial coal generation (2021, Generation). \u2022 Impact of UK tax rate change on deferred tax balances (2022 and 2021, Generation and Customers). See note 2.6 for further information. Certain remeasurements comprise gains or 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. The effect of excluding certain remeasurements from Adjusted results is to reflect commodity sales and purchases at contracted prices i.e. at the all-in-hedged amount paid or received in respect of the delivery of the commodity in question, and \ufb01nancial contracts in the period they are intended to hedge, to reflect the underlying trading performance of the Group in Adjusted results. 2.7 Alternative performance measures continued Volatility in \ufb01nancial and commodity markets has continued in 2022, in part due to the conflict in Ukraine. This has resulted in signi\ufb01cant movements in the remeasurement gains and losses on certain derivative \ufb01nancial instruments which do not qualify for hedge accounting, or where hedge accounting is ineffective, as shown in the table below, principally relating to gas, certain foreign currency contracts, inflation and oil. Further detail on the Group\u2019s derivative \ufb01nancial instruments is provided in Section 7. Year ended 31 December 2022 \u00a3m 2021 (1) \u00a3m Exceptional items: Inventory provision as a result of coal closure \u2013 (0.3) Acquisition costs \u2013 ( 7.9) Restructuring costs \u2013 (5.2) Integration costs \u2013 (4 .1) Coal closure costs \u2013 (4.8) Impairment of non-current assets (24.9) \u2013 Exceptional items included within operating pro\ufb01t and pro\ufb01t before tax (24.9) (22.3) Tax on exceptional items 4.7 2.5 Impact of tax rate change (9.8) (50.2) Exceptional items after tax (30.0) (70.0) Certain remeasurements: Net fair value remeasurements on derivative contracts included in revenue (441.4) (7 7.0) Net remeasurements realised on maturity of derivative contracts included in revenue 107.7 (8.9) Net hedge ineffectiveness reclassi\ufb01ed to pro\ufb01t or loss included in revenue (50.2) \u2013 Net fair value remeasurements on derivative contracts included in cost of sales 32.6 36.6 Net remeasurements realised on maturity of derivative contracts included in cost of sales 53.1 98.0 Certain remeasurements included within operating pro\ufb01t (298.2) 48.7 Net remeasurements on maturity of derivative contracts included in interest payable and similar charges (0.4) (0.3) Net fair value remeasurements on derivative contracts included in foreign exchange gains/(losses) (3.8) (5.1) Certain remeasurements included in pro\ufb01t before tax (302.4) 43.3 Tax on certain remeasurements 57.5 (8.2) Impact of tax rate change 19.4 1.6 Certain remeasurements after tax (225.5) 36.7 Reconciliation of pro\ufb01t after tax from continuing operations: Adjusted pro\ufb01t after tax 338.0 88.4 Exceptional items after tax (30.0) (70.0) Certain remeasurements after tax (225.5) 36.7 Total pro\ufb01t after tax 82.5 55.1 (1) Comparative amounts for the year ended 31 December 2021 have been re-presented to split out the impact of tax rate change between exceptionals and certain remeasurements. 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 the Adjusted pro\ufb01t after tax and Adjusted basic EPS from continuing operations and the total cash flow from continuing and discontinued operations. Year ended 31 December 2022 Revenue \u00a3m Gross pro\ufb01t \u00a3m Operating pro\ufb01t \u00a3m Pro\ufb01t before tax \u00a3m Tax credit/ (charge) \u00a3m Pro\ufb01t/(loss) for the period \u00a3m Basic earnings/ (loss) per share Pence Net cash from operating activities \u00a3m Total results IFRS measure 7,7 75.3 1,023.3 146.3 7 8 .1 4.4 82.5 21.3 207.7 Certain remeasurements: Net fair value remeasurement on derivative contracts 383.9 298.2 298.2 302.4 (57.5) 244.9 61.2 \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 (19.4) (19.4) (4.8) \u2013 Exceptional items: Impairment of non-current assets \u2013 \u2013 24.9 24.9 (4.7) 20.2 5.0 \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 9.8 9.8 2.4 \u2013 Total 383.9 298.2 32 3.1 327.3 (71.8) 255.5 63.8 \u2013 Adjusted results totals 8,159.2 1,321.5 469.4 405.4 (67.4) 338.0 8 5.1 2 07.7 Year ended 31 December 2021 (1) Revenue \u00a3m Gross pro\ufb01t/ (loss) \u00a3m Operating pro\ufb01t/(loss) \u00a3m Pro\ufb01t/(loss) before tax \u00a3m Tax (charge)/ credit \u00a3m Pro\ufb01t/(loss) for the period \u00a3m Basic earnings/ (loss) per share Pence Net cash from operating activities \u00a3m Total results IFRS measure 5,088.0 891.2 196.5 121.5 (66.4) 55.1 13.9 306.5 Certain remeasurements: Net fair value remeasurement on derivative contracts 85.9 (48.7) (48.7) (43.3) 8.2 ( 35.1) (8.8) \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 (1.6) (1.6) (0.4) \u2013 Exceptional items: Inventory provision as a result of coal closure \u2013 0.3 0.3 0.3 (0.1) 0.2 0.1 \u2013 Acquisition costs \u2013 \u2013 7.9 7.9 \u2013 7.9 1.8 7.9 Restructuring costs \u2013 \u2013 5.2 5.2 (0.8) 4.4 1.1 4.4 Integration costs \u2013 \u2013 4.1 4 .1 (0.8) 3.3 0.8 3.3 Coal closure costs \u2013 \u2013 4.8 4.8 (0.8) 4.0 1.2 \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 50.2 50.2 12.6 \u2013 Total 85.9 (48.4) (26.4) (21.0) 54.3 33.3 8.4 15.6 Adjusted results totals 5,173.9 842.8 170.1 100.5 (12.1) 88.4 22.3 322.1 (1) Comparative amounts for the year ended 31 December 2021 have been re-presented to split out the impact of tax rate change between exceptionals and certain remeasurements. 2.7 Alternative performance measures continued Adjusted EBITDA from continuing and discontinued operations is a key measure of performance for the Group. A reconciliation from Adjusted operating pro\ufb01t from continuing operations as per the Consolidated income statement is shown below: Year ended 31 December 2022 Attributable to Owners of the Parent Company \u00a3m NCI \u00a3m Total \u00a3m Adjusted operating pro\ufb01t/(loss) 472.0 (2.6) 469.4 Depreciation and amortisation 237. 2 2.2 239.4 Impairment losses on non-current assets 16.6 \u2013 16.6 Other losses 5.7 0.1 5.8 Income from associates (0.5) \u2013 (0.5) Adjusted EBITDA 731.0 (0.3) 730.7 Year ended 31 December 2021 Attributable to Owners of the Parent Company \u00a3m NCI \u00a3m Total \u00a3m Adjusted operating pro\ufb01t 170.6 (0.5) 170 .1 Depreciation and amortisation 198.3 0.6 198.9 Other losses 9.3 0 .1 9.4 Income from associates (0.3) \u2013 (0.3) Adjusted EBITDA from continuing operations 37 7.9 0.2 378 .1 Adjusted EBITDA from discontinued operations 20.3 \u2013 20.3 Adjusted EBITDA from continuing and discontinued operations 398.2 0.2 398.4 Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Total \u00a3m Segment Adjusted EBITDA: Continuing operations 133.7 695.5 25.8 (113.6) (10.4) 731.0 Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Total \u00a3m Segment Adjusted EBITDA: Continuing operations 85.7 351.5 5.7 (70.9) 5.9 37 7.9 Discontinued operations \u2013 20.3 \u2013 \u2013 \u2013 20.3 Total 85.7 371.8 5.7 (70.9) 5.9 398.2 Net debt Net debt is calculated by taking the Group\u2019s borrowings (note 4.2), adjusting for the impact of associated hedging instruments, and subtracting cash and cash equivalents (note 4.1). The Group has entered into cross-currency interest rate swaps, \ufb01xing the sterling value of the principal repayments and interest in respect of the Group\u2019s US dollar (USD) and euro (EUR) denominated debt (see note 4.2). USD and EUR balances are translated at the hedged rate, rather than the rate prevailing at the reporting date, which impacts the carrying amount of the Group\u2019s borrowings. Net debt excludes the share of borrowings and cash and cash equivalents attributable to NCI. See the APMs glossary and the APMs section within the Basis of preparation for further details on the calculation of Net debt. As at 31 December 2022 \u00a3m 2021 \u00a3m Borrowings (1,440.9) (1,361.0) Cash and cash equivalents 238.0 317.4 Net cash and borrowings (1,202.9) (1,043.6) NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries (0.7) \u2013 Net debt excluding the impact of hedging instruments (1,203.6) (1,043.6) Impact of hedging instruments (2.4) (64.4) Net debt (1,206.0) (1,10 8 .0) Collateral posted/(received) 234.0 (172.8) Net debt excluding collateral (972.0) (1,280.8) The table below reconciles Net debt in terms of changes in these balances across the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Net debt at 1 January (1,10 8 .0) (8 19.1) (Decrease)/increase in cash and cash equivalents (85.6) 27.3 Increase in borrowings (8.6) (310.2) Effect of changes in foreign exchange rates (65.8) 15.2 Movement in the impact of hedging instruments 62.0 (21.2) Net debt at 31 December (1,206.0) (1,10 8 .0) Borrowings include listed bonds, bank debt and RCFs (to the extent drawn in cash), net of any deferred \ufb01nance costs. Borrowings do not include other \ufb01nancial liabilities such as lease liabilities and trade and other payables (including working capital facilities as described in note 3.7). The Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This reflects the nature of the contracts included in this balance which, prior to the application of IFRS 16, were predominantly not held on the Consolidated balance sheet and instead disclosed as operating commitments. The exclusion of lease liabilities from the calculation of Net debt is also consistent with the Group\u2019s covenant reporting requirements. The Group does not include balances related to supply chain \ufb01nancing or factoring in the de\ufb01nition of Net debt. These facilities do not increase the Group\u2019s working capital cycle beyond the Group\u2019s standard payment terms and are only short-term balances. Therefore, the balances do not meet the Group\u2019s de\ufb01nition of borrowings and so are excluded from Net debt. A reconciliation of the change in borrowings during the year is set out in the table on 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 2022 2021 Adjusted EBITDA (continuing and discontinued operations) (\u00a3m) 731.0 398.2 Net debt (\u00a3m) (1,206.0) (1,10 8 .0) Net debt excluding collateral (\u00a3m) (972.0) (1,280.8) Net debt to Adjusted EBITDA ratio 1.6 2.8 Net debt (excluding collateral) to Adjusted EBITDA ratio 1.3 3.2 2.7 Alternative performance measures continued Cash and committed facilities The below table reconciles the Group\u2019s available cash and committed facilities: As at 31 December 2022 \u00a3m 2021 \u00a3m Cash and cash equivalents (note 4.1) 238.0 317.4 RCF available but not utilised (1) 26 0.1 231.4 Liquidity facility available but not utilised 200.0 \u2013 Total cash and committed facilities 698 .1 548.8 (1) The Group\u2019s available balance on the RCF facility (includes \u00a3300 million and C$10 million RCF, see note 4.2) is reduced by letters of credit drawn under the RCF. At 31 December 2022 \u00a346.0 million letters of credit were drawn (2021: \u00a374.4 million). Further commentary on total cash and committed facilities is contained within the Financial review starting on page 20. 2.8 Earnings per share Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to each ordinary share in issue. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the Parent Company (pro\ufb01t or loss after tax in accordance with IFRS excluding amounts attributable to NCI) by the weighted average number of ordinary shares that were in issue 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 contingency period (such as those to be issued under employee share schemes \u2013 see note 6.2), were exercised and treated as ordinary shares as at the reporting date. Repurchased shares of 13.8 million (2021: 13.8 million) held in the Treasury shares reserve (see note 4.4) are not included in the weighted average calculation of shares. 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 2022 2021 Earnings attributable to equity holders of the Parent Company for the purposes of basic and diluted earnings per share (\u00a3m), made up of: 85.1 79.7 Net result from continuing operations 85.1 55.6 Net result from discontinued operations \u2013 24 .1 Number of shares (millions): Weighted average number of ordinary shares for the purposes of basic earnings per share 400.4 398.4 Effect of dilutive potential ordinary shares under share plans 14.0 14.2 Weighted average number of ordinary shares for the purposes of diluted earnings per share 414.4 412.6 Year ended 31 December 2022 2021 Earnings per share attributable to the owners of the Parent Company Adjusted results Total results Adjusted results Total results Earnings \u2013 pro\ufb01t after tax (\u00a3m) 340.6 85.1 105.6 79.7 Earnings per share \u2013 basic (pence) 85.1 21.3 26.5 20.0 Earnings per share \u2013 diluted (pence) 82.2 20.5 25.6 19.3 Year ended 31 December 2022 2021 Earnings per share from continuing operations attributable to the owners of the Parent Company Adjusted results Total results Adjusted results Total results Earnings \u2013 pro\ufb01t after tax (\u00a3m) 340.6 85.1 88.9 55.6 Earnings per share \u2013 basic (pence) 85.1 21.3 22.3 13.9 Earnings per share \u2013 diluted (pence) 82.2 20.5 21.5 13.5 There were no discontinued operations in the year. The Total pro\ufb01t after tax from discontinued operations in 2021 of \u00a324.1 million, resulted in Total basic EPS of 6.1 pence and Total diluted EPS of 5.8 pence. Application of the same calculation to Adjusted pro\ufb01t after tax from discontinued operations in 2021 of \u00a316.7 million, resulted in Adjusted basic EPS of 4.2 pence and Adjusted diluted EPS of 4.1 pence. 2.9 Dividends Year ended 31 December 2022 \u00a3m 2021 \u00a3m Amounts recognised as distributions to equity holders in the year (based on the number of shares in issue at the record date): Interim dividend for the year ended 31 December 2022 of 8.4 pence per share paid on 7 October 2022 (2021: 7.5 pence per share paid on 8 October 2021) 33.7 29.9 Final dividend for the year ended 31 December 2021 of 11.3 pence per share paid on 13 May 2022 (2020: 10.3 pence per share paid on 14 May 2021) 45.2 41.0 Total distributions 78.9 70.9 At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a resolution is passed to approve payment of a \ufb01nal dividend for the year ended 31 December 2022 of 1 2.6 pence per share (equivalent to approximately \u00a350 million) payable on or before 19 May 2023. The \ufb01nal dividend has not been included as a liability as at 31 December 2022. This would bring total dividends payable in respect of the 2022 \ufb01nancial year to approximately \u00a384 million. The Group has a long-standing capital allocation policy. This policy is based on a commitment to robust \ufb01nancial metrics that underpin the Group\u2019s strong credit rating: investment in the core business; paying a sustainable and growing dividend; and returning surplus capital to shareholders. The Board is con\ufb01dent that the dividend is sustainable and expects it to grow as the implementation of the Group\u2019s 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\u2019s commodity-linked revenue streams. In future years, if there is a build-up of capital in excess of the Group\u2019s investment needs, the Board will consider the most appropriate mechanism to return this to shareholders. Consideration of sustainability, including a link to the Group\u2019s dividend, can be found in the Market context section on pages 4 and 5. 2.10 Retained pro\ufb01ts Retained pro\ufb01ts are a component of equity reserves. The overall balance reflects the total pro\ufb01ts the Group has generated over its lifetime that are attributable to the equity holders of the Parent Company, reduced by the amount of that pro\ufb01t distributed to shareholders. The table below sets out the movements in retained pro\ufb01ts during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 198.3 153.4 Pro\ufb01t for the year 85.1 79.7 Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3) (24.4) 30.7 Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6) 6 .1 (7.2) Deferred tax on share-based payments (note 2.6) 7.4 5.4 Equity dividends paid (note 2.9) (78.9) (70.9) Movements in equity associated with share-based payments (note 6.2) 9.5 7.4 Acquisition of NCI without a change in control (note 4.5) (9.3) (0.2) At 31 December 193.8 198.3 Distributable reserves The capacity of the Group to make dividend payments is primarily determined by the availability of retained distributable pro\ufb01ts and cash resources. The Parent Company\u2019s \ufb01nancial statements are set out on pages 277 to 283 of this Annual report, disclose the Parent Company\u2019s distributable reserves of \u00a3306.3 million. Suf\ufb01cient reserves are available across the Group as a whole to make future distributions in accordance with the Group\u2019s dividend policy for the foreseeable future. The majority of the Group\u2019s 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 that the Parent Company has access to these reserves. The immediate cash resources of the Group of \u00a3238.0 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\u2019s \ufb01nancing facilities (see note 4.2) place customary conditions on the amount of dividend payments to 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 the Viability statement on page 75 and note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. This section gives further information on the operating assets the Group uses to generate revenue and the short-term liquid assets and liabilities, managed during day-to-day operations, that comprise the Group\u2019s working capital balances. 3.1 Property, plant and equipment This note shows the cost, depreciation 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 less impairment, 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 the 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 brought into use and over its UEL. Where relevant, this is limited to the expected 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 way 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 2022 (years) Freehold buildings 20 Plant and equipment Electricity generation assets: Drax Power Station common plant 14 Drax Power Station biomass-speci\ufb01c assets 16 Hydro-electric plants (including pumped storage) 39 Pellet production plant 10 Other plant, machinery and equipment 14 Reinstatement asset 17 Plant spare parts 17 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 2022 is \u00a337.5 million (2021: \u00a326.9 million). An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is de\ufb01ned to be the higher of an asset\u2019s value in use and its fair value less costs to sell. The Group\u2019s policy is to recognise an impairment charge through accumulated depreciation if the asset will continue to be used by the Group or if the asset will be subsequently sold. However, if the asset is still under construction, as no depreciation has yet been charged, the impairment charge is recognised in cost. Assets that will no longer be used by the Group are disposed of by removing both the cost and any accumulated depreciation and impairment. Electricity generation assets are grouped according to the fuel type of the relevant plant. Certain assets at Drax Power Station are common to the whole plant. Pellet Production plant includes the US and Canadian based assets of the Group\u2019s 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. Occasionally, plant spare parts are required to be used within 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 on 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 or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed as incurred. Estimated UELs and residual values are reviewed annually, taking into account regulatory changes 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\u2019s accounting policy in respect of impairment, along with details of the impairment review conducted during 2022 and disclosures relating to the impairment of Daldowie and Abergelli assets, are set out in note 2.4. During the year, the Group has capitalised \u00a319.1 million (2021: \u00a35.4 million) of costs relating to the UK BECCS project at Drax Power Station. The Group has also commenced construction of the Group\u2019s three OCGT projects that have obtained Capacity Market contracts. The costs capitalised in the year on the OCGT projects total \u00a390.2 million (2021: \u00a3 7. 8 million). The Group\u2019s total commitment for future capital expenditure is disclosed in note 7.7. Signi\ufb01cant estimation uncertainty Assets\u2019 UELs are reviewed annually at each reporting date, taking into consideration the impact of climate and environmental change. See note 3.8 for further details. As disclosed on page 178, 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\u2019s net zero strategy becomes clearer, particularly in relation to UK BECCS, the Group will continue to assess any potential impact of these developments and whether the UEL of Drax Power Station is impacted. The continued rate of change in these areas increases the risk that UELs 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\u2019s biomass assets has been disclosed as a key source of estimation uncertainty. If UK BECCS is 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 currently limited to end of station life of 2039 were to increase by a further 10 years, the annual depreciation charge for the year would decrease by approximately \u00a314.2 million. 3.1 Property, plant and equipment continued Freehold land and buildings \u00a3m Plant and equipment \u00a3m Plant spare parts \u00a3m Assets under the course of construction \u00a3m Total \u00a3m Cost: At 1 January 2021 389.3 2,836.3 69.6 188.8 3,484.0 Additions at cost 13.9 0.9 5.3 195.4 215.5 Acquired in business combinations 43.8 185.0 \u2013 61.1 289.9 Disposals (1) (1.4) (24.1) \u2013 \u2013 (25.5 Movement in reinstatement asset (1) \u2013 (2.7) \u2013 \u2013 (2.7) Issues to maintenance projects \u2013 \u2013 (5.5) \u2013 (5.5) Transfers from inventories \u2013 \u2013 3.7 \u2013 3.7 Transfers from right-of-use assets 0.3 0.7 \u2013 \u2013 1.0 Transfers from intangibles (2) \u2013 \u2013 \u2013 18 .1 18 .1 Transfers between PPE categories 5.7 156.4 (0.8) (161.3) \u2013 Effect of changes in foreign exchange rates 2.2 8.0 \u2013 2.2 12.4 At 1 January 2022 453.8 3,160 . 5 72.3 304.3 3,990.9 Additions at cost 8.2 2.2 3.8 231.8 246.0 Acquired in business combinations 3.3 4.6 \u2013 \u2013 7.9 Impairment (0.2) \u2013 \u2013 (6.7) (6.9) Disposals (1.3) (23.7) \u2013 (0.9) (25.9) Movement in reinstatement asset \u2013 (22.4) \u2013 \u2013 (22.4) Issues to maintenance projects \u2013 \u2013 (3.3) \u2013 (3.3) Transfers from inventories \u2013 \u2013 0.5 \u2013 0.5 Transfers from/(to) intangibles \u2013 0.3 \u2013 (0.3) \u2013 Transfers between PPE categories 22.3 202.6 7.7 (232.6) \u2013 Effect of changes in foreign exchange rates 17.2 52.6 \u2013 13.3 83.1 At 31 December 2022 503.3 3,376.7 81.0 308.9 4,269.9 Accumulated depreciation: At 1 January 2021 102.4 1,415.6 24.9 \u2013 1,542.9 Depreciation charge for the year 15.8 130.2 3.8 \u2013 149.8 Disposals (0 .1) (16.2) \u2013 \u2013 (16.3) Issues to maintenance projects \u2013 \u2013 (0.8) \u2013 (0.8) Transfers from right-of-use assets 0.1 0.7 \u2013 \u2013 0.8 Transfers between PPE categories (0.4) 0.4 \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 0.4 3.4 \u2013 \u2013 3.8 At 1 January 2022 118.2 1, 53 4 .1 27.9 \u2013 1,680.2 Depreciation charge for the year 21.5 171.6 2.5 \u2013 195.6 Impairment 0.5 7.5 \u2013 \u2013 8.0 Disposals (1.7) (19.7) \u2013 \u2013 (21.4) Issues to maintenance projects \u2013 \u2013 (0.4) \u2013 (0.4) Transfers between PPE categories (0.3) (3.2) 3.5 \u2013 \u2013 Effect of changes in foreign exchange rates 4.1 15.8 \u2013 \u2013 19.9 At 31 December 2022 142.3 1,70 6 .1 33.5 \u2013 1,881.9 Net book value: At 31 December 2021 335.6 1,626.4 44.4 304.3 2,310.7 At 31 December 2022 361.0 1,670.6 47.5 308.9 2,388.0 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. Included in the amount for assets under the course of construction are capitalised borrowing costs of \u00a35.2 million (2021: \u00a3nil) related to the construction of the three OCGT projects that have obtained a Capacity Market contract. In the table above, impairments within cost of \u00a36.9 million relate to the write down of the Group\u2019s fourth OCGT project that has not obtained a Capacity Market contract. Impairments within accumulated depreciation of \u00a38.0 million relate to the write down of assets at the Daldowie fuel plant. See note 2.4 for further details of the Group\u2019s accounting policy for impairments of \ufb01xed assets.
3.1 Property, plant and equipment continued
Plant and equipment shown above includes the following categories of assets:
Biomass and
coal plant
\u00a3m
Hydro-electric
plant
\u00a3m
Pellet
production
plants
\u00a3m
Other
\u00a3m
Total
plant and
equipment
\u00a3m
Cost:
At 1 January 2021 2,072.9 471.0 276.4 16.0 2,836.3
Additions at cost \u2013 \u2013 0.8 0 .1 0.9
Acquired in business combinations \u2013 \u2013 185.0 \u2013 185.0
Disposals
(1)
(17.5) \u2013 (5.6) (1.0) (24 .1)
Movement in reinstatement asset
(1)
(2.7) \u2013 \u2013 \u2013 (2.7)
Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7
Transfers between PPE categories 65.1 5.0 82.0 4.3 156.4
Effect of changes in foreign exchange rates \u2013 \u2013 8.0 \u2013 8.0
At 1 January 2022
(2)
2,117. 8 476.0 5 47.3 19.4 3,16 0 . 5
Additions at cost 1.0 \u2013 0.9 0.3 2.2
Acquired in business combinations \u2013 \u2013 4.6 \u2013 4.6
Disposals (0.1) \u2013 (21.1) (2.5) (23.7)
Movement in reinstatement asset (22.4) \u2013 \u2013 \u2013 (22.4)
Transfers from intangibles \u2013 \u2013 0.3 \u2013 0.3
Transfers between PPE categories 45.0 3.4 154.2 \u2013 202.6
Effect of changes in foreign exchange rates \u2013 \u2013 52.6 \u2013 52.6
At 31 December 2022 2,141. 3 479.4 738.8 17.2 3,376.7
Accumulated depreciation:
At 1 January 2021 1,298.4 2 8 .1 7 7.3 11.8 1,415.6
Depreciation charge for the year 70.3 12 .1 45.0 2.8 130.2
Disposals (11.2) \u2013 (4.2) (0.8) (16.2)
Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7
Transfers between PPE categories (1.0) 1.0 0.4 \u2013 0.4
Effect of changes in foreign exchange rates \u2013 \u2013 3.4 \u2013 3.4
At 1 January 2022 1,356.5 41.2 122.6 13.8 1,53 4 .1
Depreciation charge for the year 64.3 12 .1 92.9 2.3 171.6
Impairment \u2013 \u2013 7.5 \u2013 7.5
Disposals \u2013 \u2013 (17.3) (2.4) (19.7)
Transfers between PPE categories (3.5) \u2013 0.3 \u2013 (3.2)
Effect of changes in foreign exchange rates \u2013 \u2013 15.8 \u2013 15.8
At 31 December 2022 1,417.3 53.3 221.8 13.7 1,70 6 .1
Net book value:
At 31 December 2021 761.3 434.8 424.7 5.6 1,626.4
At 31 December 2022 724.0 426 .1 517.0 3.5 1,670.6
(1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the
year ended 31 December 2021 was previously reported within the disposals line.
(2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction.
The depreciation expense in the Consolidated income statement of \u00a3208.0 million comprises of \u00a3195.6 million of depreciation charged
on property, plant and equipment, \u00a320.3 million charged on right-of-use assets (see note 3.2) offset by \u00a37.9 million of depreciation
included in closing inventories.
The increase in depreciation of pellet production plants during the year includes the impact of planned higher levels of capital
expenditure in relation to plant upgrades and capacity expansions, and includes some accelerated depreciation for existing equipment
that has been, or will be, replaced following capital investments. The UELs of impacted assets were reviewed and updated at the
start of 2022 to re\ufb02ect these plans, and the impact of these updates on the depreciation charge for 2022 was around an additional
\u00a322.0 million charge.
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 identi\ufb01ed asset is controlled by the Group for a period of time. If the Group is deemed to have control of an identi\ufb01ed 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 speci\ufb01c 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 speci\ufb01c proxies for risk-free rates, such as UK Gilt curves, and an adjustment
for credit risk based on the Group\u2019s credit rating. The liability is subsequently adjusted for interest, repayments and other
modi\ufb01cations.
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 modi\ufb01cations 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 modi\ufb01cation 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 scope of the lease. All other modi\ufb01cations 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 probable that the option will be exercised.
Leases with a term shorter than 12 months, or where the identi\ufb01ed asset has a value below \u00a33,500, are expensed to the Consolidated
income statement on a straight-line basis over the term of the agreement.
Right-of-use assets Land and buildings \u00a3m Plant and equipment \u00a3m Railcars \u00a3m Vessels \u00a3m Total \u00a3m Cost: At 1 January 2021 23.7 9.1 8.7 \u2013 41.5 Additions at cost 0.2 7. 0 4 .1 33.3 44.6 Other movements (0.5) (4.2) (0.3) \u2013 (5.0) Transfers to PPE (0.3) (0.7) \u2013 \u2013 (1.0) Acquired in business combinations 4.7 4 .1 17.0 34.6 60.4 Effect of changes in foreign exchange rates 0 .1 (0.1) 0.7 0.6 1.3 At 1 January 2022 27.9 15.2 30.2 68.5 141.8 Additions at cost 5.1 4.7 2.2 19.8 31.8 Other movements (3.1) 4.0 (0.8) \u2013 0 .1 Effect of changes in foreign exchange rates 0.5 0.9 2.1 2.5 6.0 At 31 December 2022 30.4 24.8 33.7 90.8 179.7 Accumulated depreciation and impairment: At 1 January 2021 6 .1 4.2 2.2 \u2013 12.5 Depreciation charge for the year 4.3 4.6 3.2 3.1 15.2 Other movements (1.9) (3.3) (0.3) \u2013 (5.5) Transfers to PPE (0.1) (0.7) \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates 0 .1 \u2013 0.5 \u2013 0.6 At 1 January 2022 8.5 4.8 5.6 3.1 22.0 Depreciation charge for the year 3.9 6.0 4.6 5.8 20.3 Other movements (1.1) (0.4) \u2013 \u2013 (1.5) Effect of changes in foreign exchange rates 0.2 0.2 0.4 (0.2) 0.6 At 31 December 2022 11.5 10.6 10.6 8.7 41.4 Net book value: At 31 December 2021 19.4 10.4 24.6 65.4 119.8 At 31 December 2022 18.9 14.2 23.1 82 .1 138.3 Lease liabilities Year ended 31 December Carrying amount: 2022 \u00a3m 2021 \u00a3m At 1 January 125.9 30.2 Additions 30.2 44.7 Acquired in business combinations \u2013 61.1 Interest charge for the year 6.8 4.9 Payments (24.8) (17.9) Other movements 3.4 0.2 Effect of changes in foreign exchange rates 11.6 2.7 At 31 December 153.1 125.9 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 \u00a30.1 million during the year (2021: \u00a30.8 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 2022 \u00a3m 2021 \u00a3m Within one year 30.3 21.2 Within one to two years 26.7 18.9 Within two to \ufb01ve years 64.3 46.4 After \ufb01ve years 72.0 78.4 Total gross lease liabilities 193.3 164.9 Effect of discounting (40.2) (39.0) Lease liabilities recognised in the Consolidated balance sheet 153.1 125.9 Current portion 22.7 15.1 Non-current portion 130.4 110.8 The Group recognised the following charges from continuing operations relating to leases in the Consolidated income statement: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Expense relating to short-term leases 0 .1 0.8 Interest charge for the year 6.8 4.9 Depreciation charge for the year 20.3 15.2 3.3 Renewable certi\ufb01cate assets The Group earns renewable certi\ufb01cate assets including ROCs and REGOs which are accredited by the Of\ufb01ce for Gas and Electricity Markets (Ofgem), as a result of burning biomass pellets to generate electricity at Drax Power Station and generating renewable energy at a number of the Group\u2019s hydro-electric plants. The Group\u2019s ROC and REGO certi\ufb01cates are sold bilaterally to counterparties, including external suppliers, and also internally for utilisation by the Customers business. This note sets out the value of these certi\ufb01cate assets that the Group held at the reporting date. Accounting policy Renewable certi\ufb01cates, principally ROCs and REGOs, are \ufb01rst recognised as current assets in the period they are generated. The Group uses their fair value at initial recognition, based on anticipated sales prices, as deemed cost. The value of renewable certi\ufb01cates earned is recognised in the Consolidated income statement as a reduction to cost of sales in the same period they are earned. Where the Customers business incurs an obligation to deliver renewable certi\ufb01cates, that obligation is provided for in the period incurred within cost of sales. ROCs and REGOs valuation 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 to cover the renewable certi\ufb01cates generated in a period, then they are recognised at the contracted price. Any renewable certi\ufb01cates generated above this, or to be utilised by the Customers 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. ROC valuations are comprised of two parts: the expected value to be obtained in a sales transaction with a third-party supplier relating to the buy-out price; and an estimate of the future bene\ufb01t that may be obtained from the ROC recycle fund at the end of the CP, which runs from April to March each year. The recycle fund provides a bene\ufb01t where supplier buy-out charges (incurred by suppliers who do not procure suf\ufb01cient 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 and also the demand for ROCs over the CP, and is thus subject to some uncertainty. The Group utilises external sources of information 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. At each reporting date, the Group reviews the carrying value of renewable certi\ufb01cate 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, the likely utilisation of renewable certi\ufb01cates generated to settle the Group\u2019s own obligations, and any relevant information about the levels of wider renewable generation. Any impairment loss is recognised in the Consolidated income statement in the period incurred. Year ended 31 December Carrying amount: 2022 \u00a3m 2021 \u00a3m At 1 January 301.4 139.6 Earned from generation 652.5 658.2 Purchased from third-parties 486.3 361.3 Utilised by the Customers business (39 4.1) (320.7) Sold to third-parties (858.3) (537. 0) At 31 December 187. 8 301.4 Recognition of revenue from the sale of renewable certi\ufb01cates is described in further detail in note 2.2. 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 and waste pellets. This note shows the cost of biomass, coal, other fuels and plant consumables held at the reporting date. Accounting policy The Group\u2019s raw materials and fuel inventory are valued at the lower of the weighted average cost to purchase and net realisable value. The cost of purchased fuel inventories includes all direct costs and overheads incurred in bringing the fuel to its 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 when they arise. Both biomass and coal inventories are weighed when entering, moving within or exiting the Group\u2019s sites using technology regularly calibrated to industry standards. Fuel burn in the electricity generation process is calculated using a combination of weights and thermal ef\ufb01ciency calculations to provide closing inventory volumes. Both calibrated weighers and ef\ufb01ciency calculations are subject to a range of tolerable error. All fuel inventories are subject to regular surveys to ensure these measurements are suf\ufb01ciently 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 \ufb01re prevention purposes and thus cannot be surveyed using traditional methods. Biomass inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy of the weights and ef\ufb01ciency methods outlined above. The cost of manufactured fuel inventories includes all direct costs incurred in production and conversion including raw materials, labour, direct overheads and other costs incurred in bringing the inventories to their existing condition and location. It also includes an allocation of overheads, including depreciation and other indirect costs. 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. The valuation of \ufb01bre inventory involves estimations of the conversion rates to determine the volume of residual \ufb01bre 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.
3.4 Inventories continued
As at 31 December
2022
\u00a3m
2021
\u00a3m
Biomass \u2013 \ufb01nished goods 294.5 144.6
Biomass \u2013 \ufb01bre and other raw materials 16.5 12.8
Coal \u2013 8.4
Other fuels and consumables 37.1 33.3
Total inventories 3 4 8 .1 19 9.1
The net realisable value of coal in the prior year in the table above was stated after provisions of \u00a30.9 million. No inventory provisions
have been recognised in the current year.
The increase in the value of biomass \ufb01nished goods held at the reporting date results from the planned build-up of inventories
due to the repro\ufb01ling of generation into winter from summer when it was originally planned, along with higher biomass prices.
At the request of the UK Government, the Group entered into an agreement with National Grid to keep the two coal units at
Drax Power Station available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the
end of March 2023. The units will not generate commercially for the duration of the agreement and only operate if and when
instructed to do so by National Grid. Under the terms of this contract, the Group no longer has control of any coal inventory.
The cost of inventories recognised as an expense in the year ended 31 December 2022 was \u00a31,587.9 million (2021: \u00a31,352.0 million).
This includes the value of write downs of inventory in the year.
3.5 Trade and other receivables and contract assets
Trade receivables represent amounts owed by customers for goods or services provided that have been invoiced for but have
not yet been paid. Accrued income represents income earned in the period but not yet invoiced, largely in respect of power delivered
to customers that will be invoiced the following month.
Accounting policy
Trade and other receivables are initially measured at the transaction price and subsequently measured at amortised cost.
The Group has access to a receivables monetisation facility under which amounts receivable can be sold to a third-party on a non-
recourse basis. Receivables sold under such facilities 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 \ufb01nancial assets. These receivables are derecognised at the point of sale which is shortly after the initial recognition
of the receivable balance. As a result, no fair value gains or losses have been recognised. Fees are recognised in the Consolidated
income statement as incurred within interest payable and similar charges. At 31 December 2022, the receivables sold under this
facility were \u00a3400.0 million (2021: \u00a3200.0 million), reflecting the increase in the size of the facility during the year. Refer to note 4.3
for further information about the facility.
Contingent consideration receivable is a \ufb01nancial asset. As the cash flows are not solely payments of principal and interest,
it does not meet the criteria for recognition at either amortised cost or FVOCI, and is therefore recognised at fair value through pro\ufb01t
and loss (FVTPL).
The UK Government introduced the Energy Bill Relief Scheme (EBRS) from 1 October 2022 to 31 March 2023. Energy supplied to
non-domestic customers in this period has a discount applied under the EBRS. The Group claims this discount back from the
Government. The amount the Group is entitled to claim from the Government is either recognised in other receivables, if it has been
claimed but has not yet been received from the Government, or accrued income if not yet claimed at the reporting date. See note 2.2
for details of energy supplied under the EBRS within the Consolidated income statement.
As at 31 December
2022
\u00a3m
2021
\u00a3m
Amounts falling due within one year:
Trade receivables 276.6 187.5
Accrued income 522.5 270.3
Prepayments 127.7 97.4
Other receivables 272.8 59.0
Contingent consideration 27. 4 27.7
Total trade and other receivables and contract assets 1,227.0 641.9
At 31 December 2022, the Group had no amounts receivable from signi\ufb01cant counterparties which represented 10% or more of total
trade receivables and accrued income (2021: one signi\ufb01cant counterparty).
3.5 Trade and other receivables and contract assets continued
Of total trade receivables and accrued income at 31 December 2022, \u00a3587.0 million (2021: \u00a3314.0 million) relates to the Customers
business, \u00a3168.0 million relates to the Generation business (2021: \u00a3125.9 million), and \u00a344.1 million (2021: \u00a317.9 million) relates to the
Pellet Production business.
The contingent consideration relates to the Group\u2019s 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, \u00a329.0 million of contingent consideration would become payable to the Group from the acquirer. The estimated fair value of this
contingent consideration is \u00a327.4 million (2021: \u00a327.7 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. See note 7.1 for further details on the contingent consideration.
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 payment is not yet due. Any amount previously recognised as a contract asset is reclassi\ufb01ed
to trade receivables at the point at which it is invoiced to the customer, usually in the following \ufb01nancial period. Contract assets at
31 December 2022 were \u00a320.0 million (2021: \u00a36.0 million).
Impairment of \ufb01nancial assets
Accounting policy
The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group\u2019s \ufb01nancial assets including trade
receivables, accrued income, contract assets and other \ufb01nancial 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 \ufb01nancial assets, the Group recognises a lifetime expected credit loss provision when there has been a signi\ufb01cant increase
in credit risk since initial recognition. If the credit risk of the \ufb01nancial instrument has not increased signi\ufb01cantly since initial recognition,
the Group recognises a 12-month expected credit loss provision.
The greatest concentration of credit risk exists in the Customers business. For the larger consumers within the Customers business
(and also customers within the Generation and Pellet Production businesses) a provision matrix method is adopted. For the SME
consumers within the Customers business, the risk is higher due to the wide range of customer characteristics within the portfolio.
The loss provisioning for these customers is complex and requires a provisioning tool that is more dynamic than the provision matrix
method and so a combined probability method is applied. Both of these approaches are described in more detail below.
Under the Group\u2019s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally
for recovery of the balance. The Group writes off a \ufb01nancial 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.
Combined probability method
The Group uses a machine learning algorithm to calculate expected credit losses for its SME customer base. The algorithm predicts
the future performance of debt on an individual account basis using a broad range of indicators that are speci\ufb01c to the customer.
The algorithm forms predictions, based on historical experience, of the debt on each account reaching greater than 365 days past due.
A timeframe of 13 months is the normal period of historic data to which the algorithm is trained. The customer\u2019s behaviours and
performance in this period inform the current provisioning for the existing debt portfolio.
As required by IFRS 9, the calculation of expected credit losses incorporates both historical and forward-looking information.
Management considers the 13 month period on which the algorithm is trained and determines whether any additional provision is
required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2022, these factors included,
but were not limited to, expectations around future inflation and interest rates, customer pricing and the impact of Government
support for customers. In the current period, management concluded that no additional provision was required (2021: no additional
provision was required).
3.5 Trade and other receivables and contract assets continued
Provision matrix method
Larger consumers within the Customers business and customers within the Generation and Pellet Production businesses 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:
2022 2021
Combined
probability
method
\u00a3m
Provision
matrix
method
\u00a3m
Total
\u00a3m
Combined
probability
method
\u00a3m
Provision
matrix
method
\u00a3m
Total
\u00a3m
At 1 January 44.4 2.2 46.6 51.4 5.0 56.4
Amounts written off (39.7) (2.6) (42.3) (41.5) (2.0) (43.5)
Net additional amounts provided against 50.2 6.4 56.6 34.5 (0.8) 33.7
At 31 December 54.9 6.0 60.9 44.4 2.2 46.6
Gross trade receivables 189.1 148.4 337.5 14 4.1 90.0 23 4 .1
Average Expected Credit Loss % 29% 4% 18% 31% 2% 20%
The provision above relates to trade receivables in the Customers business. If the calculated provision rates were 10% higher than the
provision rates calculated at the reporting date, the impact to the provision would be an increase of \u00a34.0 million. The provision matrix
method has resulted in a \u00a3nil provision applied to both Generation and Pellet Production businesses.
The risk of default within the Pellet Production and Generation businesses is considered to be remote. This is supported by strong
historic collection rates and timely receipts.
The Pellet Production business has a remote risk of default because the external customer base are high-quality counterparties with
long-term supply contracts. Furthermore, invoices are usually settled within seven days with negligible levels of aged debt.
The current economic environment and pressure on energy markets resulted in signi\ufb01cantly higher commodity prices during 2022,
and in turn higher bills raised to some of the Group\u2019s customers. This has resulted in an increase in the total gross value of trade
receivables and thus increased the value of the expected loss provision, particularly for SME customers. Prices for the deemed
customer portfolio have seen the most signi\ufb01cant increases. Deemed supply is where electricity or gas is supplied to a site or customer
that is yet to enter into a contract and, as a result, they are charged on a standard variable tariff based on merchant power and gas
prices. Given the increases in these standard variable prices during the year, the recoverability of these balances has become more
challenging. The expected credit loss provision has been updated to reflect this change. The coverage levels of the provision are in line
with the outturn performance experienced during Covid-19, a period which was also signi\ufb01cantly impacted by challenging macro-
economic conditions.
In October 2022, in response to the signi\ufb01cant increase in energy prices, the Government introduced support for non-domestic
customers through the EBRS. This has provided \ufb01nancial support to customers during this period as described in more detail
in note 2.2. The Group received no incremental revenue over that to which it was contractually entitled, due to this scheme.
The net charge to the Consolidated income statement in 2022 for impairment losses on \ufb01nancial assets was \u00a348.0 million
(2021: \u00a316.3 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a356.6 million
(2021: \u00a333.7 million) less an \u00a38.6 million (2021: \u00a317.4 million) bene\ufb01t in the period in respect of resolution of legacy credit balances.
The value of provisions calculated using the combined probability model is set out below. This shows the trade receivables balances
for SME consumers within the Customers business grouped by the combined probability assigned by the model.
The following table shows the comparative risk pro\ufb01le of amounts due based on the combined probability model at 31 December:
2022 2021
Probability of default range %
Estimated gross
carrying amount
at default
\u00a3m
Lifetime
expected
credit losses
\u00a3m
Estimated gross
carrying amount
at default
\u00a3m
Lifetime
expected
credit losses
\u00a3m
80\u2013100 50.0 40.4 43.3 35.3
50\u201379 16.8 8.9 10.7 5.7
26\u201349 18.2 5.5 11.1 3.3
0\u201325 10 4 .1 0.1 79.0 0 .1
Total 189.1 54.9 14 4 .1 44.4
3.5 Trade and other receivables and contract assets continued
The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the risk pro\ufb01le in 30-day
increments of the trade receivables within the Generation and Pellet Production businesses, the trade receivables of the Group\u2019s larger
consumers within the Customers business, and accrued income (including contract assets) of the Group at each reporting date.
As at 31 December 2022 As at 31 December 2021
Lifetime
expected
credit losses
Estimated
total gross
carrying amount
at default
Expected
credit loss rate
Lifetime
expected
credit losses
Estimated
total gross
carrying amount
at default
Expected
credit loss rate
\u00a3m \u00a3m % \u00a3m \u00a3m %
Accrued income balances not yet due 7.6 530.1 1% 8.6 278.9 3%
Trade receivables days past due:
Balances not yet due 1.8 115.0 2% 0.4 70.8 1%
Between 0-30 days 0.8 22.1 4% 0 .1 14.0 1%
Between 31-60 days 0.7 3.3 21% 0.2 1.2 17%
Between 61-90 days 0.6 1.5 42% 0 .1 0.8 13%
Over 90 days 2 .1 6.5 33% 1.4 3.2 44%
Trade receivables total 6.0 148.4 4% 2.2 90.0 2%
Total 13.6 678.5 2% 10.8 368.9 3%
The expected credit loss provision of \u00a313.6 million (2021: \u00a310.8 million) in the table above wholly relates to the Customers business.
The expected credit loss rates above are expressed as a percentage of the gross carrying amount of all of the Group\u2019s trade receivables
and accrued income balances that are subject to the provision matrix method.
The expected credit loss provision calculated for other \ufb01nancial 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 Customers 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
2022
\u00a3m
2021
\u00a3m
At 1 January 23.7 4 0 .1
Additions 30.7 14.0
Amortisation (24.6) (30.4)
At 31 December 29.8 23.7
3.7 Trade and other payables and contract liabilities
Trade and other payables represent amounts the Group owes to its suppliers for trade purchases and ongoing costs, taxes and social
security amounts due in relation to the Group\u2019s 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\u2019s activities
in the current period (e.g. fuel received but for which the Group has not yet been invoiced). Contract liabilities represent the Group\u2019s
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 measured at amortised cost.
The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring under which certain suppliers can obtain early access
to payments. There are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement
was to cease. The amount due is recognised in trade payables.
The Group also has access to payment facilities, utilised to leverage scale and ef\ufb01ciencies in transaction processing. Under these
facilities the Group bene\ufb01ts from an extension to payment terms of less than 12 months for a small fee. The original liability
is derecognised and 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,
in the period incurred.
The Group does not include trade and other payables in its calculation of Net debt (see note 2.7).
As at 31 December
2022
\u00a3m
2021
\u00a3m
Trade payables 152.9 147.8
Fuel accruals 107.7 50.3
Energy supply accruals 511.4 36 2.1
Other accruals 370.9 269.8
Other payables 351.0 366.5
Contract liabilities 34.0 14.6
Total Trade and other payables and contract liabilities 1,527.9 1,211.1
Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying amounts of trade and other payables
are the same as their fair values, due to their short-term nature.
Trade payables includes \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. Other payables includes \u00a3214.5 million
(2021: \u00a362.2 million) due under other payment facilities which includes amounts due under deferred letters of credit in respect of the
construction of the Group\u2019s three OCGT assets that obtained a Capacity Market contract.
Energy supply accruals includes \u00a3315.0 million (2021: \u00a3264.3 million) in relation to the Group\u2019s obligation to deliver ROCs arising
from activities in the Customers business. The remaining balance principally comprises third-party grid charge accruals of
\u00a3108.5 million (2021: \u00a348.2 million) and Feed-in-Tariff accruals of \u00a346.8 million (2021: \u00a319.8 million). Energy supply accruals have
increased as a result of both higher supply volumes and higher prices.
Other accruals includes \u00a311.1 million (2021: \u00a339.3 million) in respect of the Group\u2019s estimated obligation to deliver carbon emissions
allowances under the UK Emission Trading Scheme (UK ETS). Allowances are purchased in the market and are recorded at cost.
Other accruals also includes accruals for capital and operating expenditure where the invoices have not yet been received.
Contract liabilities primarily relate to the advance consideration received from customers for \ufb01xed 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. Additions in the year include \u00a314.4 million
in the Generation business in relation to the winter coal contract with the National Grid to provide a \u2018winter contingency\u2019 service
to the UK power system. The reconciliation of opening to closing contract liabilities is as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
At 1 January 14.6 11.1
Revenue recognised in the year that was included in the contract liability at the start of the period (6.6) (5.4)
Additions as a result of cash received from customers in the period not yet recognised in revenue 26.0 8.9
At 31 December 34.0 14.6
3.8 Climate change
Climate change, and tackling it, is pervasive to the Group\u2019s purpose, as set out in the Strategic report on pages 2 to 91. The Sustainable
development report, starting on page 36 sets out how the Group\u2019s ambition is to be climate positive and the TCFD disclosures, starting
on page 52, set out the Group\u2019s approach to managing climate risks, including scenario analysis. Climate change is factored into short,
medium and long-term forecasts and estimates used by the Group.
Several areas of the Consolidated \ufb01nancial statements have climate considerations in relation to them, namely:
Area Description Page reference
Judgements in relation to key sources
of estimation uncertainty
Impairment of assets, UELs of property, plant and equipment and
capitalisation of development project costs are all sensitive to
climate change. Please see further details below.
178
Impairment of assets The Group\u2019s expectations around the impacts of climate
change, and in particular the requirements of the UK Government\u2019s
commitment to reach net zero by 2050, are integral
to the forecasts used to underpin the Group\u2019s impairment analyses.
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.
Governmental and societal responses to climate change are still
developing, and therefore \ufb01nancial statements cannot capture all
potential future scenarios as these are not yet known. This
presents uncertainty around future cash\ufb02ows from an IAS 36
perspective. Sensitivities modelled, including around biomass
acceptability, seek to capture some of these potential scenarios.
Also, operational outages, whether caused by climate related
events or other factors, are some of the sensitivities modelled
in the impairment testing.
194
Going concern and viability As above, forecast power prices and operational outages are also
incorporated into the going concern and viability assessments.
176 for going
concern and 75
for viability
Fixed asset UELs
Climate impacts are one of the factors assessed in determining
how long the Group anticipate both additions and existing assets
to operate for. For example, the OCGT assets under development
will be given a UEL commensurate with the Group\u2019s expectations
around the UK\u2019s transition to a net zero position by 2050.
Although, as outlined in the Key sources of estimation uncertainty,
the likelihood is that UELs at Drax Power Station will be extended,
were UELs to be shortened by 10 years, whether as a result of
climate change or otherwise, depreciation would increase by
approximately \u00a365 million per year.
210
Section 4: Financing and capital structure This section provides further information about the Group\u2019s capital structure (equity and debt \ufb01nancing) and cash generated from operations during the year. 4.1 Cash and cash equivalents Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity of three months or less, and money market funds. The carrying amount of these assets is approximately equal to their fair value. It is the Group\u2019s policy to invest available cash on hand in short-term, low-risk bank accounts or deposit accounts. As at 31 December 2022 \u00a3m 2021 \u00a3m Cash at bank 102.1 35.9 Short-term deposits 19.5 23.7 Money market funds 116.4 2 57. 8 Total cash and cash equivalents 238.0 317.4 Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. At 31 December 2022, net postings of \u00a3234.0 million had been made to counterparties (2021: \u00a3172.8 million of net receipts from counterparties) to support energy hedging activity. Cash collateral payments of \u00a3234.0 million (2021: \u00a332.8 million) were recognised in other receivables and \u00a3nil (2021: \u00a3205.6 million) of cash collateral receipts were recognised in other payables. The increase in cash collateral payments is predominantly due to the signi\ufb01cant price increases seen in the power, gas and carbon markets as well as an increase in the use of collateralised exchange based trading. See note 7.6 and 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. 4.2 Borrowings Accounting policy The Group measures all debt instruments (whether \ufb01nancial assets or \ufb01nancial liabilities) initially at fair value, which equates to the principal value of the consideration paid or received. 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 \ufb01nancial 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 payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, with a \ufb01xed repayment date regardless of when the loan is drawn down, are recognised on a systematic basis over the period the Group is able to draw down if draw down is probable. Loan commitment fees payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, where the loan has the same \ufb01xed term regardless of when the loan is drawn down, are deferred until draw down and are recognised over the life of the instrument as part of the effective interest rate if draw down is probable. 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 draw down can vary at the Group\u2019s discretion, such as 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 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 \ufb01x 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 statement of comprehensive income within either foreign exchange gains/(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. 4.2 Borrowings continued The Group\u2019s net borrowings at each reporting date were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Secured borrowings at amortised cost: 2.625% loan notes \u20ac250m (1) 219.8 207. 2 6.625% loan notes $500m (2) 412.8 367.0 Index-linked loan \u00a335m (3) \u2013 40.6 UK infrastructure private placement facilities (2019) (4) 372.5 370.0 UK infrastructure private placement facilities (2020) (5) 207.9 201.2 CAD term facility C$300m (6) 183.6 175.0 Unsecured borrowings at amortised cost: Uncommitted short-term loan facility \u20ac50m (7) 44.3 \u2013 Total borrowings 1,440.9 1,361.0 Split between: Current liabilities 44.3 40.6 Non-current liabilities 1,396.6 1,320.4 (1) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.6%. (2) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.9%. (3) The index-linked loan facility matured in March 2022. On maturity the principal amount of \u00a335 million plus \u00a36.4 million of indexation was repaid wholly from cash reserves. (4) These comprise committed facilities totalling \u00a3375 million with a range of maturities extending out to between 2024 and 2029. Interest rate swaps have been used to \ufb01x floating rates. This equates to an effective sterling interest rate of 3.3%. (5) These comprise committed facilities totalling \u00a398 million and \u20ac126.5 million with a range of maturities extending out to between 2024 and 2030. Interest rate swaps have been used to \ufb01x sterling floating rates on sterling facilities. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments on euro facilities. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 2.5%. (6) This facility matures in 2024 with the option to extend by two years and has a customary margin grid reference over the Canadian Dollar Offered Rate (CDOR). No interest rate or cross-currency interest rate swaps are in place to hedge the facility, so the Group is exposed to movements in both floating interest rates and movements in the Canadian dollar. (7) This is an uncommitted short-term facility with a maturity term of one month, however this term may be extended at the option of the lender. The average \ufb01xed interest rate for this facility is 2.4%. The Group has a committed \u00a3300 million RCF and C$10 million RCF. These had no cash drawings as at 31 December 2022 or 31 December 2021. The Group has never had cash drawings under this facility since its inception, three years ago. The Group also has access to certain non-recourse trade receivable monetisation facilities and payment facilities, as described in note 4.3, which are utilised to accelerate working capital cash inflows and defer cash outflows. In December 2022, the Group secured a new \u00a3200 million committed liquidity facility with banks within its lending group. This facility provides an additional source of liquidity to the Group\u2019s existing undrawn RCFs, over the 12 months following the reporting date. This facility was temporarily drawn during December, to support optimisation of generation and associated cash collateral postings, but was undrawn at 31 December 2022. The Group has a \u20ac50 million uncommitted facility that was drawn during the second half of 2022 and at 31 December 2022 \u20ac50 million remained drawn (2021: \u00a3nil). This facility was also drawn to support optimisation of generation and associated cash collateral postings. See note 2.7 for further details on the Group\u2019s cash and committed facilities. The Group\u2019s secured borrowings are secured against the assets of a number of the Group\u2019s subsidiaries, with the exception of property owned by the US subsidiaries. The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%). Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated net income and the consolidated net income to debt ratio. The consolidated net income to debt ratio broadly equates to an EBITDA to Net debt calculation and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group is required to test its \ufb01nancial covenants every six months at \ufb01nancial full-year and half-year reporting periods, and has complied with all \ufb01nancial covenants during the current and prior year. The Group has signi\ufb01cant headroom and expects to continue to comply with these \ufb01nancial covenants in future periods under all reasonably possible downside scenarios. See the Viability statement on page 75 for further details on the scenarios considered. The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. (1) The net debt calculation for \ufb01nancial covenants is based on Net debt including cash and borrowings attributable to non-controlling interests, but excludes the impact of hedging. 4.2 Borrowings continued Reconciliation of borrowings The table below shows the movement in borrowings during the current and previous year: Year ended 31 December 2022 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,376.2 (15.2) 1,361.0 Cash movements: Repayment of Index-linked loan (41.4) \u2013 (41.4) Draw down of facilities 188.5 \u2013 188.5 Repayment of facilities (145.0) \u2013 (145.0) Non-cash movements: Indexation of linked loan 0.8 \u2013 0.8 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 6 .1 6 .1 Amortisation of USD loan note premium (0.4) \u2013 (0.4) Effect of changes in foreign exchange rates 71.1 0.2 71.3 Borrowings at 31 December 1,449.8 (8.9) 1,440.9 Year ended 31 December 2021 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,085.3 (19.6) 1,065.7 Cash movements: Drawdown of 2020 Infrastructure private placement facilities 130.8 (0.5) 130.3 Repayment of debt acquired from Pinnacle (25 3.1) \u2013 (25 3.1) Drawdown of C$300m term facility 17 3.1 (0.8) 172.3 Other cash movements (3.2) \u2013 (3.2) Non-cash movements: Borrowings acquired on acquisition of Pinnacle (note 5.1) 256.3 \u2013 256.3 Indexation of linked loan 2.2 \u2013 2.2 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 5.7 5.7 Amortisation of USD loan note premium (0.3) \u2013 (0.3) Effect of changes in foreign exchange rates (14.9) \u2013 (14.9) Borrowings at 31 December 1,376.2 (15.2) 1,361.0 As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange losses (2021: gains) on borrowings disclosed in the above tables have been offset by \u00a362.0 million of foreign exchange gains (2021: 21.2 million of losses) on cross-currency interest rate swaps that have been recycled to pro\ufb01t and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group\u2019s cash flow hedging relationships on Net debt.
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 \ufb01nancing 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 \ufb01nancing activities.
Cash generated from operations
Cash generated from operations is the starting point of the Group\u2019s Consolidated cash flow statement on page 185. The table below
makes adjustments for any non-cash accounting items to reconcile the Group\u2019s net pro\ufb01t for the year to the amount of cash generated
from the Group\u2019s operations.
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Pro\ufb01t for the year \u2013 continuing 82.5 55.1
Pro\ufb01t for the year \u2013 discontinued \u2013 24 .1
Adjustments for:
Interest payable and similar charges 83.1 70.9
Interest receivable (4.3) (0.3)
Tax (credit)/charge (4.4) 6 8 .1
Research and development tax credits (5.5) (7.5)
Income from associates (0.5) (0.3)
Depreciation of property, plant and equipment 187.7 149.8
Amortisation of intangible assets 31.4 34.4
Depreciation of right-of-use assets 20.3 15.2
Impairment of non-current assets 41.5 \u2013
Losses on disposal of \ufb01xed assets 5.5 9.4
Gain on disposal of subsidiaries \u2013 (16.2)
Other losses 0.3 \u2013
Certain remeasurements of derivative contracts
(1)
288.7 (74.6)
Non-cash charge for share-based payments 9.6 7.4
Effect of changes in foreign exchange rates (2.2) 1.3
Operating cash \ufb02ows before movement in working capital 733.7 336.8
Changes in working capital:
(Increase)/decrease in inventories (133.4) 3 7.4
Increase in receivables (379.0) (27.4)
Increase in payables 431.8 15.0
Net movement in collateral
(2)
(406.8) 168.3
Decrease in provisions (29.1) (4.2)
Decrease/(increase) in renewable certi\ufb01cate assets 113.7 (161.8)
Total cash (absorbed by)/released from working capital (402.8) 27.3
Net movement in de\ufb01ned bene\ufb01t pension obligations
(3)
(10.6) (9.6)
Cash generated from operations 320.3 354.5
(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.
(2) The \u00a3168.3 million increase in collateral received in the prior year has been re-presented. Previously this was included in the movement in receivables as a \u00a330.6 million
increase and movement in payables as a \u00a3198.9 million increase.
(3) The comparative \ufb01gure has been re-presented to combine the de\ufb01ned bene\ufb01t scheme current and past service costs and contributions into a net de\ufb01ned bene\ufb01t
pension obligation.
The Group has generated cash from operations of \u00a3320.3 million during the year (2021: \u00a3354.5 million). This resulted from a cash
inflow from operating activities before working capital of \u00a3733.7 million (2021: \u00a3336.8 million). This was offset by a \u00a310.6 million (2021:
\u00a39.6 million) cash outflow in respect of pension obligations and a net working capital outflow of \u00a3402.8 million (2021: \u00a327.3 million
inflow), principally due to collateral payments. The most signi\ufb01cant factors making up these cash movements are explained in further
detail below.
The \u00a3288.7 million adjustment for certain remeasurements of derivative contracts (2021: \u00a3(74.6) million adjustment) in the current year
predominantly relates to net unrealised losses recognised within the Consolidated income statement, where cash has not yet been paid
or received by the Group. These net unrealised losses were offset by a net cash outflow due to realised losses on maturing trades.
4.3 Notes to the consolidated cash flow statement continued From time to time, where market conditions change, the Group can rebase foreign currency contracts including cross-currency interest rate swaps. Rebasing trades accelerates certain cash flows at the point of rebasing that would have been received on maturity or at contractual payment dates per the original terms of the trade. There is an equal and opposite reduction in cash flows (less rebasing fees) on the original maturity or contractual payment dates. At 31 December 2022 the Group had accelerated \u00a343.1 million of cash flows through the use of rebasing (2021: \u00a348.1 million). The reduction in accelerated cash flows reflects the unwinding of the cash bene\ufb01t as the original maturity or contractual payment dates pass. The accelerated cash flows related wholly to rebased cross-currency interest rate swaps in the current and prior year. The impact of rebasing is reflected within the Certain remeasurements of derivative contracts line in the table above. 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 certi\ufb01cate 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 explained further below. High levels of volatility in power and commodity markets have continued during 2022. Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. The Group actively manages the liquidity requirements, including collateral, associated with the hedging of power and other commodities. At 31 December 2022 the Group had a net posting of collateral. However, the design of the Group\u2019s trading agreements and methods of posting collateral, such as being able to utilise letters of credit and surety bonds to meet collateral requirements, aims to minimise cash outflows resulting from collateral requirements where possible. The Group has had a net cash outflow of \u00a3406.8 million during the year due to collateral (2021: \u00a3168.3 million inflow). At 31 December 2022 the Group held \u00a3nil in cash collateral receipts (2021: \u00a3205.6 million) recognised in payables and had posted \u00a3234.0 million (2021: \u00a332.8 million) of cash collateral payments recognised in receivables. The Group also had \u00a354.5 million (2021: \u00a342.5 million) of letters of credit and \u00a3165.0 million (2021: \u00a3107.1 million) of surety bonds utilised covering 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 reduced the amount by which receivables has increased. See notes 4.1 and 7.6 for further details on cash collateral receipts and non-cash collateral postings respectively. The \u00a3379.0 million (2021: \u00a327.4 million) cash outflow due to an increase in receivables in 2022 is predominantly related to the Customers business as a result of higher power and gas prices during the year, resulting in higher amounts receivable from customers. The Customers business has access to a facility which enables it to accelerate cash flows associated with amounts receivable from energy supply customers on a non-recourse basis. The Group has re\ufb01nanced this facility during the year, extending the maturity to January 2027 and increasing the size of the facility to \u00a3300.0 million from \u00a3200.0 million. The Group also agreed a further increase to the \u00a3300.0 million limit, to \u00a3400.0 million, for the period November 2022 to January 2024. Utilisation of the facility was \u00a3400.0 million at 31 December 2022 (2021: \u00a3200.0 million). The additional utilisation of this facility has resulted in a \u00a3200.0 million cash inflow which has offset the increase in receivables described above to lead to the net \u00a3379.0 million cash outflow. The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales, as described in note 3.3. The \u00a3113.7 million cash inflow is predominantly due to the Group\u2019s use of standard renewable certi\ufb01cate sale and renewable certi\ufb01cate purchase arrangements. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however, through these arrangements, the Group is able to accelerate cash flows over a proportion of these assets. At 31 December 2022 the Group had accelerated \u00a3331.2 million of cash flows using these standard renewable certi\ufb01cate sales (2021: \u00a3199.8 million). This cash inflow was offset by a net cash outflow as a result of renewable certi\ufb01cates generated and still held by the Group. The Group had a \u00a3431.8 million (2021: \u00a315.0 million) cash inflow due to an increase in payables during the year. This increase is predominantly due to increased levels of power repurchases within the Generation business in the current year, as well as higher accruals as a result of both increased volumes and higher prices in the Customers business. The Group has sought to normalise payments across its supplier base resulting in certain suppliers extending payment terms and some reducing terms. The Group\u2019s suppliers are able to access a supply chain \ufb01nance facility provided by a bank, for which funds can be accelerated in advance of the normal payment terms. At 31 December 2022, the Group had trade payables of \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. The facility does not directly impact the Group\u2019s 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 a number of payment facilities to leverage scale and ef\ufb01ciencies in transaction processing, whilst providing a working capital bene\ufb01t for the Group due to a short extension of payment terms of less than 12 months. The amount outstanding under these facilities at 31 December 2022 was \u00a3214.5 million (2021: \u00a362.2 million) resulting in a cash inflow of \u00a3152.3 million. Utilisation of these payment facilities has reduced the cash outflow in the purchases of property, plant and equipment line in the Consolidated cash flow statement by \u00a364.6 million and has also impacted the movement in payables line in the table above by \u00a387.7 million. The cash outflow of \u00a3133.4 million as a result of the increase in inventories results in part from the planned build-up of inventories due to the repro\ufb01ling of generation from summer into winter.
4.3 Notes to the consolidated cash flow statement continued
Changes in liabilities arising from \ufb01nancing cash flows
A reconciliation of the movements in liabilities arising from \ufb01nancing activities for both cash and non-cash movements
is provided below:
As at 31 December 2022
Borrowings
\u00a3m
Lease liabilities
\u00a3m
Total
\u00a3m
Balance at 1 January 1,361.0 125.9 1,486.9
Cash \ufb02ows from \ufb01nancing activities 2.1 (18.0) (15.9)
Effect of changes in foreign exchange rates 71.3 11.5 82.8
Other movements 6.5 33.7 40.2
Balance at 31 December 1,440.9 153.1 1,594.0
As at 31 December 2021
Borrowings
\u00a3m
Lease liabilities
\u00a3m
Total
\u00a3m
Balance at 1 January 1,065.7 30.2 1,095.9
Cash \ufb02ows from \ufb01nancing activities 46.3 (13.2) 33.1
Effect of changes in foreign exchange rates (14.9) 2.7 (12.2)
Other movements 7.6 45 .1 52.7
Acquisition of subsidiary 256.3 61.1 317.4
Balance at 31 December 1,361.0 125.9 1,486.9
Other movements principally relate to the amortisation of deferred \ufb01nance costs, discounting of lease liabilities and lease additions
in the year.
4.4 Equity and reserves
The Group\u2019s 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 classi\ufb01ed 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
2022
\u00a3m
2021
\u00a3m
Issued and fully paid:
2022: 414,872,491 ordinary shares of 11
16
\u2044
29
pence each (2021: 413,068,027) 47.9 47.7
The movement in allotted and fully paid share capital of the Company during the year was as follows:
Year ended 31 December
2022
(number)
2021
(number)
At 1 January 413,068,027 410,848,934
Issued under employee share schemes 1,804,464 2,219,093
At 31 December 414,872,491 413,068,027
The Company has only one class of shares, which are ordinary shares of 11
16
\u2044
29
pence each, carrying no right to \ufb01xed 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\u2019s employee share schemes (see note 6.2).
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 reflect amounts received on the issue of shares under employee share schemes. Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 432.2 430.0 Issue of share capital 1.1 2.2 At 31 December 433.3 432.2 Other reserves Other equity reserves reflect the impact of certain historical transactions, which are described under the table below: Capital redemption reserve \u00a3m Translation reserve \u00a3m Merger reserve \u00a3m Treasury shares \u00a3m Total other reserves \u00a3m At 1 January 2021 1.5 35.4 710.8 (50.4) 697.3 Exchange differences on translation of foreign operations \u2013 8.7 \u2013 \u2013 8.7 At 1 January 2022 1.5 4 4 .1 710.8 (50.4) 706.0 Exchange differences on translation of foreign operations \u2013 42.4 \u2013 \u2013 42.4 Exchange differences on acquisition of interest in Alabama Pellets LLC \u2013 (0.7) \u2013 \u2013 (0.7) At 31 December 2022 1.5 85.8 710.8 (50.4) 747.7 The capital redemption and treasury share reserves arose when the Group completed previous share buyback programmes. The 13.8 million shares held in the treasury share reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\u2019s US and Canadian subsidiaries from their functional currencies (USD and CAD) into sterling for presentation in these Consolidated \ufb01nancial statements are recognised in the translation reserve. Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \ufb01nancial instruments designated into hedge accounting relationships in accordance with IFRS 9, 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 identi\ufb01able 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 pro\ufb01ts. At 31 December 2022, the Group has two (2021: three) subsidiary undertakings with NCIs. These subsidiaries were acquired during the prior year through the acquisition of Pinnacle. During the year, the Group purchased the remaining 10% of NCI in Alabama Pellets LLC increasing the Group\u2019s interest in the subsidiary to 100%. See the Transactions with NCI section below for further information. 4.5 Non-controlling interests continued Summarised \ufb01nancial information The summarised \ufb01nancial information disclosed is shown on a 100% basis. It represents the results of each entity below that would be shown in the subsidiaries own \ufb01nancial statements prepared in accordance with IFRS, modi\ufb01ed for Group level fair value adjustments at acquisition. The comparative amounts at 31 December 2021 have been re-presented to include the Group level fair value adjustments and these adjustments have no impact to cashflow. All amounts are presented before intercompany eliminations. As at 31 December 2022 As at 31 December 2021 Principal place of business Non-controlling interest % Non-controlling interests \u00a3m Non-controlling interest % Non-controlling interests \u00a3m Alabama Pellets LLC North America 0% 10% 7. 2 Lavington Pellet Limited Partnership North America 25% 7.7 25% 8.5 Smithers Pellet Limited Partnership North America 30% 5.7 30% 5.8 Total 13.4 21.5 No dividends were paid to NCIs in the current or previous reporting period. Summarised statement of total comprehensive income Year ended 31 December 2022 Re-presented Year ended 31 December 2021 (2) Revenue \u00a3m Loss for the year \u00a3m Loss for the year attributable to the non- controlling interests \u00a3m Total comprehensive loss for the year \u00a3m Total comprehensive loss attributable to the non-controlling interests \u00a3m Revenue \u00a3m Loss for the year \u00a3m (Loss)/pro\ufb01t for the year attributable to the non- controlling interests \u00a3m Total comprehensive loss \u00a3m Total comprehensive (loss)/income attributable to the non-controlling interests \u00a3m Alabama Pellets LLC (1) 39.5 (9.5) (1.0) (9.5) (1.0) 25.6 (9.4) (1.7) (9.4) (1.7) Lavington Pellet Limited Partnership 36.5 (1.7) (0.7) (1.7) (0.7) 29.3 (0.6) 0.1 (0.6) 0 .1 Smithers Pellet Limited Partnership 13.0 (3.0) (0.9) (3.0) (0.9) 11.8 (1.1) (0.4) (1.1) (0.4) Total 89.0 (14.2) (2.6) (14.2) (2.6) 66.7 (11.1) (2.0) (11.1) (2.0) (1) The 2022 Summarised statement of total comprehensive income for Alabama Pellets LLC is for the period up to acquisition of the remaining NCI on 30 September 2022. (2) The comparative amounts at 31 December 2021 have been re-presented to include Group level fair value adjustments . 4.5 Non-controlling interests continued Summarised Balance sheet As at 31 December 2022 Re-presented As at 31 December 2021 (1) Non-current assets \u00a3m Current assets \u00a3m Current liabilities \u00a3m Non-current liabilities \u00a3m Net assets \u00a3m Non-current assets \u00a3m Current assets \u00a3m Current liabilities \u00a3m Non-current liabilities \u00a3m Net assets \u00a3m Alabama Pellets LLC 120.4 14.7 (16 .1) (0.6) 118.4 Lavington Pellet Limited Partnership 27.7 6.8 (3.1) (0.6) 30.8 2 9.1 6.9 (2.1) (0.7) 33.2 Smithers Pellet Limited Partnership 17. 3 1.8 (1.1) \u2013 18.0 17.1 2.0 (0.7) \u2013 18.4 Total 45.0 8.6 (4.2) (0.6) 48.8 166.6 23.6 (18.9) (1.3) 170.0 (1) The comparative amounts at 31 December 2021 have been re-presented to include Group level fair value adjustments. Summarised Cash flow Year ended 31 December 2022 Year ended 31 December 2021 Net cash in\ufb02ow/ (out\ufb02ow) from operating activities \u00a3m Net cash out\ufb02ow from investing activities \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow from \ufb01nancing activities \u00a3m Net cash in\ufb02ow/ (out\ufb02ow) \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow from operating activities \u00a3m Net cash out\ufb02ow from investing activities \u00a3m Net cash in\ufb02ow/ (out\ufb02ow) from \ufb01nancing activities \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow \u00a3m Alabama Pellets LLC (2.9) (47.9) 50.6 (0.2) Lavington Pellet Limited Partnership 3.5 (0.7) (2.2) 0.6 2.2 (0.5) (0 .1) 1.6 Smithers Pellet Limited Partnership (1.9) (0.2) 1.8 (0.3) (0.7) (2.5) 3.6 0.4 Total 1.6 (0.9) (0.4) 0.3 (1.4) (50.9) 5 4 .1 1.8 Transactions with NCI When the Group acquired Pinnacle during 2021, the NCI in Alabama Pellets LLC (APLLC) was 30%. In July 2021, the Group acquired a further 20% interest in APLLC for \u00a321.5 million ($29.7 million), increasing the Group\u2019s total interest in APLLC to 90% and reducing the NCI to 10%. This resulted in a \u00a30.2 million charge recognised in equity, within retained pro\ufb01ts, for the difference between the adjustment to NCI and the fair value of any consideration paid. In September 2022, the Group acquired the remaining 10% of NCI in APLLC for \u00a320.2 million ($22.2 million), resulting in the Group now owning 100% of APLLC. This resulted in a \u00a39.3 million charge recognised in equity, within retained pro\ufb01ts, for the difference between the adjustment to NCI and the fair value of any consideration paid, and a decrease in the translation reserve of \u00a30.7 million. The following table summarises the impact of changes in the Group\u2019s ownership of APLLC: Year ended 31 December 2022 \u00a3m Carrying amount of non-controlling interest acquired 10.2 Consideration paid to non-controlling interest (20.2) Decrease in equity attributable to owners of the Parent Company (10.0) Further information on changes during the year in the Group\u2019s NCIs is given in the Consolidated statement of changes in equity. 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 accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the target (the acquisition date). The consideration transferred, the identi\ufb01able 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 pro\ufb01t or loss 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: \u2022 consideration transferred; less \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able net assets acquired. Share-based payment awards held by employees of the acquired business that are voluntarily replaced are recognised as post- acquisition remuneration. Share-based payment awards held by employees of the acquired business that are obliged to be replaced are allocated between post-acquisition remuneration, which is treated as an expense, and pre-acquisition remuneration, which is treated as part of the overall consideration. Acquisition of Pinnacle In the prior year the Group completed the acquisition of Pinnacle. The primary reason for the acquisition was to advance the Group\u2019s biomass strategy by more than doubling its production capacity, signi\ufb01cantly reducing its cost of biomass production and adding a major biomass supply business underpinned by long-term sales contracts with high-quality Asian and European counterparties. The Group completed the acquisition on 13 April 2021. The purchase consideration was valued on a fully diluted equity basis at \u00a3222 million (C$385 million), a price of C$11.30 per share representing a premium of 13% based on the closing market price on 5 February 2021 of C$10.04 per share. The purchase consideration consisted of the following: As at 13 April 2021 \u00a3m Cash paid to ordinary shareholders 218 .1 Cash paid to settle existing share-based payment awards 4.2 Total purchase consideration 222.3 There was no contingent consideration in relation to the acquisition. Acquisition date fair values The Group\u2019s one year measurement period from the acquisition date, to \ufb01nalise the acquisition accounting, ended in the current reporting period. There were no changes to the provisional fair values of the identi\ufb01able assets acquired, liabilities assumed and NCI as at 13 April 2021 that were recognised in the 2021 Consolidated \ufb01nancial statements. Detailed below are the relevant acquisition values and the methods used to estimate them, as presented in the prior year. As at 13 April 2021 Fair value \u00a3m Property, plant and equipment and intangible assets 326.2 Right-of-use assets 60.4 Other non-current assets 4.3 Inventories 26.8 Trade and other receivables 29.4 Cash and cash equivalents 18.8 Trade and other payables (37.1) Lease liabilities (61.1) Borrowings (256.3) Deferred tax liabilities (12.1) Other liabilities (3.3) Net identi\ufb01able assets acquired 96.0 NCI (39.6) Goodwill 165.9 Net assets acquired 222.3 5.1 Business combinations continued As part of the accounting for the Pinnacle acquisition, the assets and liabilities acquired were measured at fair value on the acquisition date. The valuation was performed by an independent valuation specialist. A fair value uplift of \u00a323.6 million (C$40.8 million) was recognised on the carrying value of property, plant and equipment acquired as part of the acquisition. If different assumptions and inputs were used, this could have resulted in a different fair value. The Pinnacle business held a number of long-term customer contracts at the acquisition date. As part of the acquisition accounting, these existing customer contracts were required to be measured at their fair value. In determining the fair value of these contracts, estimates were required for inputs to the valuation, such as the margin associated with these customer contracts, the required return for assets used to generate these contract revenues, retention rates, and an appropriate discount rate based on the risk pro\ufb01le of these contracts. A change to any of these inputs could signi\ufb01cantly impact the fair value calculated for these customer contracts. A customer-related intangible asset with a fair value of \u00a335.9 million (C $62.1 million) was recognised in relation to customer contracts at acquisition and is being amortised over its remaining UEL. See note 5.2 for further details of the valuation approach, the key valuation inputs, the carrying value and remaining amortisation period. The Group and Pinnacle had a pre-existing relationship relating to long-term supply contracts under which Pinnacle supplied the Group with biomass pellets at a \ufb01xed price. On acquisition, the Group assessed the terms of these supply contracts compared to current market transactions for an identical contract. Pricing for current market transactions for the purpose of this exercise was assessed based on the existing portfolio of the Group and Pinnacle contracts. These supply contracts were determined to be consistent with the pricing for current market transactions for an identical contract and the settlement provision for terminating these contracts would have been immaterial. As a result, no consideration was attributed to the settlement of the pre-existing relationship and therefore no gain or loss relating to the pre-existing relationship was recognised in the prior year. The fair values of the acquired property, plant and equipment, customer-related intangible asset and pre-existing relationship are inherently judgemental and involve a high degree of estimation, meaning valuations based on different methodologies or assumptions may have resulted in a materially different fair value. However, these valuations were performed by specialists, using appropriate methodologies and information. Goodwill on acquisition predominantly related to the value of uncontracted revenues and synergies expected to be realised by combining Pinnacle with the Group\u2019s existing Pellet Production business. The increased size of the Group\u2019s Pellet Production business has enabled greater flexibility, opportunities to optimise the Group\u2019s operations and logistics across the enlarged portfolio and has increased knowledge. The goodwill is not deductible for tax purposes. Goodwill is required to be denominated in the functional currency of the operations to which the goodwill is allocated to. The goodwill on the Pinnacle acquisition relates to both CAD and USD functional currency operations. This resulted in goodwill of C$97.4 million and $151.9 million which, when translated at the acquisition date, resulted in \u00a3165.9 million of goodwill. These goodwill balances are translated at the rates prevailing at each reporting date into the Group\u2019s presentational currency of GBP (see note 5.2 for further details). The NCI was measured at the proportionate share of the identi\ufb01able net assets of the acquiree at the acquisition date (see note 4.5 for further details on NCI).
5.1 Business combinations continued
Acquired receivables
The Group acquired receivables with a fair value and a gross contracted value of \u00a322.9 million (C$39.6 million). No provision for
receivables was recognised due to the risk of default within the Pinnacle business, as well as the wider Pellet Production business,
being considered to be remote, as explained further in note 3.5.
Contingent liabilities
No contingent liabilities or indemni\ufb01cation assets were recognised on acquisition of Pinnacle.
Reconciliation of net cash outflow from investing activities
Year ended
31 December 2021
Cash out\ufb02ow/
(in\ufb02ow)
\u00a3m
Cash paid to acquire Pinnacle 222.3
Less balances acquired:
Cash (18.8)
Net cash out\ufb02ow 203.5
Acquisition of Princeton pellet plant
On 3 August 2022, the Group announced that it had signed an agreement with Princeton Standard Pellet Corporation (PSPC)
to acquire its pellet plant in Princeton, British Columbia, Canada for consideration of \u00a37.6 million (C$11.5 million), subject to customary
working capital adjustments. The sale subsequently completed on 1 September 2022. The plant has nameplate capacity to produce
90kt of biomass pellets a year from sawmill residuals and will contribute to the Group\u2019s strategy to increase pellet production capacity.
In addition to the pellet plant itself, the Group also acquired certain other assets from PSPC including inventories and other working
capital balances. As part of the transaction, the employees of PSPC joined the Group. Although the legal structure of the transaction
was that of an asset purchase agreement, it was concluded that the substance of the transaction met the criteria of a business
combination as de\ufb01ned by IFRS 3 and therefore the Group accounted for the transaction under the acquisition method.
The fair value of the assets and liabilities acquired were as follows:
As at 1 September
2022
Fair values
\u00a3m
Property, plant and equipment 7.9
Inventories 1.0
Trade and other receivables 0.8
Trade and other payables (1.2)
Deferred tax liabilities (0.9)
Net identi\ufb01able assets acquired 7.6
No goodwill arose from this transaction and no contingent liabilities or indemni\ufb01cation assets have been recognised.
The Group acquired receivables with a fair value and gross contracted value of \u00a30.8 million.
No provision was recognised due to the risk of default within the Princeton business, as well as the wider Pellet Production business,
being considered to be remote.
As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements.
5.2 Goodwill and intangible assets Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets are not physical in nature but are identi\ufb01able and separable from other assets. Intangible assets other than goodwill can be acquired in business combinations, purchased separately or internally developed. Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. Method of amortisation Average UEL remaining 2022 (years) Brand Straight line 4 Customer-related assets: Opus Energy Reducing balance 5 Pinnacle Straight line 8 Other Straight line 11 Computer software and licences Straight line 3 Other intangibles Straight line 5 Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Opus Energy CGU and the Pinnacle CGU. The brand is attributable to the Opus Energy CGU. Details of the impairment tests relating to these CGUs are included in note 2.4. 5.2 Goodwill and intangible assets continued Customer- related assets \u00a3m Brand \u00a3m Computer software and licences \u00a3m Development assets \u00a3m Other intangibles \u00a3m Goodwill \u00a3m Total \u00a3m Cost and carrying amount: At 1 January 2021 211.0 11.3 131.5 21.0 \u2013 248.2 623.0 Additions at cost (acquired separately) 8.2 \u2013 \u2013 \u2013 \u2013 \u2013 8.2 Additions at cost (internally generated) \u2013 \u2013 14.1 \u2013 \u2013 \u2013 14.1 Transfers from/(to) tangible fixed assets \u2013 \u2013 1.2 (19.3) \u2013 \u2013 (18 .1) Acquired in business combinations 35.9 \u2013 0.4 \u2013 0.2 165.9 202.4 Effect of changes in foreign exchange rates 0.4 \u2013 \u2013 \u2013 0 .1 2.2 2.7 At 1 January 2022 255.5 11.3 147.2 1.7 0.3 416.3 832.3 Additions at cost (internally generated) \u2013 \u2013 9.4 \u2013 \u2013 \u2013 9.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 (19.2) (1.7) \u2013 \u2013 (20.9) Transfers between categories \u2013 \u2013 (0.5) 0.5 \u2013 \u2013 \u2013 Transfers to property, plant and equipment \u2013 \u2013 0.5 (0.5) \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 2.1 \u2013 0.3 \u2013 \u2013 7.9 10.3 At 31 December 2022 257.6 11.3 129.5 \u2013 0.3 424.2 822.9 Accumulated amortisation: At 1 January 2021 126.6 4.5 61.9 \u2013 \u2013 \u2013 193.0 Charge for the year 22.8 1.1 10.5 \u2013 \u2013 \u2013 34.4 Acquired in business combinations 0 .1 \u2013 \u2013 \u2013 0 .1 \u2013 0.2 Effect of changes in foreign exchange rates (0.1) \u2013 \u2013 \u2013 (0.1) \u2013 (0.2) At 1 January 2022 149.4 5.6 72.4 \u2013 \u2013 \u2013 227.4 Charge for the year 21.2 1.2 9.0 \u2013 \u2013 \u2013 31.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 5.7 \u2013 \u2013 \u2013 5.7 Effect of changes in foreign exchange rates \u2013 \u2013 0.1 \u2013 \u2013 \u2013 0 .1 At 31 December 2022 170.6 6.8 79.0 \u2013 \u2013 \u2013 256.4 Net book value: At 31 December 2021 10 6 .1 5.7 74.8 1.7 0.3 416.3 604.9 At 31 December 2022 87.0 4.5 50.5 \u2013 0.3 424.2 566.5 The Group has incurred research and development expenditure of \u00a312.5 million (2021: \u00a311.4 million), which is included within Operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets primarily reflects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017 and the acquisition of Pinnacle in April 2021, which provided the Group with access to customer bases with contracted cash flows. The Opus Energy asset acquisition date fair value of \u00a3211.0 million reflected the estimated value of the future cash flows associated with this customer base at the acquisition date and is dependent upon estimates of both current and expected future contract margins and assumed customer retention rates. The cash flows have been discounted using an asset speci\ufb01c discount rate of 10.7%. The asset has an estimated UEL from acquisition of 11 years, calculated based on customer churn-rate analysis which shows how many customers are expected to leave the business in a given year, and is being amortised on a reducing balance basis to reflect the diminishing rate of contract renewals over time. At 31 December 2022, the Opus Energy asset had a carrying value of \u00a347.8 million (2021: \u00a364.2 million) and a remaining UEL of approximately \ufb01ve years (2021: six years). The Pinnacle asset acquisition date fair value of \u00a335.9 million (C$ 6 2 .1 million) was estimated based on a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash flows attributable to the customer-related intangible asset, after deducting a contributory asset charge that represented the required return for \ufb01xed assets, net working capital and the assembled workforce that are required to generate the cash flows. The valuation estimates an appropriate margin to apply to the contracts. 5.2 Goodwill and intangible assets continued No customer retentions were assumed as part of the valuation. The inputs used as part of the valuation are detailed below: Pinnacle customer- related asset Asset speci\ufb01c discount rate 10.0% Weighted average tax rate 25.2% Return on net working capital 1.5% Return on \ufb01xed assets 7.0% Return on the assembled workforce 8.5% Useful economic life 10 years The Pinnacle customer-related asset is being amortised on a straight-line basis to reflect the even spread of contract maturities over the UEL. At 31 December 2022, the Pinnacle asset had a carrying value of \u00a331.5 million (2021: \u00a333.8 million) and a remaining UEL of approximately eight years (2021: approximately nine years). The Other customer-related assets primarily relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. Opus Energy brand The Opus Energy brand was acquired as part of the acquisition in February 2017 and valued at \u00a311.3 million on a relief-from-royalty method. The brand is being amortised on a straight-line basis over its assumed 10-year UEL from acquisition. Computer software and licences Additions in the period include those in the ordinary course of business, which principally reflect ongoing investment in business systems to support the Customers segment. Software assets are amortised on a straight-line basis over their estimated UEL ranging from three to 10 years. In March 2021 The IFRIC \ufb01nalised its agenda decision regarding how to account for cost of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement. The agenda decision concluded that the con\ufb01guration and customisation costs do not normally result in an intangible asset and should therefore be recognised as an expense. The Group has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. These assets have been impaired during the year, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. See the Change in accounting policy section in the Basis of preparation for further details. As at 31 December 2022, computer software assets under the course of construction amounted to \u00a318.3 million (2021: \u00a339.3 million). The comparative amount included \u00a319.2 million for a billing system where the Group has stopped development and is engaged in active discussion with the supplier following the supplier\u2019s failure to perform under the contract. Proceedings have been issued against the supplier to recover damages for misrepresentation and breach of contract. The Group no longer expects that future economic bene\ufb01ts will be recovered as an ongoing intangible asset and as a result, the asset has been impaired in the current \ufb01nancial period. The impairment charge has been recognised against the cost the asset in the table above, and recorded as an exceptional cost. See notes 2.7 and 7.6 for further information. See note 2.4 for a summary of impairment charges recognised on \ufb01xed assets during the year. Goodwill The table below shows the carrying amount of goodwill by CGU: As at 31 December 2022 \u00a3m 2021 \u00a3m CGU allocation: Drax Energy Solutions CGU: Haven Power acquired in 2009 10.7 10.7 Opus Energy CGU: Opus Energy acquired in 2017 159.2 159.2 Lanark CGU: Drax Generation Enterprise acquired in 2018 11.3 11.3 Galloway CGU: Drax Generation Enterprise acquired in 2018 40 .1 4 0.1 Cruachan CGU: Drax Generation Enterprise acquired in 2018 26.9 26.9 Pellet group of CGUs: Pinnacle acquired in 2021 176.0 16 8 .1 Total goodwill 424.2 416.3 A full impairment assessment of CGUs with goodwill allocated to them has been performed as detailed in note 2.4.
5.3 Provisions
The Group makes provisions for reinstatement to cover the estimated costs of decommissioning and demolishing or remediating the
sites of its generation assets at the end of their useful economic lives (UELs). The Group has recognised a restructuring provision
in respect of coal closure. Other provisions primarily relate to dilapidation provisions for leased assets.
Accounting policy
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable estimate can be made of the amount required to settle the obligation.
Speci\ufb01cally, a provision is made for the estimated decommissioning costs at the end of the UEL of the Group\u2019s generating assets, when
a legal or constructive obligation arises, on a discounted basis. The amount provided is calculated on a site-by-site basis and represents
the present value of the expected future costs. An amount equivalent to the discounted provision is capitalised within property, plant
and equipment and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable
and similar charges.
The Group recognises a restructuring provision when it has developed a detailed formal plan for the restructuring and has raised
a valid expectation that it will carry out the restructuring either by starting to implement the plan or announcing its main features
to those affected by it. The restructuring provision includes only the direct expenditures arising from the restructuring programme.
These are costs that would have been avoided if the restructuring programme did not go ahead. Any costs to be incurred relating
to the ongoing activities of the Group are excluded from the provision.
A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination
bene\ufb01t and when the Group recognises any related restructuring costs.
Decommissioning
provision
\u00a3m
Restructuring
provision
\u00a3m
Other
provisions
\u00a3m
Total
\u00a3m
Carrying amount:
At 1 January 2022 69.5 16.7 0.2 86.4
Additions \u2013 0.4 0.1 0.5
Utilised (2.7) (4.4) \u2013 ( 7.1)
Reclass between provision categories (1.5) \u2013 1.5 \u2013
Unwinding of discount and changes in the discount rate
(1)
(21.3) \u2013 \u2013 (21.3)
Effect of changes in foreign exchange rates \u2013 \u2013 0.1 0.1
At 31 December 2022 44.0 12.7 1.9 58.6
(1) The unwinding of discount and changes in the discount rate is comprised of a \u00a31.1m increase to the provision relating to unwinding of the discount (see note 2.5) and a
\u00a322.4m decrease in the provision relating to changes in the discount rate (see note 3.1).
Decommissioning provisions are made in respect of Drax Power Station. The decommissioning provision is based on the assumption
that the decommissioning and reinstatement will take place at the end of the expected UEL of Drax Power Station, currently estimated
to be 2039. This has been estimated using existing technology at current prices based on independent third-party advice, updated
on a triennial basis as a minimum, but more regularly where deemed appropriate due to changes in plans for decommissioning the
site that would impact the expected costs. The most recent update took place in December 2020.
This cost of decommissioning was estimated to be \u00a356.0 million. An inflation curve was then applied to estimate the decommissioning
costs in 2039. This value was then discounted to calculate the present value of the provision to be recognised.
The discount rate used is a nominal risk-free rate that reflects the duration of the liability. The discount rate is estimated using forward
UK Gilt curves as a proxy for risk-free rates. The use of a risk-free rate reflects the fact that the estimated future cash flows have
built-in risks speci\ufb01c to the liability. The discount rate used for the Group\u2019s decommissioning provision is 4.05% (2021: 1.16%).
The decommissioning provision is not considered a key source of estimation uncertainty to which there is a signi\ufb01cant risk of a material
adjustment to the carrying amount within the next \ufb01nancial year. Decommissioning provisions are based on costs suf\ufb01ciently far in the
future that, given the length of time, it is not anticipated that any new, more reliable, or accurate information will be available within
the next \ufb01nancial year to update this estimate that would result in a material adjustment. The cost of decommissioning a site the size
of Drax Power Station will be impacted by things such as the exact composition and volumes of materials used in the structures to be
decommissioned, and the presence of contaminants. Full site surveys and investigations will need to be performed once the site
ceases operation to ascertain further information necessary to decommission the site which could impact the potential costs.
Notwithstanding this, due to the high degree of estimation and uncertainty regarding the potential costs and timing of
decommissioning Drax Power Station, there remains a risk of a material adjustment to the carrying amount in the longer-term.
5.3 Provisions continued The present value recognised for the decommissioning provision is dependent on the inflation rate and discount rate used. Inflation rates are estimated using forward inflation curves. An increase of 10% to the cost estimates would increase the decommissioning provision by \u00a34.7 million (2021: \u00a36.8 million). An increase of 100 basis points in the inflation and discount rates used would result in a \u00a39.5 million (2021: \u00a313.8 million) increase and a \u00a37.0 million (20 21: \u00a311.1 million) decrease respectively in the amount recognised. The relationship between the change in basis points and change in amount recognised is relatively linear therefore the impact of similar sensitivities may be interpolated and extrapolated from these amounts. The restructuring provision consists of redundancy costs relating to the formal closure of the coal units at Drax Power Station which was initially planned for September 2022. It also includes costs for engineering works required to make the coal units and related assets safe when they cease operating. At the request of the UK Government, the Group has entered into an agreement with National Grid to keep the two coal units available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and will only operate if and when instructed to do so by National Grid. This has delayed the formal closure of the coal units and has resulted in the utilisation of certain amounts of the restructuring provision also being delayed. This has not materially impacted the expected costs. The amount of the restructuring provision utilised in the year predominantly relates to engineering and redundancy costs. Of the balance remaining at 31 December 2022, \u00a311.6 million relates to engineering works, of which \u00a33.2 million is expected to be utilised in 2023 with the remaining amounts expected to be utilised in the period 2024 to 2026. A further \u00a30.6 million relates to redundancy costs, which are expected to be utilised in 2023, and the remaining \u00a30.5 million relates to other costs, which are expected to be utilised in the period 2024 to 2026. The full provision has been presented within non-current liabilities in the Consolidated balance sheet. 5.4 Discontinued operations A discontinued operation is a component of the Group that has been disposed of or classi\ufb01ed as held for sale and meets one of the following criteria outlined in IFRS 5: \u2022 represents a separate major line of business or geographic area of operations; \u2022 is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or \u2022 is a subsidiary acquired exclusively with a view to resale. Accounting policy The component is classi\ufb01ed as a discontinued operation at the earlier of when it is disposed of or when the component meets the held for sale criteria. When an operation is classi\ufb01ed as a discontinued operation its results are presented separately in the Consolidated income statement. The results of the discontinued operation are also re-presented in the Consolidated income statement as discontinued in the comparative period. Sale of CCGT portfolio On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited for cash consideration of up to \u00a3193 million, subject to customary adjustments. This included \u00a329 million of contingent consideration associated with the option to develop the site at Damhead Creek (see notes 3.5 and 7.1). The sale price represented a return over the Group\u2019s period of ownership signi\ufb01cantly ahead of the Group\u2019s weighted average cost of capital. The Group received initial consideration of \u00a3188 million in February 2021 which was amended to \u00a3186 million in July 2021 following conclusion of the completion accounts process. The Group recognised an overall net gain on disposal of \u00a38.5 million spread across the \ufb01nancial years ending 31 December 2020 and 31 December 2021. The Group recognised certain transaction-related and mark-to-market costs, as incurred, during the year ended 31 December 2020. As a result, recognition of the net gain on disposal in the Group\u2019s Consolidated income statement is spread across 2020 and 2021, as illustrated below. No amounts have been recognised in the current \ufb01nancial year in relation to this disposal. Year ended 31 December 2022 \u00a3m 2021 \u00a3m 2020 \u00a3m Total \u00a3m Gross gain on disposal \u2013 17.1 \u2013 17.1 Transaction costs \u2013 (0.9) (3.3) (4.2) Mark-to-market costs \u2013 (1.1) (3.3) (4.4) Net gain/(loss) on disposal \u2013 15.1 (6.6) 8.5
5.4 Discontinued operations continued
Discontinued operations
The income and expenditure of the CCGT generation portfolio were classi\ufb01ed as discontinued operations in the comparative period.
There are no items of income or expenditure from discontinued operations in the current \ufb01nancial year.
Year ended 31 December 2021
Adjusted
results
\u00a3m
Exceptional
items and
certain
remeasurements
\u00a3m
Total
results
\u00a3m
Revenue 51.8 (2.5) 49.3
Cost of sales (31.6) (7.2) (38.8)
Gross pro\ufb01t/(loss) 20.2 (9.7) 10.5
Operating and administrative expenses 0.1 (1.9) (1.8)
Adjusted EBITDA 20.3
Other gains \u2013 17.1 17.1
Operating pro\ufb01t 20.3 5.5 25.8
Pro\ufb01t before tax on discontinued operations 20.3 5.5 25.8
Total tax (charge)/credit (3.6) 1.9 (1.7)
Pro\ufb01t after tax from discontinued operations and total pro\ufb01t
from discontinued operations 16.7 7.4 24 .1
Earnings per share
Pence Pence
For net pro\ufb01t for the period from discontinued operations attributable to owners of the
Parent Company
\u2013 Basic 4.2 6 .1
\u2013 Diluted 4.1 5.8
Section 6: People costs The notes in this section relate to the remuneration of the Directors and employees of the Group, including the Group\u2019s obligations under retirement bene\ufb01t schemes. 6.1 Colleagues including directors and employees This note provides a more detailed breakdown of the cost of employees, including Executive directors of the Group. The average number of employees in Operations (staff based at production and generation sites), Customers (employees in the Group\u2019s Customers segment) and Central corporate and commercial functions are also provided. Further information in relation to pay and remuneration of the Executive directors can be found in the Remuneration Committee report, starting on page 127. Staff costs (including Executive directors) Year ended 31 December 2022 \u00a3m 2021 \u00a3m Wages and salaries 201.8 167.9 Social security costs 21.6 20.0 De\ufb01ned bene\ufb01t pension service cost (note 6.3) 4.7 6.3 De\ufb01ned contribution pension cost (note 6.3) 16.7 15.7 Share-based payments (note 6.2) 9.6 7. 4 Termination bene\ufb01ts 1.4 7.3 Total staff costs 255.8 224.6 Staff costs capitalised (6.9) ( 7.5) Staff costs included in discontinued operations \u2013 1.5 Staff costs included in operating and administrative expenses from continuing operations 248.9 218.6 Termination bene\ufb01ts of \u00a31.4 million (2021: \u00a37.3 million) includes a de\ufb01ned bene\ufb01t past service credit of \u00a3nil (2021: credit of \u00a32.6 million). See note 6.3. Average monthly number of people employed (including Executive directors) Year ended 31 December 2022 (number) 2021 (number) Operations (Generation) 685 754 Operations (Pellet Production) 696 520 Customers 866 964 Central corporate and commercial functions 880 884 Total average monthly number of people employed 3,127 3,122 6.2 Share-based payments The Group operates three share option schemes for employees: the Long Term Incentive Plan (LTIP) for Executive directors and senior employees (which replaced the Performance Share Plan (PSP) from 2020), the Deferred Share Plan (DSP) for Executive directors, and the Sharesave Plan (SAYE) for all UK qualifying employees. Awards are made to certain employees below senior management under the rules of the LTIP \u2013 such awards are retention and recognition awards, designated as One Drax Awards, for more junior colleagues. The Group incurs a non-cash charge in respect of these schemes in the Consolidated income statement, which is set out below along with a detailed description of each scheme and the number of options outstanding at the reporting date. Accounting policy The LTIP, PSP, DSP, One Drax Awards and SAYE share-based payment schemes are equity-settled. In accordance with IFRS 2, equity-settled share-based payments are measured at the fair value of the equity instrument at the date of grant. The corresponding expense is recognised in the Consolidated income statement on a straight-line basis over the relevant vesting period, based on an estimate of the number of shares that will ultimately vest as a result of the effect of non-market based vesting conditions, which is revised at each reporting date. Market based conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured.
6.2 Share-based payments continued
Costs recognised in the Consolidated income statement in relation to share-based payments during the year were as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Equity-settled
LTIP (granted from 2020) 5.6 3.6
PSP (granted from 2017 to 2019) 0.5 0.9
DSP (granted from 2017) 0.4 0.6
One Drax Awards 1.0 0.7
SAYE 2.1 1.6
Total share-based payment expense included within staff costs (note 6.1) 9.6 7.4
Movements in the number of share options outstanding at the reporting date for each scheme is shown below. Only the SAYE options
have exercise prices listed as all other schemes have no exercise price.
SAYE
LTIP
(number)
PSP
(number)
DSP
(number)
One Drax
Awards
(number)
Three-year
weighted
average
exercise price
(pence)
SAYE three-year
(number)
Five-year
weighted
average
exercise price
(pence)
SAYE \ufb01ve-year
(number)
At 1 January 2021 3 , 055,16 8 1,807,607 690,438 \u2013 137 9,523,816 139 3,649,625
Granted 1,990,385 \u2013 99,367 226,852 331 790,701 331 109,566
Forfeited (445,760) (325,362) (40,568) (10,083) 141 (813,391) 132 (607,663)
Exercised \u2013 (627,10 1) (135,972) \u2013 174 (828,697) 180 (516,317)
Expired (29,565) (138,722) (45,839) (703) 170 (295,606) 164 (95,501)
At 1 January 2022 4,570,228 716,422 5 67,4 26 216,066 149 8,376,823 140 2,539,710
Granted 1,399,952 \u2013 71,399 143,439 563 700,799 563 107,122
Forfeited (2 38 ,121) (46,716) (5,598) (11,235) 176 (222,311) 154 (80,928)
Exercised \u2013 (622,989) (265,482) (211,265) 206 (545,220) 188 (72,097)
Expired (32,688) (46,717) \u2013 (258) 304 (146,423) 254 (28,945)
At 31 December 2022 5,699,371 \u2013 367,745 136,747 178 8,163,6 6 8 155 2,464,862
The fair value of share options is calculated using either a Monte-Carlo model or a Black-Scholes model, depending on which model is
deemed most appropriate for the nature of the share options. The Black-Scholes model compares exercise price to share price at the
date of grant. The Monte-Carlo model takes into account the estimated probability of different levels of vesting for share options with
market based conditions. The key inputs to the valuation models for the options are the share price at the date of grant, expected
volatility and risk-free interest rate. Expected volatility was determined by calculating the historical volatility of the Group\u2019s share price.
The expected life used in the model has been adjusted, based on management\u2019s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
6.2 Share-based payments continued
Information about the valuation models used and relevant inputs to the models is set out in the table below, along with key information
about each scheme for options granted and exercised in the current and prior year:
Year ended 31 December 2022
Scheme LTIP PSP DSP One Drax Awards SAYE three-year SAYE \ufb01ve-year
Valuation model used Monte-Carlo Black-Scholes Black-Scholes Black-Scholes Black-Scholes
Dividend yield for Black-Scholes model N/A N/A N/A 2.85% 3.15%
Annual risk-free interest rate 1.20% 1.20% 1.20% 2.46% 2.38%
Expected volatility 40% 40% 40% 41% 38%
Grant date 18 March 2022 18 March 2022 18 March 2022 12 April 2022 12 April 2022
Share price at grant date (pence) 726 726 726 783 783
Weighted average fair value of options
granted at measurement date (pence) 697 726 726 293 291
Fair value of options granted (\u00a3m) 9.8 0.5 1.0 2 .1 0.3
Vesting period of options granted 3 years 3 years 1 year 3 years 5 years
Weighted average share price of
options exercised during the period
at the date of exercise (pence) \u2013 711 729 729 729 722
Number of options exercisable
at year end \u2013 \u2013 17,05 8 \u2013 605 \u2013
Range of exercise price of options
outstanding at year end (pence)
Between 127
and 563
Between 127
and 563
Weighted average remaining
contractual life (months) 13 \u2013 11 3 8 30
Year ended 31 December 2021
Scheme LTIP PSP DSP One Drax Awards SAYE three-year SAYE \ufb01ve-year
Valuation model used Monte-Carlo Black-Scholes Black-Scholes Black-Scholes Black-Scholes
Dividend yield for Black-Scholes model N/A N/A N/A 4.3% 4.7%
Annual risk-free interest rate 0.12% 0 .12% 0.12% 0.43% 0.68%
Expected volatility 40% 40% 40% 38% 36%
Grant date 1 April 2021 1 April 2021 1 April 2021 13 April 2021 13 April 2021
Share price at grant date (pence) 418 418 418 413 413
Weighted average fair value of options
granted at measurement date (pence) 388 418 418 111 105
Fair value of options granted (\u00a3m) 7.7 0.4 0.9 0.9 0.1
Vesting period of options granted 3 years 3 years 1 year 3 years 5 years
Weighted average share price of
options exercised during the period
at the date of exercise (pence) \u2013 380 380 \u2013 449 420
Number of options exercisable
at year end \u2013 \u2013 \u2013 \u2013 8,551 \u2013
Range of exercise price of options
outstanding at year end (pence)
Between 127
and 331
Between 127
and 331
Weighted average remaining
contractual life (months) 21 4 11 3 18 41
6.2 Share-based payments continued
LTIP
The LTIP was introduced in 2020 for Executive directors and senior employees. This replaced the PSP, which operated from 2017
to 2019 (see below). Under the LTIP, annual awards of performance and service-related shares are made for no consideration
to Executive directors and other senior employees up to a maximum of 200% of their annual base salary. Vesting of a proportion
of shares (50%) is conditional upon whether the Group\u2019s Total Shareholder Return (TSR) matches or outperforms an index (determined
in accordance with the scheme rules) over three years, and vesting of a proportion of shares (50%) is conditional upon performance
of cumulative Adjusted EPS (de\ufb01ned to be derived from Adjusted results) over three years.
Shares are forfeited due to employees failing to meet the continuing service conditions of the grant and as such do not attract
a charge.
Shares expire due to employees not meeting market-based conditions, withdrawing (by choice) part way through the vesting period
or for any other reason not exercising their options in the exercise period after they vest. Under IFRS 2 such options still attract
a charge.
PSP
The PSP was introduced for Executive directors and senior employees to replace the Bonus Matching Plan from 2017. Under the PSP,
annual awards of performance and service-related shares were made for no consideration up to a maximum of 175% of their annual
base salary. Vesting of a proportion of shares (50%) was conditional upon whether the Group\u2019s TSR matches or outperforms an index
(determined in accordance with the scheme rules) over three years and vesting of a proportion of shares (50%) was conditional upon
performance against the Group Scorecard (see page 147).
DSP
The Group operates the DSP, under which Executive directors receive 40% (2021: 40%) of their annual bonus in shares. DSP awards
are granted at nil cost and vest after three years subject to continued employment or \u201cgood leaver\u201d termination provisions.
One Drax Awards
One Drax Awards are granted under the rules of the LTIP to certain employees below senior management and vest after one year
subject to continuous employment. The number of shares awarded to the employee is equivalent to 10% of their base salary based
on the Group\u2019s share price as at the grant date.
SAYE
In April 2022, participation in the SAYE plan was offered again to all UK qualifying employees. Options were granted for employees to
acquire shares at a discount of 20% to the prevailing market price at the grant date, determined in accordance with the scheme rules.
The options are exercisable at the end of three or \ufb01ve-year savings contracts.
Additional information in relation to the Group\u2019s share-based incentive plans is included in the Remuneration Committee report
on pages 138 and 139.
6.3 Retirement bene\ufb01t obligations
The Group operates two de\ufb01ned bene\ufb01t and \ufb01ve de\ufb01ned contribution pension schemes.
Name of scheme Type of Bene\ufb01t Status Country
Drax Power Group (DPG) section of the
Electricity Supply Pension Scheme (ESPS) De\ufb01ned bene\ufb01t \ufb01nal salary Closed to new members in 2002 UK
Drax 2019 Scheme De\ufb01ned bene\ufb01t \ufb01nal salary Closed to new members on transfer in 2019 UK
Drax Group Personal Pension Plan De\ufb01ned contribution Open to new members UK
Drax Energy Solutions Personal Pension Plan De\ufb01ned contribution Open to new members UK
Opus Energy Group Personal Pension Plan De\ufb01ned contribution Open to new members UK
Drax Biomass Inc. 401(K) Plan De\ufb01ned contribution Open to new members US
Pinnacle Registered Retirement Savings Plan De\ufb01ned contribution Open to new members Canada
Trustee governance (de\ufb01ned bene\ufb01t pension schemes)
The UK de\ufb01ned bene\ufb01t schemes are administered by a board of Trustees, which is legally separate from the Group. The Trustees are
composed of representatives of both the employer and employees. The Trustees are required by law to act in the interest of all relevant
bene\ufb01ciaries and are responsible for the investment policy for the assets and the day-to-day administration of the bene\ufb01t schemes.
Accounting policy
Payments to de\ufb01ned contribution schemes are recognised as an expense when employees have rendered services that entitle them
to the contributions. The Consolidated income statement charge for the de\ufb01ned contribution scheme represents the total
contributions to be paid by the Group in respect of the current period.
6.3 Retirement bene\ufb01t obligations continued
For the de\ufb01ned bene\ufb01t pension schemes, the cost of providing bene\ufb01ts is determined using the projected unit credit method, with
actuarial valuations being carried out at the end of each reporting period. Remeasurement of the obligation, comprising actuarial gains
and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest), is recognised immediately
in the Consolidated balance sheet with a charge or credit to the Consolidated statement of comprehensive income in the period in
which it occurs. De\ufb01ned bene\ufb01t costs, including current service costs, past service costs and gains and losses on curtailments and
settlements, are recognised in the Consolidated income statement as part of operating and administrative expenses in the period in
which they occur. The net interest expense or credit is recognised in interest payable and similar charges or interest receivable.
Signi\ufb01cant estimation uncertainty
Measurement of the de\ufb01ned bene\ufb01t pension obligation using the projected unit credit method involves the use of key assumptions,
including discount rates, inflation rates, salary and pension increases and mortality rates. These actuarial assumptions are reviewed
annually and modi\ufb01ed as appropriate. The Group believes that the assumptions utilised in measuring obligations under the schemes
are reasonable based on prior experience, market conditions and the advice of pension scheme actuaries. However, actual results may
differ from such assumptions.
The assumptions applied in 2022 have been prepared in accordance with independent actuarial advice received and are consistent
with those applied in the prior period.
De\ufb01ned contribution schemes
The Group operates \ufb01ve de\ufb01ned contribution schemes for all qualifying employees. Pension costs for the de\ufb01ned contribution
schemes are as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Total included in staff costs (note 6.1) 16.7 15.7
As at 31 December 2022, contributions of \u00a31.5 million (20 21: \u00a3 1.1 million) due in respect of the current reporting period had not been
paid over to the schemes. The Group has no further outstanding payment obligations in respect of the current reporting period once
these contributions have been paid.
De\ufb01ned bene\ufb01t schemes
Any pension surplus and obligation are shown gross on the Consolidated balance sheet as there is no legal right of offset between
the two de\ufb01ned bene\ufb01t pension schemes. The net pension surplus for the two de\ufb01ned bene\ufb01t pension schemes is as follows:
As at 31 December
2022
\u00a3m
2021
\u00a3m
DPG section of the ESPS (DPG ESPS) 32.4 44.0
Drax 2019 Scheme 6.1 4.9
Total net surplus recognised in the Consolidated balance sheet 38.5 48.9
The DPG ESPS and the Drax 2019 Scheme are collectively referred to as \u201cthe Schemes\u201d below. At 31 December 2022, application of
the accounting assumptions used in relation to the Schemes, which are described in further detail below, continued to result in a net
position of surplus assets over liabilities.
Both of the Schemes are de\ufb01ned bene\ufb01t \ufb01nal salary pension plans, which provide bene\ufb01ts to members in the form of a guaranteed
level of pension payable for life. The level of bene\ufb01ts provided depends on members\u2019 length of service and their salary in the \ufb01nal years
leading up to retirement. Pension bene\ufb01ts are updated in line with inflationary increases.
The DPG ESPS was closed to new members as of 1 January 2002 unless they had quali\ufb01ed through being existing members of
another part of the ESPS. Employed members who joined before this date continue to build up pension bene\ufb01ts as part of the scheme.
Members are typically entitled to an annual pension on retirement of 1/80th of \ufb01nal pensionable salary for each year of service plus
a tax-free lump sum of three times the member\u2019s annual pension at retirement.
The Drax 2019 Scheme was set up following a transaction on 31 December 2018, when the Group acquired assets from Scottish
Power Limited. Under the terms of the sale and purchase agreement, employees with de\ufb01ned bene\ufb01t pension rights who moved
to the Group as part of the transaction were able to build up a future de\ufb01ned bene\ufb01t pension and were also able to transfer their
de\ufb01ned bene\ufb01ts they had already built up to the Group. The scheme was set up to facilitate this from 1 January 2020. From this date,
96 members joined the Drax 2019 scheme and continued to build up a future de\ufb01ned bene\ufb01t pension. Of these, 81 members agreed
to transfer their past service bene\ufb01ts into the scheme.
Under the Drax 2019 Scheme, employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on attainment of retirement age
(or earlier withdrawal or death). No other post-retirement bene\ufb01ts are provided. The scheme is open to future accrual of bene\ufb01ts
but closed to new members.
6.3 Retirement bene\ufb01t obligations continued
The Group and Trustees have agreed a long-term strategy for reducing investment risk as and when appropriate. This includes an
asset-liability matching policy which aims to reduce the volatility of the funding level of the Schemes by investing in assets that
perform in line with the liabilities to protect against interest rates being lower or inflation being higher than expected, for example.
The Schemes expose the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be:
Investment risk The Schemes\u2019 liabilities are calculated using a discount rate set with reference to corporate bond yields;
if assets underperform this yield, this creates a de\ufb01cit. The DPG ESPS holds a signi\ufb01cant proportion of growth
assets (diversi\ufb01ed growth funds, direct lending and absolute return bonds) which, though expected to
outperform corporate bonds in the long term, create volatility and risk in the short term. The allocation
to growth assets is monitored to ensure it remains appropriate given this scheme\u2019s long-term objectives.
The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and
cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit
and 15% to credit opportunities. The scheme has moved towards a fully hedged position but continues
to maintain return-generating assets such as equity options and credit strategies.
Discount rate risk A decrease in corporate bond yields will increase the value placed upon the Schemes\u2019 liabilities, although
this will be partially offset by an increase in the value of the Schemes\u2019 bond holdings.
Longevity risk The majority of the Schemes\u2019 obligations are to provide bene\ufb01ts for the life of the member, so increases
in life expectancy will result in an increase in the liabilities of the Schemes.
In\ufb02ation risk The majority of the Schemes\u2019 obligations to pay bene\ufb01ts are linked to in\ufb02ation and, as such, higher in\ufb02ation
leads to higher liabilities. In most cases, caps on in\ufb02ationary increases are in place to protect against extreme
in\ufb02ation. The Schemes have a signi\ufb01cant holding in liability-driven investments and around 85% of in\ufb02ation
risk in the Schemes is hedged on a low-risk measure (2021: around 85%).
Credit risk Around 85% of the Schemes\u2019 overall funded liabilities are currently hedged against interest rates and inflation
using liability-driven investments. The Schemes hedge interest rate risks on a statutory and long-term funding
basis (gilts) whereas AA corporate bonds are implicit in the discount rate and so there is a degree of
mismatching risk to the Group should yields on gilts and corporate bonds diverge. The Schemes\u2019 holding
in corporate bonds mitigates this risk to some extent.
During the year, particularly around September and October 2022, there was signi\ufb01cant yield volatility. However, with the exception
of one week over which hedge ratios reduced for the DPG ESPS, the Schemes were able to maintain their target hedge levels
throughout this period.
Other risks include operational risks (such as paying out the wrong bene\ufb01ts), legislative risks (such as the Government increasing
the burden on pension schemes through new regulation) and other demographic risks (such as making a higher proportion
of members with dependents eligible to receive pensions from the Group). The Trustees ensure certain bene\ufb01ts are payable
on death before retirement.
A quali\ufb01ed independent actuary, Aon, carried out the most recent funding valuation of the DPG ESPS as at 31 March 2019,
and the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2021. The actuarial review at 31 December 2022
is based on the same membership and other data as these funding valuations. The Schemes\u2019 Boards accepted the advice of the
actuary and approved the use of these assumptions for the purpose of assessing the Schemes\u2019 costs.
The results of the latest funding valuations have been adjusted to 31 December 2022, taking into account experience over the period
since that date, changes in market conditions and differences in \ufb01nancial and demographic assumptions. The present value of the
de\ufb01ned bene\ufb01t obligation and the related current service costs were measured using the projected unit credit method.
The principal assumptions for the Schemes are set out below. Where absolute assumptions differ between the two schemes,
reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average is shown.
As at 31 December
2022
% p.a.
2021
% p.a.
Discount rate 4.8 1.9
In\ufb02ation (RPI) 3.0 3.0
Rate of increase in pensions in payment and deferred pensions 2.8 2.9
Rate of increase in pensionable salaries 3.6 3.6
6.3 Retirement bene\ufb01t obligations continued
Whilst actual inflation has been high over 2022, long-term expectations as at 31 December 2022 are in line with long-term
expectations as at 31 December 2021. The de\ufb01ned bene\ufb01t obligation for the Schemes allows for expected bene\ufb01t increases that
will be awarded in 2023, based on known 2022 indices.
Mortality assumptions are based on recent actual mortality experience of the Schemes\u2019 members and allow for expected future
improvements in mortality rates. The assumptions are that a member aged 60 in 2022 will live, on average, for a further 26 years
if they are male (2021: 26 years) and for a further 28 years if they are female (2021: 28 years). Life expectancy at age 60 for male
and female non-pensioners currently aged 45 is assumed to be 27 and 29 years respectively (2021: 27 and 29 years respectively).
The weighted average duration of the DPG ESPS at 31 December 2022 based on the IAS 19 position was 18 years (2021: 20 years).
The weighted average duration of the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 21 years
(2021: 24 years).
The DPG ESPS de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (45%), former employees of the Group
who are yet to retire (5%) and retired pensioners (50%). The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current
employees of the Group (55%), former employees of the Group who are yet to retire (43%) and retired pensioners (2%).
The net surplus recognised in the Consolidated balance sheet in respect of the Schemes is the excess of the fair value of the plan
assets over the present value of the de\ufb01ned bene\ufb01t obligation, determined as follows:
As at 31 December
2022
\u00a3m
2021
\u00a3m
Fair value of plan assets 219.6 369.8
De\ufb01ned bene\ufb01t obligation (181.1) (320.9)
Net surplus recognised in the Consolidated balance sheet 38.5 48.9
The total charges and credits recognised in the Consolidated income statement, within other operating and administrative expenses
and interest receivable, are as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Included in staff costs (note 6.1):
Current service cost 4.7 6.3
Past service credit \u2013 (2.6)
Included in interest receivable (note 2.5):
Interest income on net de\ufb01ned bene\ufb01t surplus (1.0) (0.3)
Total amount recognised in the Consolidated income statement 3.7 3.4
On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited. The past service credit
in 2021 relates to this sale, which led to 42 members, of a pre-transaction total of 96, ceasing to accrue bene\ufb01ts in the Drax 2019
Scheme and becoming deferred members.
The past service credit calculation was performed by a quali\ufb01ed independent actuary using the same assumptions as those applied
to the rest of the Schemes. The past service credit represents the difference between the liability relating to the standard Drax 2019
Scheme bene\ufb01ts as an active member as per the reserve in the calculation of the Group\u2019s IAS 19 position at that time, and the
corresponding liability in respect of the equivalent bene\ufb01ts as deferred members (including allowance for two members who were
offered enhanced past service bene\ufb01ts).
6.3 Retirement bene\ufb01t obligations continued
Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes are as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
De\ufb01ned bene\ufb01t obligation at 1 January 320.9 37 8 .1
Current service cost 4.7 6.3
Past service credit \u2013 (2.6)
Interest cost 5.7 5.3
Actuarial gains (123.6) (15.4)
Bene\ufb01ts paid (26.6) (50.8)
De\ufb01ned bene\ufb01t obligation at 31 December 181.1 320.9
The actuarial gains of \u00a3123.6 million (2021: \u00a315.4 million) reflect gains of \u00a3133.3 million (2021: \u00a310.3 million) arising from changes
in financial assumptions, losses arising from scheme experience of \u00a39.9 million (2021: gains of \u00a34.3 million) and gains of \u00a30.2 million
(2021: \u00a30.8 million) arising from changes in demographic assumptions.
The gains due to changes in \ufb01nancial assumptions principally reflect the decrease in the present value of the Schemes\u2019 liabilities
arising as a result of the movement in discount rate assumption to 4.8% p.a. (2021: 1.9% p.a.) following an increase in corporate bond
yields, coupled with a slight decrease in overall long-term inflationary assumptions reflecting market pricing.
Changes in the fair value of plan assets are as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Fair value of plan assets at 1 January 369.8 386.3
Interest on plan assets 6.7 5.7
Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3
Employer contributions 17.7 13.3
Bene\ufb01ts paid (26.6) (50.8)
Fair value of plan assets at 31 December 219.6 369.8
Employer contributions included payments totalling \u00a37.6 million (2021: \u00a37.2 million) to reduce the actuarial de\ufb01cit in the DPG ESPS.
There were contributions of \u00a33.2 million outstanding at the end of the year (2021: \u00a31.0 million).
The actual return on plan assets in the period was a \u00a3141.3 million loss (2021: \u00a321.0 million gain).
6.3 Retirement bene\ufb01t obligations continued
Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a324.4 million (2021: gains of \u00a330.7 million) were recognised
in the Consolidated statement of comprehensive income. These are made up as follows:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Actuarial gains on de\ufb01ned bene\ufb01t obligation 123.6 15.4
Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3
Total remeasurement (losses)/gains recognised in other comprehensive income (24.4) 30.7
The fair values of the major categories of plan assets were as follows:
As at 31 December
2022
\u00a3m
2021
\u00a3m
Gilts 117. 2 150.0
Equities
(1)
6.5 26.5
Fixed interest bonds
(2)
4.8 30.3
Property 28.6 32.1
Investment funds 4.3 25.0
Cash and other assets
(3)
58.2 105.9
Fair value of total plan assets 219.6 369.8
(1) At 31 December 2022 DPG ESPS\u2019s long-term asset strategy was: diversi\ufb01ed growth funds (37%), direct lending (10%), absolute return bonds (3%), liability driven
investing (40%) and long-lease property (10%). The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support
liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities.
(2) Fixed interest bonds include a mixture of corporate, Government and absolute return bonds.
(3) Other assets include \u00a329.9 million (202 1: \u00a3 2 7.1 million) of investments in direct lending, a type of private equity vehicle which is not quoted in an active market.
The fair value of these investments is derived in accordance with International Private Equity and Venture Capital Valuation (IPEV) Guidelines. All other assets are quoted
in an active market.
The pension plan assets do not include any ordinary shares issued by Drax Group plc or any property occupied by the Group.
The valuation of the pension liabilities has been disclosed as a key source of estimation uncertainty due to the assumptions used in the
valuation. The assumptions for discount rate, inflation rate (and related inflation linked bene\ufb01ts) and life expectancy have a potentially
signi\ufb01cant effect on the measurement of the Schemes\u2019 surpluses. The following table provides an indication of the sensitivity of the
net pension surplus at 31 December 2022 to changes in these assumptions, considering the impact on the de\ufb01ned bene\ufb01t obligation
only. If a combination of the below reasonably possible changes to key assumptions were used in the valuation of the pension liabilities,
this could result in a material change to the amount recognised.
Increase/(decrease) in net surplus
As at 31 December
2022
\u00a3m
2021
\u00a3m
Discount rate \u2013 Increase 0.25% 8.0 17.3
\u2013 Decrease 0.25% (8.5) (19.5)
In\ufb02ation rate
(1)
\u2013 Increase 0.25% ( 7. 0) (15.1)
\u2013 Decrease 0.25% 6.6 13.8
Life expectancy \u2013 Increase 1 year (6.2) (13.2)
\u2013 Decrease 1 year 6.4 12.7
(1) The sensitivity of the Schemes\u2019 liabilities to salary and pension increases is closely correlated with inflation, therefore separate sensitivities have not been performed
on salary and pension increases and the inflationary sensitivity incorporates these.
6.3 Retirement bene\ufb01t obligations continued
The Group is exposed to investment and other risks. However, this risk is mitigated by the Schemes being around 85% hedged against
movements in government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Schemes
are broadly only exposed to changes in credit spreads plus around 15% of changes in underlying gilt yields and, for inflation,
the Schemes\u2019 exposure is around 15% of any actual changes.
Future contributions
UK legislation requires that pension schemes are funded prudently (i.e. to a level in excess of the current expected cost of providing
bene\ufb01ts). This funding is carried out with reference to actuarial valuations which are required by law to take place at intervals of no
more than three years. Following each valuation, the Trustees and the Group must agree the contributions required (if any) such that
the Schemes are fully funded over time on the basis of suitably prudent assumptions.
The Group expects to make total contributions of \u00a312.8 million to the Schemes during the 12 months ending 31 December 2023.
The latest actuarial valuation of the Drax 2019 Scheme which was carried out as at 31 March 2020 resulted in a funding surplus of
\u00a31.3 million and so no de\ufb01cit recovery plan was required. The last actuarial valuation of the DPG ESPS was carried out as at 31 March
2019. Following this actuarial valuation, the Group agreed to repair the funding de\ufb01cit of \u00a335.9 million as at 31 March 2019 over the
period to 30 June 2024, subject to the actuarial assumptions adopted for the triennial valuation as at 31 March 2019 being borne out
in practice. The agreement includes payments of \u00a37.2 million per annum (indexed with RPI) to be paid until 30 June 2024.
The Group has also agreed to make additional contributions to the DPG ESPS over the period to 31 December 2025 to eliminate the
self-suf\ufb01ciency de\ufb01cit. At this point, the DPG ESPS is expected to be self-suf\ufb01cient and fully funded, unless material adverse changes
in economic conditions arise compared to those assumed in the valuation. The Group is satis\ufb01ed that the additional contributions are
manageable within the Group\u2019s business plan.
The Trust Deeds of the DPG ESPS and the Drax 2019 Scheme provide the sponsors of the Schemes with an unconditional right
to a refund of surplus assets assuming the gradual settlement of plan liabilities over time. Furthermore, in the ordinary course of
business, the Trustees have no right to unilaterally wind up, or otherwise augment the bene\ufb01ts due to members of the DPG ESPS.
Based on these rights, any net surplus in the plan is recognised in full in the Consolidated balance sheet.
Post balance sheet event
On 31 January 2023 the DPG ESPS\u2019s assets and liabilities were transferred to the Drax 2019 Scheme, and it is expected that the DPG
ESPS will be wound-up in due course. The Drax 2019 Scheme will continue to provide the same level of pension bene\ufb01ts to current
and former employees as they were previously entitled to, with the combination allowing the resulting scheme to operate in a more
ef\ufb01cient and focused manner, with a reduced administrative burden and associated cost.
Section 7: Risk management This section provides disclosures around \ufb01nancial risk management, including the \ufb01nancial instruments the Group uses to mitigate such risks. 7.1 Financial instruments and their fair values The Group holds a variety of derivative and non-derivative \ufb01nancial instruments, including cash and cash equivalents, borrowings, payables and receivables arising from operations. Accounting classi\ufb01cations and fair values IFRS 13 requires categorisation of the Group\u2019s \ufb01nancial instruments in accordance with the following hierarchy in order to explain the basis on which their fair values have been determined: \u2022 Level 1 \u2013 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2022 Level 2 \u2013 Fair value measurements are those derived from inputs, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2022 Level 3 \u2013 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Categorisation within this fair value measurement hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability. The table below shows the carrying amounts and fair values of \ufb01nancial assets and liabilities, including their levels in the fair value hierarchy as de\ufb01ned by IFRS 13. It does not include fair value information for leases or for \ufb01nancial assets and \ufb01nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Cash and cash equivalents (note 4.1), trade and other receivables (note 3.5) and trade and other payables (note 3.7) generally have a short time to maturity. For this reason, their carrying values, on the historical cost basis, are approximate to their fair values. The Group\u2019s borrowings relate principally to the publicly traded high-yield loan notes and amounts drawn against term loans (note 4.2). These \ufb01nancial liabilities are measured at amortised cost. Carrying amount Fair value As at 31 December 2022 \u00a3m Fair value- hedging instruments Mandatorily at FVTPL- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Tot al Financial assets measured at fair value Commodity contracts 549.9 84.2 \u2013 \u2013 \u2013 63 4.1 \u2013 63 4.1 \u2013 634.1 Financial contracts \u2013 232.8 \u2013 \u2013 \u2013 232.8 \u2013 232.8 \u2013 232.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 297.1 Interest rate and cross- currency contracts 54.0 \u2013 \u2013 \u2013 \u2013 54.0 \u2013 54.0 \u2013 54.0 Contingent consideration \u2013 27.4 \u2013 \u2013 \u2013 27.4 \u2013 \u2013 27.4 27. 4 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 1,071.9 \u2013 1,071.9 Cash and cash equivalents \u2013 \u2013 \u2013 238.0 \u2013 238.0 Financial liabilities measured at fair value Commodity contracts (804.3) (62.5) \u2013 \u2013 \u2013 (866.8) \u2013 (866.8) \u2013 (866.8) Financial contracts \u2013 (467.0) \u2013 \u2013 \u2013 (467.0) \u2013 (467.0) \u2013 (467.0) Foreign currency exchange contracts (0.4) (69.0) \u2013 \u2013 \u2013 (69.4) \u2013 (69.4) \u2013 (69.4) Interest rate and cross- currency contracts (14.3) \u2013 \u2013 \u2013 \u2013 (14.3) \u2013 (14.3) \u2013 (14.3) In\ufb02ation rate contracts (307.3) \u2013 \u2013 \u2013 \u2013 (307.3) \u2013 ( 307.3) (1) \u2013 ( 3 07.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (764.0) (764.0) \u2013 (759.9) \u2013 (759.9) Unsecured bank loans \u2013 \u2013 \u2013 \u2013 (44.3) (44.3) \u2013 (44.3) \u2013 (44.3) Secured loan notes \u2013 \u2013 \u2013 \u2013 (632.6) (632.6) (593.9) \u2013 \u2013 (593.9) Lease liabilities \u2013 \u2013 \u2013 \u2013 (153.1) (153.1) Trade and other payables \u2013 \u2013 \u2013 \u2013 (1,065.9) (1,065.9 ) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value valuation techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a323.8 million of derivative liabilities relating to the UK CPI inflation rate contracts.
7.1 Financial instruments and their fair values continued
Carrying amount Fair value
As at 31 December 2021
\u00a3m
Fair value-
hedging
instruments
Mandatorily
a t F V TP L-
others
FVOCI-
equity
instruments
Financial
assets at
amortised
cost
Other
\ufb01nancial
liabilities Total Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Commodity contracts 877.5 121.3 \u2013 \u2013 \u2013 998.8 \u2013 998.8 \u2013 998.8
Financial contracts \u2013 143.9 \u2013 \u2013 \u2013 143.9 \u2013 143.9 \u2013 143.9
Foreign currency exchange
contracts 56.9 40.6 \u2013 \u2013 \u2013 97.5 \u2013 97.5 \u2013 97.5
Interest rate and cross-
currency contracts 4.6 \u2013 \u2013 \u2013 \u2013 4.6 \u2013 4.6 \u2013 4.6
In\ufb02ation rate contracts 1.3 \u2013 \u2013 \u2013 \u2013 1.3 \u2013 1.3
(1)
\u2013 1.3
Contingent consideration \u2013 27.7 \u2013 \u2013 \u2013 27.7 \u2013 \u2013 27.7 27.7
Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5
Financial assets not measured at fair value
Trade and other receivables \u2013 \u2013 \u2013 516.8 \u2013 516.8
Cash and cash equivalents \u2013 \u2013 \u2013 317.4 \u2013 317.4
Financial liabilities measured at fair value
Commodity contracts (1,054.8) (33.1) \u2013 \u2013 \u2013 (1,0 87.9) \u2013 (1,0 87.9) \u2013 (1,0 87.9)
Financial contracts \u2013 (90.2) \u2013 \u2013 \u2013 (90.2) \u2013 (90.2) \u2013 (90.2)
Foreign currency exchange
contracts (29.3) (108.4) \u2013 \u2013 \u2013 (137.7) \u2013 (137.7) \u2013 (137.7)
Interest rate and cross-
currency contracts (48.4) \u2013 \u2013 \u2013 \u2013 (48.4) \u2013 (48.4) \u2013 (48.4)
In\ufb02ation rate contracts (93.7) (46.6) \u2013 \u2013 \u2013 (140.3) \u2013 (140.3)
(1)
\u2013 (140.3)
Financial liabilities not measured at fair value
Secured bank loans \u2013 \u2013 \u2013 \u2013 (786.8) (786.8) \u2013 (805.9) \u2013 (805.9)
Secured bond issues \u2013 \u2013 \u2013 \u2013 (574.2) (574.2) (598.3) \u2013 \u2013 (598.3)
Lease liabilities \u2013 \u2013 \u2013 \u2013 (125.9) (125.9)
Trade and other payables \u2013 \u2013 \u2013 \u2013 (869.5) (869.5)
Note:
(1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value techniques. However, these unobservable inputs are not material to the valuation
and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a31.3 million of derivative assets
and \u00a311.5 million of derivative liabilities relating to the UK CPI inflation rate contracts.
The derivative \ufb01nancial instruments used by the Group and not subject to the own-use exemption have been categorised as follows:
\u2022 Commodity contracts \u2013 forward contracts for the sale or purchase of a physical commodity which is expected to be settled through
delivery of the commodity.
\u2022 Financial contracts \u2013 weather-related contracts, as well as contracts for commodities that are not expected to be settled through
physical delivery of the commodity.
\u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, vanilla options and structured
option products.
\u2022 Interest rate and cross-currency contracts \u2013 contracts which swap one interest rate for another in a single currency, including
floating-to-\ufb01xed interest rate swaps, and contracts which swap interest and principal cash flows in one currency for another
currency, including \ufb01xed-to-\ufb01xed and floating-to- \ufb01xed cross-currency interest rate swaps.
\u2022 Inflation rate contracts \u2013 swap contracts, such as floating-to-\ufb01xed, which are linked to an inflation index such as RPI or CPI,
and inflation swaptions.
7.1 Financial instruments and their fair values continued
Fair value measurement
\u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated
by reference to forward market prices at the reporting date.
\u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date.
\u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward
currency exchange market rates at the reporting date.
\u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting
date for the relevant interest index.
\u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant
forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market
rates and interest index for floating-to-\ufb01xed swaps.
\u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting
date for the relevant inflation index.
Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts.
The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent
within the instrument.
Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility
and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly.
The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its
assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices
from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market
movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs,
assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by
the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions
may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted
product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such
instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable
transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value.
The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR
loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of
embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the
host contract.
The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency
contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore,
these contracts are categorised as Level 2.
There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs.
The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including
Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are
discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required
with each valuation.
Level 3 fair values
The fair value of the UK CPI inflation swaps comprises an RPI and CPI component. Whilst the RPI component is based on observable
market rates, CPI is based on unobservable rates and therefore deemed to be Level 3 in the fair value hierarchy. However, this
component is not material to the overall valuation and therefore the instruments as a whole have been classi\ufb01ed as Level 2.
The valuation technique used for non-listed equity investments comprises unobservable inputs and these are therefore classi\ufb01ed as
Level 3. However, given the valuation as a whole for Level 3 equity investments are immaterial, it is not deemed necessary to include
all Level 3 disclosures in these Consolidated \ufb01nancial statements.
The consideration receivable by the Group for the sale of the CCGT generation portfolio in 2021 includes \u00a329.0 million that is
contingent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of these
assets. The fair value measurement for the contingent consideration has been categorised as Level 3 based on the inputs to the
valuation techniques used.
7.1 Financial instruments and their fair values continued Valuation approach Signi\ufb01cant unobservable inputs and range of inputs (probability weighted) Relationship between signi\ufb01cant unobservable input and fair value measurement Contingent consideration The fair value of the contingent consideration is determined using a discounted cash flow model. The valuation approach is based on a calculation of the probability of the option to develop the Damhead Creek land being exercised. This probability is calculated using a range of forecasts for future Capacity Market auctions and the assumption that the option to develop the land would be exercised if the Capacity Market price were to clear above a certain level, providing suf\ufb01cient certainty on the economics of the development. Forecasted future Capacity Market clearing prices: \u00a37.00/kW \u2013 \u00a364.64/kW (\u00a335.91/kW) (2021: \u00a34.81/kW \u2013 \u00a364.13/kW) (2021: (\u00a318.70/kW)) Estimated bid price at which Damhead Creek 2 is to be entered into the Capacity Market auction: \u00a340.00/kW (2021: \u00a320.00/kW) The fair value measurement would increase/(decrease) with: \u2013 higher/(lower) forecasted Capacity Market clearing prices causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. \u2013 higher/(lower) estimated bid price required for the Damhead Creek 2 development to proceed causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. A reconciliation of the contingent consideration is detailed below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Balance at 1 January 27.7 \u2013 Contingent consideration receivable recognised on the sale of the CCGT generation portfolio \u2013 27.7 Net change in fair value (unrealised) (0.3) \u2013 Balance at 31 December 27.4 27.7 Sensitivities are disclosed below for reasonably possible changes to the unobservable inputs that would have a signi\ufb01cant impact on the fair value measurement: Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2022 Forecasted future Capacity Market clearing prices (25%) (3.7) 0.7 Estimated bid price (25%) 1.0 (3.2) Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2021 Forecasted future Capacity Market clearing prices (25%) (2.9) 1.1 Estimated bid price (25%) 1.1 (2.2) Accounting for derivatives Derivatives (subject to certain exemptions described below) must be measured at fair value, which represents the difference between the price the Group has secured in the contract, and the price the Group could achieve in the market at the reporting date. Changes in fair value are recognised either within the Consolidated income statement or the hedge reserve and cost of hedging reserve, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). Where applicable the Group applies the own-use exemption which allows qualifying contracts to be excluded from fair value mark-to- market accounting. This applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. Contracts for non-\ufb01nancial assets which do not qualify for the own-use exemption (principally power, gas, \ufb01nancial oil and carbon emissions allowances) are accounted for as derivatives in accordance with IFRS 9 and are recorded in the Consolidated balance sheet at fair value. Changes in fair value are reflected through the hedge reserve (note 7.3) to the extent that the contracts are designated as effective hedges in accordance with IFRS 9, or the Consolidated income statement where the hedge accounting requirements are not met, or the hedges are ineffective. To ensure these derivatives are not reflected in the underlying performance of the Group, they are excluded from the Adjusted results in the Consolidated income statement until the contract matures (see note 2.7 for further details).
7.1 Financial instruments and their fair values continued
The Group\u2019s biomass risk management policy permits some flexibility in trading activity to optimise the overall portfolio position and
potentially release value in certain, limited circumstances. As such, the own-use exemption would likely not apply to these biomass
contracts. However, the nature of these contracts means they cannot be readily net settled in cash or other \ufb01nancial instruments and,
as a result, they remain outside of the scope of IFRS 9 and are excluded from fair value mark-to-market accounting.
The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
2022
\u00a3m
2021
\u00a3m
Non-current derivative \ufb01nancial instrument assets 421.7 357.5
Current derivative \ufb01nancial instrument assets 796.3 888.6
Total derivative \ufb01nancial instrument assets 1,218.0 1,24 6 .1
Non-current derivative \ufb01nancial instrument liabilities (735.4) (541.8)
Current derivative \ufb01nancial instrument liabilities (989.4) (962.7)
Total derivative \ufb01nancial instrument liabilities (1,724.8) (1,504.5)
Total net derivative \ufb01nancial instruments (506.8) (258.4)
The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at FVTPL are detailed
below. The Group had no \ufb01nancial assets or \ufb01nancial liabilities voluntarily designated at FVTPL. In addition to the amounts disclosed
below, gains and losses relating to derivatives qualifying for hedge accounting are disclosed in notes 7.2 to 7.4.
Gains or losses recognised
2022
\u00a3m
2021
\u00a3m
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in revenue (441.4) ( 7 7.0)
Gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013
recognised in cost of sales 32.6 36.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges (0.4) (0.3)
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in foreign
exchange gains/(losses) (3.8) ( 5.1)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting (413.0) (45.8)
Rebasing is explained in the glossary. When the Group rebases derivative contracts, the Group retains the contractual rights to the
cash flows, the risks and rewards, and control of the derivative asset. The Group does not assume any obligation to pay the cash flows
to another recipient. Accordingly, the derivative asset is not derecognised.
The cash flows received at the point of rebasing reduce the cash flows to be received on maturity of the trade, and as such the
cash flows over the life of the instrument are the same whether a trade is rebased or not, minus fees.
At the point of rebasing, the Group recognises a reduction in the fair value of the derivative asset, equivalent to the fair value
difference between the original rate per the contract and the rebased rate. The Group also recognises the cash received, or due,
as a result of the rebasing. Any difference between the reduction in the fair value of the derivative asset, and the cash received,
is recognised as a fee charged for rebasing and is recognised within operating and administrative expenses.
The total gain or loss recognised in the period on the derivative contract, including rebased amounts, is included within Total results.
No amounts are recognised in Adjusted results at the point of rebasing. The total gain or loss on the derivative contract,
including the amount rebased, is recognised in Adjusted results on the contractual maturity date of the contract. If a rebased trade
is hedge accounted, the rebased amount is deferred or released from the hedge reserve in line with the hedge accounting
requirements of IFRS 9.
7.2 Financial risk management
The Group\u2019s activities expose it to a variety of \ufb01nancial risks, including commodity price risk, foreign currency risk, interest rate risk,
inflation risk, liquidity risk, counterparty risk and credit risk. The Group\u2019s overall risk management programme focuses on the
unpredictability of commodity and \ufb01nancial markets and seeks to manage potential adverse effects on the Group\u2019s \ufb01nancial performance
.
The Group uses derivative \ufb01nancial instruments to hedge certain risk exposures. Risk management is overseen by the Risk
management committees as explained in the Principal Risks and uncertainties section (page 77) which identify, evaluate and hedge
\ufb01nancial risks in close co-ordination with the Group\u2019s trading and treasury functions under policies approved by the Board of directors.
7.2.1 Commodity price risk
The Group is exposed to the effect of fluctuations in commodity prices, particularly the price of power, gas, biomass pellets and \ufb01bre,
other fuels and the price of carbon emissions allowances. Price variations and market cycles have historically influenced the \ufb01nancial
results of the Group and are expected to continue to do so.
Commodity price sensitivity
The sensitivity analysis below has been determined based on the exposure to commodity prices and the impact on pro\ufb01t after tax and
other components of equity of reasonably possible increases or decreases in commodity prices. The analysis assumes all other
variables were held constant.
Financial and commodity markets have become increasingly volatile in 2022, in part due to the conflict in Ukraine. This volatility has
impacted economies and markets around the world, including the UK energy market, which has in part contributed to rising inflation.
The geopolitical environment and concerns over the macro-economic outlook have also contributed to a weakening in sterling during
2022. See the Principal risks and uncertainties section on page 77 for further details on both the conflict in Ukraine and energy
market conditions. As a result of these factors, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas,
foreign currency contracts, inflation and oil, were subject to signi\ufb01cant fluctuations during 2022.
Sensitivities for a 10% change in prices have been included in the current year. The impact of smaller and larger price changes can be
interpolated and extrapolated from the below table as changes in prices have a relatively linear relationship with the impact on pro\ufb01t
after tax and on the hedge reserve.
Impact on pro\ufb01t after tax
Impact on other components
of equity, net of tax
10% decrease
\u00a3m
10% increase
\u00a3m
10% decrease
\u00a3m
10% increase
\u00a3m
As at 31 December 2022
Power \u2013 \u2013 33.8 (33.8)
Carbon 2.5 (2.5) (0.8) 0.8
Gas 0.8 (0.8) \u2013 \u2013
Oil (10.6) 10.6 \u2013 \u2013
Impact on pro\ufb01t after tax
Impact on other components
of equity, net of tax
10% decrease
\u00a3m
10% increase
\u00a3m
10% decrease
\u00a3m
10% increase
\u00a3m
As at 31 December 2021
Power \u2013 \u2013 27.8 (27.8)
Carbon \u2013 \u2013 (0.2) 0.2
Gas (7.4) 7.4 \u2013 \u2013
Oil (9.8) 9.8 \u2013 \u2013
Pro\ufb01t after tax is sensitive to increases or decreases in commodity prices as a result of the impact on the fair value of derivative
\ufb01nancial instruments not designated as hedging instruments under cash flow hedge accounting. The Group designates certain
derivatives as hedging instruments under cash flow hedge accounting. As such other components of equity are sensitive to increases
or decreases in commodity price risk and the impact on the hedge reserve resulting from these movements.
Commodity risk management
The Group has a policy of securing forward power sales and purchases of fuel when it is pro\ufb01table to do so and is in line with speci\ufb01ed
limits under approved policies. Forward power sales can be secured up to 100% of forecast availability two years ahead.
All commitments to sell power under \ufb01xed price contracts are designated as cash flow hedges as they reduce the Group\u2019s cash flow
exposure resulting from fluctuations in the price of power.
The Group purchases biomass pellets and other fuels under either a \ufb01xed or variable priced contract with different maturities
principally from a number of international sources. The Group considers all such contracts to be economic hedges. If these contracts
are within the scope of IFRS 9, the Group, where possible, either applies the own-use exemption or hedge accounting in accordance
with IFRS 9. If the own-use exemption or hedge accounting are not applicable then the contracts are recognised at FVTPL.
7.2 Financial risk management continued Where forward power curves are less liquid, the Group uses \ufb01nancially settled gas sales as a proxy for power to mitigate the risk of power price fluctuations. The Group also purchases gas under \ufb01xed-price contracts to meet the demand of the Customers business and for its Daldowie fuel plant. To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Group, within the Customers business. The Group purchases carbon emissions allowances under \ufb01xed price contracts to cover the Group\u2019s purchase requirements under the UK Emissions Trading Scheme (UK ETS) in relation to the Group\u2019s carbon emissions. These are designated as cash flow hedges as they reduce the Group\u2019s cash flow exposure resulting from fluctuations in the price of carbon emissions allowances. Carbon emissions allowances are also purchased as part of proxy power hedges in the same way as \ufb01nancial gas described above. These proxy hedges are not designated as cash flow hedges. Hedge accounting The Group has cash flow hedges relating to commodity contracts, principally commitments to sell power and purchase carbon. Amounts are recognised in the hedge reserve as the designated contracts are marked-to-market at each reporting date for the effective portion of the hedge, which is generally 100% of the relevant contract. Amounts held within the hedge reserve are then released to the Consolidated income statement as the related contract matures. For power sales contracts, this is at the point that the underlying power is delivered. Included in amounts released from equity are gains and losses on \ufb01nancial instruments that matured in a previous period, released to the Consolidated income statement in the period the hedged transaction has occurred. No ineffectiveness was recognised in the Consolidated income statement on continuing commodity or \ufb01nancial hedges in the year (2021: \u00a3nil). Due to the use of \u2018all-in-one\u2019 hedges, this results in the movement in fair value for the hedged items and hedging instruments being identical. The only source of ineffectiveness regarding the \u2018all-in-one\u2019 hedges would be if delivery of the commodities was no longer expected to occur, which would result in hedge accounting being discontinued. The main sources of ineffectiveness regarding \ufb01nancial contracts would be as a result of timing differences and credit risk. The Group had a number of forward sale contracts for power relating to forecast generation from the CCGT assets that were designated as cash flow hedges. All subsequent fair value movements on hedges that had been discontinued were recognised in the Consolidated income statement. By January 2021 the Group had closed out all derivative positions in relation to the CCGT assets. As such, from this point, no further gains or losses occurred in relation to these trades. The remaining CCGT trades matured in the first half of 2022. Prior year amounts relating to these trades are included within discontinued operations, and no further gains or losses were recognised in the current period. The reconciliation of the reserves and time period when the hedge will affect the Consolidated income statement are disclosed in note 7.3.
7.2 Financial risk management continued
The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented
in the table below.
The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s commodity and \ufb01nancial
contracts that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s
total portfolio of commodity and \ufb01nancial contracts that are used to protect the value of future cash flows.
31 December 2022
Exposure
Notional
value of
contracts
(MWh, allowances)
Average
\ufb01xed price
\u00a3
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
Commodity contracts
Sale of power 2,135, 9 0 9 218.00 (534.4) 549.9 (803.3) (19 0 .1) \u2013
Purchase of carbon
emissions allowances 148,000 77.5 (4.2) \u2013 (1.0) (0.8) (1.9)
31 December 2022
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
losses
recognised in OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item
in the income
statement
that includes
hedge
ineffectiveness
Amount
transferred to
the cost or
carrying value of
a non-\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed due
to the hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged future
cash \ufb02ows
being no longer
expected
to occur
\u00a3m
Line item
in the income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
Commodity contracts
Sale of power 534.4 (534.4) \u2013 Revenue \u2013 459.8 \u2013 Revenue
Purchase of carbon
emissions allowances 4.2 ( 4.2) \u2013
Cost of
sales \u2013 0 .1 \u2013
Cost of
sales
31 December 2021
Exposure
Notional
value of
contracts
(MWh, allowances)
Average
\ufb01xed price
\u00a3
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
Commodity contracts
Sale of power 2 ,5 85 ,113 72.83 (181.0) 8 74 .1 (1,052.0) (138.6) \u2013
Purchase of carbon
emissions allowances 161,000 57.7 9 17.7 3.4 (2.8) 0.4 \u2013
31 December 2021
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
(losses)/gains
recognised in
OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income
statement
that includes
hedge
ineffectiveness
Amount
transferred to
the cost or
carrying value
of a non-
\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged
future cash
\ufb02ows being no
longer expected
to occur
\u00a3m
Line item in the
income
statement/
balance sheet
affected by the
reclassi\ufb01cation/
transfer
Commodity contracts
Sale of power 181.0 (181.0) \u2013 Revenue \u2013 6.3 \u2013 Revenue
Purchase of carbon
emissions allowances (17.7) 17.7 \u2013
Cost of
sales \u2013 (17. 2) \u2013
Cost of
sales
7.2 Financial risk management continued 7.2.2 Foreign currency risk The Group is exposed to fluctuations in foreign currency rates as a result of committed and forecast transactions in foreign currencies, principally in relation to purchases of fuel for use in the Generation business and principal and interest payments relating to foreign currency denominated debt. These fuel purchases are typically denominated in US dollars (USD), Canadian dollars (CAD) or euros (EUR), and the foreign currency debt is denominated in USD, CAD and EUR (see note 4.2 for further details on the Group\u2019s borrowings). The Group also has an exposure to translation risk in relation to its net investment in its US and Canadian subsidiaries within the Pellet Production business. Foreign currency sensitivity The analysis below shows the impact on pro\ufb01t after tax and other components of equity of reasonably possible strengthening or weakening of currencies against GBP. The analysis assumes all other variables were held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% strengthening \u00a3m 10% weakening \u00a3m 10% strengthening \u00a3m 10% weakening \u00a3m As at 31 December 2022 USD 41.7 (59.0) 137.1 (112.2) EUR 12.2 (20.5) 23.6 (14.6) CAD 24.4 (15.1) 7.8 (13.0) Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% strengthening \u00a3m 10% weakening \u00a3m 10% strengthening \u00a3m 10% weakening \u00a3m As at 31 December 2021 USD 104.2 (140.8) 173.4 (141.9) EUR 19.24 (47.7) 26.9 (1.5) CAD 63.7 (11.3) 22.9 (24.7) Pro\ufb01t after tax is sensitive to the strengthening or weakening of other currencies as a result of the impact on the fair value of foreign currency derivatives not designated as hedging instruments under cash flow hedge accounting. The Group designates certain foreign currency derivatives as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to the strengthening or weakening of other currencies in relation to the impact on the hedge reserve of these movements. Prior year foreign currency sensitivities have been restated to fully reflect the impact of option contracts and relevant strike prices, which limit the impact of fluctuations in underlying exchange rates. Foreign currency risk management It is the Group\u2019s policy to hedge material transactional exposures using a variety of derivatives to protect the sterling values of foreign currency cash flows, except where there is an economic hedge inherent in the transaction. The Group enters into derivative contracts in line with the currency risk management policy, including forwards and options, to manage the risks associated with its anticipated foreign currency requirements over a rolling \ufb01ve-year period, covering contracted exposures and a proportion of highly probable forecast transactions. In addition, in order to optimise the cost of funding, the Group has issued foreign currency denominated debt in USD, CAD and EUR (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps, to manage exchange risk on foreign currency debt with the exception of CAD denominated debt.
7.2 Financial risk management continued
Hedge accounting
The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps.
Foreign currency exchange contracts that are designated as hedges are transferred from equity to inventories for hedges of fuel
purchases when the Group takes ownership of the fuel.
Cross-currency interest rate swap gains and losses that are effective at hedging the foreign exchange risk on the interest payments
are released to interest payable and similar charges. Gains and losses that are effective at hedging the foreign exchange risk on the
USD or EUR principal are released to foreign exchange gains/(losses) to offset gains and losses on retranslating the USD and EUR
denominated hedged borrowings.
The Group has taken out \ufb01xed-to-\ufb01xed cross-currency interest rate swaps to hedge the future cash flows associated with the
$500 million and \u20ac250 million 2025 \ufb01xed rate loan notes, effectively converting them to sterling \ufb01xed rate cash flows. The Group
has taken out a combination of \ufb01xed-to-\ufb01xed and floating-to-\ufb01xed cross-currency interest rate swaps in order to \ufb01x the sterling
cash flows payable on the \u20ac126.5 million facilities agreed as part of the 2020 Infrastructure private placement facilities (see note 4.2
for further details on borrowings).
The main sources of ineffectiveness relating to foreign currency exchange contracts are timing differences and credit risk. The main
sources of ineffectiveness relating to cross-currency interest rate swaps are differences in the critical terms, differences in repricing
dates and credit risk.
A reconciliation of reserves and the time period when the hedge will affect the Consolidated income statement or will be removed
from equity and included in the initial cost of the non-\ufb01nancial item, are disclosed in notes 7.3 and 7.4.
A summary of amounts relating to the hedging instruments, and any related ineffectiveness in the period, is presented in the table
below. Ineffectiveness on foreign currency exchange contracts is recognised in cost of sales if it relates to hedges of fuel purchases.
Ineffectiveness on cross-currency interest rate swaps that are hedging principal and interest payments is recognised in foreign
exchange gains/(losses) if it relates to the principal repayment, and interest payable and similar charges if the ineffectiveness relates
to interest payments.
There are \u20ac95 million of floating-to-\ufb01xed cross-currency interest rate swaps that are hedging both foreign currency risk and interest
rate risk. These swaps have been separated into synthetic floating-to-floating cross-currency interest rate swaps, that are hedging
foreign currency risk, and synthetic floating-to-\ufb01xed GBP interest rate swaps, that are hedging interest rate risk. The synthetic
floating-to floating cross-currency interest rate swaps are disclosed in this section, and the synthetic floating-to-\ufb01xed GBP interest
rate swaps are disclosed in note 7.2.3 relating to interest rate risk.
The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s foreign currency hedging
instruments that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the
Group\u2019s total portfolio of derivatives that are used to protect the sterling value of future cash flows.
7.2 Financial risk management continued
31 December 2022
Exposure
Notional
value of
contracts
($m \u20acm, C$m)
Average
\ufb01xed/variable rate
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
Foreign currency purchase
contracts
Purchases in foreign
currency \u2013 USD 1,586.4 $1.38 187.2 149.3 \u2013 75.6 \u2013
Purchases in foreign
currency \u2013 EUR 135.0 \u20ac 1.16 17.9 3.3 (0.3) 3.3 \u2013
Purchases in foreign
currency \u2013 CAD 4 0 6 .1 C$1.73 0.4 13.9 (0.1) 5.6 \u2013
Foreign currency
denominated debt
Interest and principal
repayments \u2013 USD 500.0 4.9% 47. 5 12.3 (6.2) 0.8 \u2013
Interest and principal
repayments \u2013 EUR 376.5
4.55%/
3M SONIA +
137. 2bp s (3.1) 4.2 (8.1) (1.6) \u2013
31 December 2022
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
gains recognised
in OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income
statement
that includes
hedge
ineffectiveness
Amount
transferred to
the
cost or
carrying value
of a non-
\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged
future cash
\ufb02ows
being no longer
expected to
occur
\u00a3m
Line item in the
income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD (187.2) 187.2 \u2013
Cost
of sales (34.2) \u2013 \u2013 Inventories
Purchases in foreign
currency \u2013 EUR (17.9) 17.9 \u2013
Cost
of sales 5.9 \u2013 \u2013 Inventories
Purchases in foreign
currency \u2013 CAD (0.4) 0.4 \u2013
Cost
of sales 9.2 \u2013 \u2013 Inventories
Foreign currency
denominated debt
Interest and principal
repayments \u2013 USD (47.5) 47. 5 \u2013
Interest
payable
and
similar
charges \u2013 (9.2) \u2013
Interest
payable
and
similar
charges
\u2013
Foreign
exchange
gains/
(losses) \u2013 (44.7) \u2013
Foreign
exchange
gains/
(losses)
Interest and principal
repayments \u2013 EUR 3.1 (3.1) \u2013
Interest
payable
and
similar
charges \u2013 2.6 \u2013
Interest
payable
and
similar
charges
\u2013
Foreign
exchange
gains/
(losses) \u2013 (17.3) \u2013
Foreign
exchange
gains/
(losses)
7.2 Financial risk management continued
31 December 2021
Exposure
Notional
value of
contracts
($m, \u20acm, C$m)
Average
\ufb01xed/variable rate
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD 2,231.4 $1.38 16.3 50.9 (11.7) (40.5) \u2013
Purchases in foreign
currency \u2013 EUR 320.0 \u20ac1.11 (19.4) \u2013 (17.0) (15.0) \u2013
Purchases in foreign
currency \u2013 CAD 4 47.6 C$1.76 4.2 6.0 (0.6) (1.6) \u2013
Foreign currency
denominated debt
Interest and principal
repayments \u2013 USD 500.0 4.9% 7.6 \u2013 (39.0) 5.8 \u2013
Interest and principal
repayments \u2013 EUR 376.5
3.32%/
3M LIBOR +
125.3bps (10.4) \u2013 (9.4) 12.0 \u2013
31 December 2021
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
gains/(losses)
recognised in
OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income
statement
that includes
hedge
ineffectiveness
Amount
transferred to
the
cost or
carrying value
of a non-
\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the
hedged
future cash
\ufb02ows
being no longer
expected to
occur
\u00a3m
Line item in the
income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD (16.3) 16.3 \u2013
Cost
of sales 32.9 \u2013 \u2013 Inventories
Purchases in foreign
currency \u2013 EUR 19.4 (19.4) \u2013
Cost
of sales 0.3 \u2013 \u2013 Inventories
Purchases in foreign
currency \u2013 CAD (4.2) 4.2 \u2013
Cost
of sales \u2013 \u2013 \u2013 Inventories
Foreign currency
denominated debt
Interest and principal
repayments \u2013 USD (7.6) 7.6 \u2013
Interest
payable
and
similar
charges \u2013 (6.2) \u2013
Interest
payable
and similar
charges
\u2013
Foreign
exchange
gains/
(losses) \u2013 1.7 \u2013
Foreign
exchange
gains/
(losses)
Interest and principal
repayments \u2013 EUR 10.4 (10.4) \u2013
Interest
payable
and
similar
charges \u2013 2.6 \u2013
Interest
payable
and similar
charges
\u2013
Foreign
exchange
gains/
(losses) \u2013 24.3 \u2013
Foreign
exchange
gains/
(losses)
7.2 Financial risk management continued
7.2.3 Interest rate risk
The Group has exposure to interest rate risk, principally in relation to variable rate debt, cash and cash equivalents and the RCF, should
it be drawn. The Group has Sterling Overnight Index Average (SONIA) floating-to-\ufb01xed interest rate swaps to \ufb01x the interest payments
on the \u00a3375 million private placement issued in 2019. For the 2020 Infrastructure private placement facilities, the Group has \ufb01xed the
interest rate payable on the \u00a398 million of GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group
had a number of GBP London Interbank Offered Rate (LIBOR)-linked derivative and non-derivative \ufb01nancial instruments with maturity
dates beyond 31 December 2021, the date LIBOR ceased publication. As such, during the prior year the Group\u2019s IBOR programme
transitioned these \ufb01nancial instruments away from GBP LIBOR to SONIA.
The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated 2020 Infrastructure private placement debt
through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in section 7.2.2
above, the floating-to-\ufb01xed cross-currency interest rate swaps are hedging both interest rate risk and foreign currency risk, and as
such the disclosures relating to interest rate risk are included in this section. See note 7.2.2 for the foreign currency risk disclosures
relating to the floating-to-\ufb01xed cross-currency interest rate swaps.
At 31 December 2022, the Group has \ufb01xed interest rate payments in GBP on all of its debt instruments through the use of swaps,
with the exception of the Group\u2019s CAD denominated debt, which is the only outstanding debt that remains variable and does not have
\ufb01xed interest rate payments.
The returns generated on the Group\u2019s cash balance, or payable on amounts drawn on the RCF, are exposed to movements
in short-term interest rates. The Group actively manages cash balances to protect against adverse changes in interest rates
whilst retaining liquidity.
Further information about the Group\u2019s instruments that are exposed to interest rate risk and their repayment schedules is provided
in note 4.2.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative
\ufb01nancial instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability
outstanding at the reporting date was outstanding for the whole year.
The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase or decrease
in interest rates. The analysis assumes all other variables are held constant.
Impact on pro\ufb01t after tax
Impact on other components
of equity, net of tax
100 basis points
increase
\u00a3m
100 basis points
decrease
\u00a3m
100 basis points
increase
\u00a3m
100 basis points
decrease
\u00a3m
As at 31 December 2022
Variable rate debt \u2013 unhedged (1.4) 1.4 \u2013 \u2013
Variable rate debt \u2013 hedged (4.2) 4.2 \u2013 \u2013
Interest rate swaps 4.2 (4.2) 10.1 (10.1)
Net impact (1.4) 1.4 10.1 (10 .1)
As at 31 December 2021
Variable rate debt \u2013 unhedged (1.4) 1.4 \u2013 \u2013
Variable rate debt \u2013 hedged (4.0) 0.7 \u2013 \u2013
Interest rate swaps 4.0 (0.7) 14.6 (11.3)
Net impact (1.4) 1.4 14.6 (11.3)
An increase or decrease in interest rates would affect pro\ufb01t after tax as a result of the impact on the interest payable in the period on
any variable rate debt. The Group has reduced its exposure to interest rate risk on variable rate debt through the use of floating-to-\ufb01xed
interest rate swaps and therefore a change in interest rates would not have a signi\ufb01cant effect on pro\ufb01t after tax. The Group designates
certain floating-to-\ufb01xed interest rate swaps as hedging instruments under cash flow hedge accounting. As such, other components of
equity are sensitive to an increase or decrease in interest rates in relation to the impact on the hedge reserve of these movements.
Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a floor of 0% for the benchmark interest rate. As a
result of very low or negative benchmark interest rates in 2021, a 100 basis point increase had a larger impact on pro\ufb01t after tax and
other components of equity, than a 100 basis points decrease. Given the increase in interest rates during the year a larger decrease in
interest rates would be needed to reach the 0% floor and therefore in the sensitivities above for the current year an increase and a
decrease in interest rates have a more comparable impact. The Group also has CAD denominated debt that has a variable rate based
on Canadian Dollar Offered Rate (CDOR). At 31 December 2022 no swaps were in place to hedge the CAD denominated debt.
Therefore in relation to this debt a change in interest rates has an impact on pro\ufb01t after tax but not on other components of equity.
Interest rate risk management
The Group has a risk management policy in place relating to interest rate risk. The Group policy permits, but does not require,
the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast interest rate exposure.
7.2 Financial risk management continued
Hedge accounting
The Group designates its floating-to-\ufb01xed SONIA interest rate swaps and the floating-to-\ufb01xed cross-currency interest rate swaps
as hedging instruments against interest rate risk. The SONIA interest rate swaps are hedges of the interest payments relating to the
\u00a3375 million private placement (2019) and the \u00a398 million GBP facility part of the 2020 Infrastructure private placement. The cross-
currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million
facility part of the 2020 Infrastructure private placement. As such this has been separated into synthetic floating-to-floating cross-
currency interest rate swaps and synthetic floating-to-\ufb01xed GBP interest rate swaps. The synthetic floating-to-floating cross-currency
interest rate swaps swap the \u20ac95 million variable rate EURIBOR linked debt to variable rate SONIA linked GBP debt with a principal
of \u00a385.8 million. The synthetic floating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate.
Details of the floating-to-\ufb01xed SONIA interest rate swaps are included in the disclosures below.
Gains and losses on the interest payments on interest rate swaps are released to interest payable and similar charges at the same time
as the interest is expensed on the hedged borrowings.
The main sources of ineffectiveness relating to interest rate risk hedges are differences in the critical terms, differences in repricing
dates and credit risk.
A summary of the amounts relating to the sterling interest rate hedging instruments and any related ineffectiveness in the period
is presented in the table below.
31 December 2022
Exposure
Notional
value of
contracts
\u00a3m
Average
% \ufb01xed rate
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
Interest rate
Variable rate GBP debt 558.8 1.06% 39.9 37.5 \u2013 31.7 \u2013
31 December 2022
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
gains
recognised in OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income statement
that includes
hedge
ineffectiveness
Amount
transferred to the
cost or
carrying value
of a non-\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
future cash \ufb02ows
being no longer
expected to occur
\u00a3m
Line item in the
income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
Interest rate
Variable rate GBP debt (39.9) 39.9 \u2013
Interest
payable
and similar
charges \u2013 (3.1) \u2013
Interest
payable
and similar
charges
31 December 2021
Exposure
Notional
value of
contracts
\u00a3m
Average
% \ufb01xed rate
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
Interest rate
Variable rate GBP debt 558.8 1.06% 19.3 4.6 \u2013 4.2 \u2013
31 December 2021
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
gains
recognised in OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income statement
that includes
hedge
ineffectiveness
Amount
transferred to the
cost or
carrying value
of a non-\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
future cash \ufb02ows
being no longer
expected to occur
\u00a3m
Line item
in the
income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
Interest rate
Variable rate GBP debt (21.0) 19.3 \u2013
Interest
payable
and similar
charges \u2013 3.3 \u2013
Interest
payable
and similar
charges
7.2 Financial risk management continued
7.2.4 Inflation risk
The Group is exposed to inflation risk on elements of its revenues and cost base. The Group\u2019s ROC revenue is linked to UK RPI and its
CfD income is linked to UK CPI (see note 2.2 for further information on ROC and CfD income). In addition, a proportion of the Group\u2019s
fuel costs are linked to either US or Canadian CPI. The Group has UK CPI and RPI swaps to hedge certain revenues linked to inflation.
Inflation risk sensitivity
The sensitivity analysis below has been determined based on the exposure to inflation rates on inflation linked derivatives at the
reporting date.
The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase/decrease
in inflation rates. The analysis assumes all other variables are held constant.
Impact on pro\ufb01t after tax
Impact on other components
of equity, net of tax
200 basis points
increase
\u00a3m
200 basis points
decrease
\u00a3m
200 basis points
increase
\u00a3m
200 basis points
decrease
\u00a3m
As at 31 December 2022
UK CPI in\ufb02ation swaps \u2013 \u2013 (34.8) 29.2
UK RPI in\ufb02ation swaps (0.7) 1.1 (52.8) 50.9
Impact on pro\ufb01t after tax
Impact on other components
of equity, net of tax
200 basis points
increase
\u00a3m
200 basis points
decrease
\u00a3m
200 basis points
increase
\u00a3m
200 basis points
decrease
\u00a3m
As at 31 December 2021
UK CPI in\ufb02ation swaps \u2013 \u2013 (6.0) 6.0
UK RPI in\ufb02ation swaps and swaptions (38.9) 3 7. 2 (48.5) 46.6
The Group designates the UK CPI and RPI inflation swaps as hedging instruments under cash flow hedge accounting. As such, other
components of equity are sensitive to the impact on inflation linked derivatives recognised in the hedge reserve of an increase or
decrease in UK inflation rates. Pro\ufb01t after tax is sensitive to an increase or decrease in UK inflation rates due to the impact these rate
changes would have on the over-hedged portion of the inflation swaps, with this impact being recognised directly in the Consolidated
income statement. Pro\ufb01t after tax in 2021 was sensitive to the impact on inflation linked derivatives of an increase or decrease
in UK inflation rates due to the impact this would have on the fair value of the unhedged UK RPI inflation swaptions.
Inflation risk management
The Group has a risk management policy in place relating to inflation risk. The Group policy permits, but does not require,
the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast inflation exposure.
Hedge accounting
The Group has contracts for which the revenue is contractually linked to UK CPI inflation. The Group has designated this risk
component as a hedged item. UK CPI and UK RPI inflation swaps are utilised as the hedging instruments for these inflation risks.
Gains and losses on the inflation swaps are held in the hedge reserve and reclassi\ufb01ed to revenue in the Consolidated income
statement at the same time the revenue with inflation linked contracts impacts on the Consolidated income statement or if the
hedged item is on longer expected to occur.
The main sources of ineffectiveness relating to the inflation swaps are the basis point difference between the RPI swaps and the
CPI-linked revenues they are hedging, calculation differences, and the hedged item no longer being expected to occur. Calculation
differences occur due to differences between the reference months used to calculate the inflationary increase per the swaps and the
reference months used to calculate the inflationary increase for the CPI-linked revenues.
During the current year, as a result of a decrease in the forecast CfD generation, the Group has recycled \u00a339.5 million of losses on
hedge accounted inflation linked derivative contracts to the Consolidated income statement, due to the hedged item no longer being
expected to occur. The Group has also recognised \u00a318.5 million of ineffectiveness due to the basis difference between the RPI hedging
instruments and the CPI exposure.
7.2 Financial risk management continued
The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented
in the table below.
31 December 2022
Exposure
Notional
value of
contracts
\u00a3m
Average
\ufb01xed rate
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
In\ufb02ation
In\ufb02ation linked sales
contracts \u2013 CPI
30.3 CPI \u2013 2.72% (13.3) \u2013 (23.8) (18 .1) 14.6
440.0 RPI \u2013 3.45% (144.0) \u2013 (283.5) ( 71.1) \u2013
31 December 2022
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
gains
recognised in OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income statement
that includes
hedge
ineffectiveness
Amount
transferred to the
cost or
carrying value
of a non-\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
future cash \ufb02ows
being no longer
expected to occur
\u00a3m
Line item in
the income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
contracts \u2013 CPI
13.3 (13.3) \u2013 Revenue \u2013 (2.0) (3.5) Revenue
125.5 (125.5) (18.5) Revenue \u2013 7. 2 43.0 Revenue
31 December 2021
Exposure
Notional
value of
contracts
\u00a3m
Average
\ufb01xed rate
Change in fair
value of hedging
instrument during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Fair value
recognised in
balance sheet
(assets)
\u00a3m
Fair value
recognised in
balance sheet
(liabilities)
\u00a3m
Balance in the
hedge reserve
for continuing
hedges
net of deferred tax
\u00a3m
Balance in the
hedge reserve
for hedging
relationships for
which hedge
accounting is
no longer applied
net of deferred tax
\u00a3m
In\ufb02ation
In\ufb02ation linked sales
contracts \u2013 CPI
30.3 CPI \u2013 2.72% (15.7) 1.3 (11.5) (10.9) 22.0
495.0 RPI \u2013 3.42% (19.5) \u2013 (82.2) (15.2) \u2013
31 December 2021
Exposure
Change in fair
value of hedged
item during
the reporting
period used
for measuring
ineffectiveness
\u00a3m
Hedging
losses
recognised in OCI
in the period
\u00a3m
Hedge
ineffectiveness
recognised in
the income
statement
in the period
\u00a3m
Line item in the
income statement
that includes
hedge
ineffectiveness
Amount
transferred to the
cost or
carrying value
of a non-\ufb01nancial
asset/liability
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
item affecting
pro\ufb01t or loss
\u00a3m
Amount
reclassi\ufb01ed
due to the hedged
future cash \ufb02ows
being no longer
expected to occur
\u00a3m
Line item in
the income
statement/
balance sheet
affected by the
transfer/
reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
contracts \u2013 CPI
15.7 (15.7) \u2013 Revenue \u2013 (2.2) \u2013 Revenue
21.7 (19.5) \u2013 Revenue \u2013 \u2013 \u2013 Revenue
7.2.5 Liquidity risk
The Treasury function is responsible for liquidity, funding and settlement management under policies approved by the Board.
Liquidity needs are monitored using regular forecasting of operational cash flows and \ufb01nancing commitments. The Group maintains
a mixture of cash and cash equivalents, committed facilities and uncommitted facilities in order to ensure suf\ufb01cient funding
for business requirements.
In managing liquidity risk, the Group has the ability to accelerate the cash flows associated with certain working capital items,
principally those related to ROC sales and Customers\u2019 power sales. In each case this is undertaken on a non-recourse basis and,
accordingly, the ROC assets and other items are derecognised from the Consolidated balance sheet at the point of sale. The Group also
utilises standard purchasing facilities to extend the working capital cycle, whilst still paying suppliers on time. The impact on the
Group\u2019s cash flows is described in note 4.3.
The following tables set out details of the expected contractual maturity of non-derivative \ufb01nancial liabilities. The tables include
both interest and principal cash flows. To the extent that interest payments or receipts are floating rate, the undiscounted amount
is derived from interest rate curves at the reporting date.
7.2 Financial risk management continued
As at 31 December 2022
Within
3 months
\u00a3m
3 months\u2013
1 year
\u00a3m
1\u20132 years
\u00a3m
2\u20135 years
\u00a3m
>5 years
\u00a3m
Total
\u00a3m
Term loans, gross value 10.5 32.4 353.3 338.5 144.9 879.6
Loan notes, gross value \u2013 33.3 33.3 663.6 \u2013 730.2
Borrowings, contractual maturity 10.5 65.7 386.6 1,0 02 .1 144.9 1,609.8
Trade and other payables 920.0 143.3 2.0 0.6 \u2013 1,065.9
Lease liabilities 8.3 22.0 26.7 64.3 72.0 193.3
938.8 231.0 415.3 1,0 67. 0 216.9 2,869.0
Trade and other payables of \u00a31,065.9 million (2021: \u00a3869.5 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation
to deliver ROCs.
As at 31 December 2021
Within
3 months
\u00a3m
3 months\u2013
1 year
\u00a3m
1\u20132 years
\u00a3m
2\u20135 years
\u00a3m
>5 years
\u00a3m
Total
\u00a3m
Term loans, gross value 46.4 14.7 17.5 650.9 138.7 868.2
Loan notes, gross value \u2013 30.0 30.0 639.6 \u2013 699.6
Borrowings, contractual maturity 46.4 44.7 47.5 1,290.5 138.7 1,567.8
Trade and other payables 826.9 4 0 .1 0.6 0.7 1.2 869.5
Lease liabilities 5.5 15.7 18.9 46.4 78.4 164.9
878.8 100.5 67.0 1,337.6 218.3 2,602.2
Interest payments are calculated based on forward interest rates estimated at the reporting date using publicly available information.
The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%).
The following tables set out details of the expected contractual maturity of derivative \ufb01nancial liabilities which are marked-to-market.
Where the amount payable is not \ufb01xed, the amount disclosed has been determined by reference to projected commodity prices,
foreign currency exchange rates, inflation rates or interest rates, as illustrated by the yield or other forward curves existing at the
reporting date. Where derivatives are expected to be gross settled, the gross cash flows have been presented. Commodity contracts
and vanilla foreign currency exchange contracts are expected to be gross settled. Where derivatives are expected to be net settled,
the undiscounted net cash flows expected to occur based on the current fair value have been disclosed. Financial contracts and other
foreign exchange contracts (excluding forwards and swaps) are expected to be net settled. Interest rate contracts and inflation rate
contracts are presented based on net settlement of the interest rate and inflation rate differentials. Gross settlement of both the
interest and principal on cross-currency interest rate swaps is expected and as such this element of the swap is presented gross.
As at 31 December 2022
Within
1 year
\u00a3m
1\u20132 years
\u00a3m
>2 years
\u00a3m
Total
\u00a3m
Commodity contracts 1,006.0 12.1 3.6 1,021.7
Financial contracts 322.8 161.7 1.0 485.5
Foreign currency exchange contracts 921.4 45.4 47.8 1,014.6
Interest rate and cross-currency contracts 8.2 0 .1 0.2 8.5
In\ufb02ation contracts 67.3 83.1 203.8 354.2
2,325.7 302.4 256.4 2,884.5
As at 31 December 2021
Within
1 year
\u00a3m
1\u20132 years
\u00a3m
>2 years
\u00a3m
Total
\u00a3m
Commodity contracts 175.9 27.4 2.1 205.4
Financial contracts 45.1 55.8 1.5 102.4
Foreign currency exchange contracts 2,306.9 148.7 705.3 3,16 0.9
Interest rate and cross-currency contracts 3.1 43.9 1.0 48.0
In\ufb02ation contracts 52.0 10.1 78.2 140.3
2,583.0 285.9 78 8 .1 3,657. 0
7.2 Financial risk management continued
7.2.6 Credit risk
The Group\u2019s gross exposure to credit risk for \ufb01nancial instruments is limited to the carrying amount of \ufb01nancial assets recognised
at the reporting date, as summarised below:
As at 31 December
2022
\u00a3m
2021
\u00a3m
Financial assets:
Cash and cash equivalents (note 4.1) 238.0 317.4
Trade and other receivables (note 3.5) 1,167.8 599.7
Derivative \ufb01nancial instruments (note 7.1) 1,218.0 1, 24 6 .1
2,623.8 2,163 . 2
Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a360.9 million
(2021: \u00a346.6 million), expected credit losses on accrued income of \u00a37.6 million (2021: \u00a38.6 million) and contingent consideration
of \u00a327. 4 million (2021: \u00a327.7 million). The balance excludes non-\ufb01nancial receivables such as prepayments.
The Group\u2018s three reportable segments (Pellet Production, Generation and Customers) are exposed to different levels and
concentrations of credit risk, largely reflecting the number, size and nature of their respective customers.
The Pellet Production segment sells biomass pellets both intra-group and to external parties. Credit risk for the Group relates to the
sales made to external parties. The majority of the Pellet Production segment\u2019s external sales are with large utility customers in Europe
and Asia. The Pellet Production segment manages its credit risk by reviewing individual sales contracts, considering the length of the
contract and assessing the credit quality of counterparties prior to signing contracts and throughout the duration of contracts.
For the Generation segment, the risk arises from treasury, trading and energy procurement activities, as well as the sale of by-products
from generation activities. Wholesale counterparty credit exposures are monitored by individual counterparty and by category
of credit rating. Counterparty credit exposures are subject to approved limits. The Group uses master netting agreements to reduce
credit risk and net settles payments with counterparties where net settlement provisions exist. In addition, the Group employs
a variety of other methods to mitigate credit risk: margining, various forms of Parent Company guarantee, deeds of charge, cash
collateral, letters of credit and surety bonds. The majority of the Generation business\u2019s credit risk is with counterparties in related
energy industries or with \ufb01nancial institutions. In addition, where deemed appropriate, the Group has historically purchased credit
default swaps.
The highest credit risk exposure is in the Customers segment, with a large number of customers of varying sizes operating in a variety
of markets. In particular, its SME customers carry lower concentrations but higher levels of credit risk, owing to a customer base
comprised of smaller retail and commercial entities. Credit risk is managed by checking a company\u2019s creditworthiness and \ufb01nancial
strength both before commencing trade and during the business relationship. Credit risk is monitored and managed by business sector.
Further details on the impact of credit risk on trade and other receivables is disclosed in note 3.5.
The investment of surplus cash is undertaken with the objective of ensuring that there is suf\ufb01cient liquidity at all times, so that funds
are available to meet liabilities as they fall due, whilst securing a return from invested funds and preserving the capital value of those
funds within Board-approved policies. These policies manage credit risk exposure by setting out minimum rating requirements and
maximum investments with any one counterparty based on their rating and the maturity pro\ufb01le.
Whilst cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identi\ufb01ed impairment loss
was immaterial.
The Group is exposed to credit risk on derivative contracts, to which the impairment requirements of IFRS 9 are not applied as the
fair value requirements of IFRS 13 are applicable. The carrying amount of these \ufb01nancial assets, disclosed above, represents the
Group\u2019s maximum credit risk exposure.
7.2 Financial risk management continued
Counterparty risk
As the Group relies on third-party suppliers and counterparties for the delivery of currency, biomass pellets and other goods
and services, it is exposed to the risk of non-performance by these third-party suppliers. For \ufb01nancial instruments this risk is limited
to the credit risk, as discussed above. The Group is also exposed to counterparty risk on non-\ufb01nancial instruments, such as the
purchases of biomass and capital expenditure. If a large supplier were to fall into \ufb01nancial dif\ufb01culty and/or fail to deliver against its
contract with the Group, there would be additional costs associated with securing the lost goods or services from other suppliers.
The Group enters into purchase and sale contracts for a wider variety of goods and services, for example the sale of power
to a number of counterparties. The failure of one or more of these counterparties to perform under their contractual obligations may
cause the Group \ufb01nancial distress or increase the risk pro\ufb01le of the Group. The Group has acceptance procedures in place to ensure
the counterparties the Group contracts with are appropriate. The Group also has limits in place, and actively monitors its exposures
to individual counterparties to minimise this risk.
Capital management
The Group is disciplined in its management of capital to ensure it is able to continue as a going concern; maintain a strong credit rating
underpinned by robust \ufb01nancial metrics; invest in its core business and pay a sustainable and growing dividend whilst maximising
the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists
of shareholders\u2019 equity (excluding the hedge and cost of hedging reserves), plus Net debt. Net debt is comprised of borrowings,
cash and cash equivalents attributable to owners of the Parent Company and is inclusive of the impact of associated hedging
instruments as disclosed in note 2.7.
See note 4.2 for details of loan covenants, and the Viability statement on page 75 for details of scenario analysis performed
on covenant restrictions of the Group\u2019s \ufb01nancing facilities.
As at 31 December
2022
\u00a3m
2021
\u00a3m
Borrowings (note 4.2) 1,440.9 1,361.0
Cash and cash equivalents (note 4.1) (238.0) (317.4)
Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries 0.7 \u2013
Impact of hedging instruments 2.4 64.4
Net debt (note 2.7) 1,206.0 1,10 8 .0
Total shareholders\u2019 equity attributable to the owners of the Parent Company, excluding hedge and
cost of hedging reserves 1,422.7 1,384.2
In 2022, the Group has updated its de\ufb01nition of Net debt. The above table has been re-presented to reflect this updated de\ufb01nition.
See the Net debt section in the Basis of preparation for further details on this change in de\ufb01nition.
7.3 Hedge reserve
The Group designates certain hedging instruments that are used to address commodity price risk, foreign exchange risk, interest rate
risk and inflation rate risk as cash flow hedges. At the inception of the hedge, the relationship between the hedging instrument and
hedged item is documented, along with its risk management objectives. Furthermore, at the inception of the hedge and on an ongoing
basis, the Group documents whether the hedging instruments used in hedging transactions are effective in offsetting changes in cash
flows of the hedged items. Changes in fair value of contracts designated into such hedging relationships are recognised within the
hedge reserve to the extent they are effective.
The table below details the gains and (losses) recognised in the current and prior year on hedging instruments, the amounts
reclassi\ufb01ed from equity due to the hedged item affecting the Consolidated income statement, and the amounts reclassi\ufb01ed due to the
hedged future cash flows no longer being expected to occur. See section 7.2 for further details on these amounts.
Hedge reserve
Commodity
price risk
\u00a3m
Foreign
currency
exchange risk
\u00a3m
Interest
rate risk
\u00a3m
In\ufb02ation
rate risk
\u00a3m
Total
\u00a3m
At 1 January 2021 (3.4) (84.8) (13.8) 26.0 (76.0)
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instrument recognised in OCI (163.3) (1.7) 19.3 (35.2) (180.9)
Reclassi\ufb01ed from equity as the hedged item has affected
pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to cost of inventory \u2013 33.2 \u2013 \u2013 33.2
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in cost of sales (17.2) \u2013 \u2013 \u2013 (17. 2)
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in revenue 6.3 \u2013 \u2013 (2.2) 4.1
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in interest payable and similar charges \u2013 (3.6) 3.3 \u2013 (0.3)
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in foreign exchange gains/(losses) \u2013 26.0 \u2013 \u2013 26.0
Related deferred tax, net (note 2.6) 39.4 (8.4) (4.6) 7.3 33.7
At 1 January 2022 (138.2) (39.3) 4.2 (4.1) (177.4)
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instrument recognised in OCI (538.6) 249.9 39.9 (138.8) (3 87.6)
Reclassi\ufb01ed from equity as the hedged item has affected
pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to cost of inventories \u2013 (19.1) \u2013 \u2013 (19.1 )
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in cost of sales 0.1
\u2013 \u2013 \u2013
0.1
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in revenue 459.8
\u2013 \u2013
5.2 465.0
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in interest payable and similar charges
\u2013
(6.6) (3.1)
\u2013
(9.7)
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in foreign exchange gains/(losses)
\u2013
(62.0)
\u2013 \u2013
(62.0)
\u2013 Reclassi\ufb01ed to Revenue as hedged item no longer expected
to occur \u2013 \u2013 \u2013 39.5 39.5
Related deferred tax, net (note 2.6) 24.1 (39.2) (9.3) 23.6 (0.8)
At 31 December 2022 (192.8) 83.7 31.7 (74.6) (152.0)
7.3 Hedge reserve continued
The expected release pro\ufb01le from equity of post-tax hedging gains and (losses) is as follows:
As at 31 December 2022
Within 1 year
\u00a3m
1\u20132 years
\u00a3m
>2 years
\u00a3m
Total
\u00a3m
Commodity risk (167.4) (22.3) ( 3.1) (192.8)
Foreign currency exchange risk 49.6 23.3 10.8 83.7
Interest rate risk 11.2 11.9 8.6 31.7
In\ufb02ation risk (3.3) (17.1) (54.2) (74.6)
(109.9) (4.2) (37.9) (152.0)
As at 31 December 2021
Within 1 year
\u00a3m
1\u20132 years
\u00a3m
>2 years
\u00a3m
Total
\u00a3m
Commodity risk (20.9) (110.2) ( 7.1) (138.2)
Foreign currency exchange risk (28.0) (9.0) (2.3) (39.3)
Interest rate risk (0.6) 1.2 3.6 4.2
In\ufb02ation risk (0.5) (0.4) (3.2) (4.1)
(50.0) (118.4) (9.0) (17 7.4)
7.4 Cost of hedging reserve
The Group allocates unrealised gains and losses on the forward rate of hedge accounted foreign currency derivative contracts
to a cost of hedging reserve in accordance with IFRS 9.
A large proportion of the derivative contracts held relate to foreign currency exchange contracts, including forward contracts,
options and swaps. Consistent with prior periods, for foreign currency exchange contracts to which the Group has applied hedge
accounting, the Group has continued to designate the change in the spot rate as the hedged risk in the Group\u2019s cash flow hedge
relationships. The Group designates the cost of hedging \u2013 being the change in fair value associated with forward points including
currency basis \u2013 to equity. All amounts within the cost of hedging reserve relate to foreign currency exchange risk.
The table below details the cost of hedging gains or (losses) recognised in the year on hedging instruments and the amounts
reclassi\ufb01ed from equity due to the hedged item affecting the Consolidated income statement:
Cost of hedging
2022
\u00a3m
2021
\u00a3m
At 1 January 78.5 87.2
(Losses)/gains recognised:
\u2013 Change in fair value of hedging instrument recognised in the Consolidated statement
of comprehensive income (19.0) 17.3
Reclassi\ufb01ed from equity as the hedged item has affected pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to cost of inventories (28.8) (23.7)
Related deferred tax, net (note 2.6) 9.4 (2.3)
At 31 December 40 .1 78.5
The expected release pro\ufb01le from equity of post-tax cost of hedging gains and (losses) is as follows:
As at 31 December 2022
Within 1 year
\u00a3m
1\u20132 years
\u00a3m
>2 years
\u00a3m
Total
\u00a3m
Foreign currency exchange risk 21.7 13.0 5.4 40.1
As at 31 December 2021
Within 1 year
\u00a3m
1\u20132 years
\u00a3m
>2 years
\u00a3m
Total
\u00a3m
Foreign currency exchange risk 25.5 28.3 24.7 78.5
7.5 Offsetting \ufb01nancial assets and \ufb01nancial liabilities
Financial assets and liabilities are offset and the net amount is reported in the Consolidated balance sheet where the Group has a
legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously. The Group also has \ufb01nancial assets and liabilities with certain counterparties that are subject to
master netting agreements. Some \ufb01nancial assets and liabilities do not meet the criteria for offsetting at the reporting date but are
subject to an enforceable master netting agreement that in certain circumstances, such as a bankruptcy, would allow for the amounts
to be offset and a single net amount payable.
The table below shows the impact if the carrying amounts that are subject to these master netting agreements were offset:
As at 31 December 2022 As at 31 December 2021
Gross amounts
of \ufb01nancial
instruments
in the
balance sheet
\u00a3m
Related
\ufb01nancial
instruments
that are
not offset
\u00a3m
Cash collateral
assets/(liabilities)
\u00a3m
Net amount
\u00a3m
Gross amounts
of \ufb01nancial
instruments
in the
balance sheet
\u00a3m
Related
\ufb01nancial
instruments
that are
not offset
\u00a3m
Cash collateral
assets/(liabilities)
\u00a3m
Net amount
\u00a3m
Financial assets
Derivative \ufb01nancial
instruments 1,218.0 (1,278.6) 234.0 173.4 1,24 6 .1 (1,008.3) (183.0) 54.8
Financial liabilities
Derivative \ufb01nancial
instruments (1,724.8) 1,278.6 \u2013 (446.2) (1,504.5) 1,008.3 10.2 (486.0)
The aforementioned collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3.
7.6 Contingent assets and liabilities
Contingent assets are potential future inflows of cash that are dependent on a future event that is outside of the control of the Group.
The amount or timing of any receipt is uncertain and cannot be measured reliably.
Contingent liabilities are potential future outflows of cash that are dependent on a future event that is outside of the control of the
Group. The amount or timing of any payment is uncertain and cannot be measured reliably.
Guarantees
In addition to the amounts drawn down against the bank loans, certain members of the Group guarantee the obligations of a number
of banks in respect of letters of credit issued by those banks to counterparties of the Group. As at 31 December 2022, the Group\u2019s
contingent liability in respect of letters of credit issued amounted to \u00a385.9 million (2021: \u00a374.4 million), of which \u00a346.0 million
(2021: \u00a374.4 million) was issued under the RCF.
The Group also guarantees obligations in the form of surety bonds with a number of insurers amounting to \u00a3202.0 million
(2021: \u00a3142.1 million).
Collateral is sometimes required to be provided in relation to the Group\u2019s commodity and treasury trading activities. When derivative
positions are out of the money for the Group, collateral may be required to be provided to the counterparty. These positions reverse
when contracts are settled, and the collateral is returned. The Group has access to certain facilities to enable it to cover collateral
requirements to counterparties through letters of credit or surety bonds.
The letters of credit and surety bond \ufb01gures above include amounts utilised to cover commodity trading collateral requirements
of \u00a354.5 million (2021: \u00a342.5 million) and \u00a3165.0 million (2 0 21: \u00a3107.1 million) respectively. See note 4.1 for details on net cash collateral
the Group has paid to or received from counterparties.
Contingent liabilities
Smart meter targets
In late February 2023, the Group received notice from Ofgem that its failure to fully achieve installation targets for Smart Meter
installations in the Opus Energy business during 2022 had been referred to Ofgem\u2019s Enforcement team. They will consider this matter
in due course and make a decision on any future action. No amount has been provided in respect of this matter in the Consolidated
\ufb01nancial statements, given the early stage of the process and the uncertainty in future outcome.
Contingent assets
Billing system
Drax Energy Solutions Limited has lodged a claim against a supplier for damages caused by the supplier\u2019s misrepresentation and failure
to perform under a contract for delivery of a new billing system. The directors have considered the potential legal outcomes of the
claim with external professional advisors and believe that a favourable outcome is probable. However, a contingent asset is disclosed
rather than a receivable recognised at 31 December 2022, as receipt of the amount is dependent on the outcome of the claim and
therefore it is not virtually certain to be received.
7.7 Commitments
The Group has a number of \ufb01nancial commitments (i.e. a contractual requirement to make a cash payment in the future) that are not
recorded in the Consolidated balance sheet as the contract is not yet due for delivery. Such commitments include contracts for the
future purchase of sustainable biomass, contracts for the construction of assets and contracts for the provision of services.
As at 31 December
2022
\u00a3m
2021
\u00a3m
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements
\u2013 Property, plant and equipment 267.9 28.6
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements
\u2013 Intangible assets 0.2 \u2013
Future support and service contracts not provided in the Consolidated \ufb01nancial statements 60 .1 51.2
Future commitments to purchase ROCs 331.9 200.5
Future commitments to purchase biomass under \ufb01xed and variable priced contracts 3,250.0 3,466.9
Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts 242.5 356.8
Commitments for future capital expenditure of property, plant and equipment have increased predominantly due to the construction
of the OCGT plants.
The contractual maturities of the future commitments to purchase biomass are as follows:
As at 31 December
2022
\u00a3m
2021
\u00a3m
Within one year 829.5 828.4
Within one to \ufb01ve years 1,12 3. 4 2,623.7
After \ufb01ve years 1, 2 97.1 14.8
3,250.0 3,466.9
Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily
for the delivery of sustainable biomass pellets for use in electricity generation at Drax Power Station. To the extent these contracts
relate to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements owing as they are not within the
scope of IFRS 9, and are therefore not required to be measured at fair value. See the Critical accounting judgements section in the
Basis of preparation for further details on this judgement.
Section 8: Reference information This section details reference information relevant to the compiling of the Consolidated \ufb01nancial statements and provides general information about the Group (e.g. operations and registered of\ufb01ce). This section also sets out the basis of preparation of the accounts and general accounting policies that are not speci\ufb01c to any one note. 8.1 General information Drax Group plc (the Company) is incorporated in England and Wales under the Companies Act 2006. The Company and its subsidiaries (together, the Group) have three principal activities: \u2022 Production and subsequent sale of biomass pellets for use in electricity production; \u2022 Electricity generation; and \u2022 Electricity and gas supply to business customers. The Group\u2019s activities are principally based within the UK and North America. The address of the Company\u2019s registered of\ufb01ce and principal establishment is Drax Power Station, Selby, North Yorkshire, YO8 8PH, United Kingdom . A full list of operating companies of the Group is disclosed in note 5 to the Company\u2019s separate \ufb01nancial statements, which follow these Consolidated \ufb01nancial statements. 8.2 Adoption of new and revised accounting standards The following amendments became effective for the \ufb01rst time in 2022. The Group adopted the following from 1 January 2022: \u2022 Annual Improvements 2018-2020 Cycle \u2013 effective from 1 January 2022. \u2022 IAS 37 (amended) \u2013 Onerous Contracts: Cost of Ful\ufb01lling a Contract \u2013 effective from 1 January 2022. \u2022 IAS 16 (amended) \u2013 Property, Plant and Equipment \u2013 Proceeds before Intended Use \u2013 effective from 1 January 2022. \u2022 IFRS 3 (amended) \u2013 Reference to the Conceptual Framework \u2013 effective from 1 January 2022. The adoption of these amendments in the current year has not had a material impact on the Consolidated \ufb01nancial statements. At the date of approval of this report, the following new or amended standards and relevant interpretations, which have not been applied in these Consolidated \ufb01nancial statements, were in issue but not yet effective. \u2022 IFRS 10 (amended) \u2013 Consolidated Financial Statements \u2013 effective date deferred inde\ufb01nitely.* \u2022 IAS 28 (amended) \u2013 Investments in Associates and Joint Ventures (2011) \u2013 effective date deferred inde\ufb01nitely.* \u2022 IFRS 16 (amended) \u2013 Lease Liability in a Sale and Leaseback \u2013 effective from 1 January 2024.* \u2022 IFRS 17 Insurance Contracts \u2013 effective from 1 January 2023. \u2022 IAS 1 (amended) \u2013 Classi\ufb01cation of Liabilities as Current or Non-Current \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Non-current Liabilities with Covenants \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Disclosure of Accounting Policies \u2013 effective from 1 January 2023. \u2022 IAS 8 (amended) \u2013 De\ufb01nition of Accounting Estimates \u2013 effective from 1 January 2023. \u2022 IAS 12 (amended) \u2013 Deferred Tax related to Assets and Liabilities arising from a single Transaction \u2013 effective from 1 January 2023. * Pending endorsement by the UK Endorsement Board (UKEB). Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the Consolidated \ufb01nancial statements of the Group. The Group will continue to monitor the developments of these new or amended standards as and when they are endorsed for use in the United Kingdom. 8.3 Related party transactions A related party is either an individual or entity with control or signi\ufb01cant influence over the Group, or a company that is linked to the Group by investment (such as an associated company or joint venture). The Group\u2019s related parties are primarily its associate and its key management personnel. Amounts below are the total amount of transactions that have been entered into with any related parties in the year . Houston Pellet Limited Partnership (HPLP) HPLP is owned 30% by the Group and 70% by non-related third parties. The Group purchases biomass pellets from HPLP. The Group manages and administers the business affairs of HPLP and charges a management fee. These transactions are at negotiated amounts between the Group and the non-related third parties. The transactions in the period and the balances at the reporting date with the related party are summarised below: Transactions in the period to 31 December 2022 Balances as at 31 December 2022 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.1 18.2 1.7 0.4 Transactions in the period to 31 December 2021(2 ) Balances as at 31 December 2021 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.2 10.3 1.4 0.6 (1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing. (2) The transactions in the period to 31 December 2021 represent the transactions from the acquisition date of 13 April 2021 to the reporting date. Remuneration of key management personnel The remuneration of the Directors and Executive management, who are considered to be the key management personnel of the Group, is set out below in aggregate for each of the categories speci\ufb01ed in IAS 24. Further information about the remuneration of individual directors, together with the directors\u2019 interests in the share capital of the Company, is provided in the audited part of the Remuneration Committee report. Year ended 31 December 2022 \u00a3000 2021 \u00a3000 Short-term employee bene\ufb01ts 7,531 6,755 Share-based payments 3,964 2,826 Post-employment bene\ufb01ts 489 635 Total remuneration 11,984 10,216 Compensation of the Group\u2019s key management personnel includes short-term employee bene\ufb01ts, which includes salaries, other short-term bene\ufb01ts, and contributions to post-employment money purchase pension schemes. Share-based payments compensation represents the amounts receivable under share-based incentive schemes as disclosed in note 6.2. Amounts included in the table above reflect the remuneration of the 17 (2021: 17) members of the Board and Executive management. There were no other transactions with directors for the periods covered by these Consolidated \ufb01nancial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-596": { "value": "Going concern The Group\u2019s business activities, along with future developments that may affect its \ufb01nancial performance, position and cash flows, are discussed within the Strategic report on pages 4 to 91 of this Annual report and accounts. The current energy market conditions and their impact on the Group are considered in the Financial review on page 20. In the Viability statement on pages 75 to 76, the Directors state 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 \ufb01ve years based on forecasts and projections that take into account reasonably possible changes in trading performance and other key assumptions. Consequently, the Directors also have a reasonable expectation that the Group will continue in existence for the next 12 months from the date of signing these Consolidated \ufb01nancial statements and have therefore adopted the going concern basis in preparing these Consolidated \ufb01nancial statements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-597": { "value": "Basis of consolidation These Consolidated \ufb01nancial statements incorporate the \ufb01nancial 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 of an entity 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 pro\ufb01ts 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 identi\ufb01ed separately from the Group\u2019s 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\u2019 proportionate share of the fair value of the acquiree\u2019s identi\ufb01able 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\u2019 share of subsequent changes in equity. Pro\ufb01t or loss and each component of OCI are attributed to the owners of the Parent Company and to the non-controlling interests. Pro\ufb01t or loss and each component of OCI of the subsidiaries is 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 de\ufb01cit balance. See note 4.5 for the accounting policy and further details on the Group\u2019s accounting for non-controlling interests. Joint arrangements are contractual arrangements where two or more parties have joint control over the arrangement. Joint arrangements are classi\ufb01ed 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 only 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. These amounts are recognised within the appropriate Consolidated \ufb01nancial statement line items in accordance with the IFRS applicable for that line item. Associates are those entities in which the Group has signi\ufb01cant influence, but not control or joint control, over the \ufb01nancial 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\u2019s share of after tax pro\ufb01t or loss and 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 \u00a3nil, the Group only recognises its share of losses of 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\u2019s 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 Income from associates in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-667": { "value": "These Consolidated \ufb01nancial statements incorporate the \ufb01nancial 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 of an entity 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 pro\ufb01ts 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-600": { "value": "Introduction The Consolidated \ufb01nancial statements provide detailed information about the \ufb01nancial performance (Consolidated income statement and Consolidated statement of comprehensive income), \ufb01nancial 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 of the entities controlled by the Company (collectively, the Group). The notes to the Consolidated \ufb01nancial 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 \ufb01nancial 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 185 to 189, as well as voluntary information which management believe users of the accounts may \ufb01nd useful, in line with the principles of IFRS. 8.1 General information Drax Group plc (the Company) is incorporated in England and Wales under the Companies Act 2006. The Company and its subsidiaries (together, the Group) have three principal activities: \u2022 Production and subsequent sale of biomass pellets for use in electricity production; \u2022 Electricity generation; and \u2022 Electricity and gas supply to business customers. The Group\u2019s activities are principally based within the UK and North America. The address of the Company\u2019s registered of\ufb01ce and principal establishment is Drax Power Station, Selby, North Yorkshire, YO8 8PH, United Kingdom . A full list of operating companies of the Group is disclosed in note 5 to the Company\u2019s separate \ufb01nancial statements, which follow these Consolidated \ufb01nancial statements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-2": { "value": "Drax Group plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-582": { "value": "Basis of preparation The Consolidated \ufb01nancial statements have been prepared in accordance with the United Kingdom adopted International Accounting Standards (as issued by the UK Endorsement Board) and in conformity with the requirements of the Companies Act 2006. The Consolidated \ufb01nancial statements have been prepared on the historical cost basis, except for certain assets and liabilities that are measured at fair value (principally derivative \ufb01nancial instruments) and the assets and liabilities of the Group\u2019s de\ufb01ned bene\ufb01t pension schemes (measured at fair value and using the projected unit credit method respectively). Foreign currency transactions Transactions in foreign currencies are translated into sterling 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 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 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 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 unless they relate to qualifying cash flow hedges. Foreign exchange gains and losses on qualifying cash flow hedges are recognised within the Consolidated statement of comprehensive income, within Other comprehensive income (OCI) and deferred within equity, to the extent the hedges are effective, until the hedged item impacts the Consolidated income statement. 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 operation\u2019s net assets, and its results for the year, are recognised in OCI. Climate change The impact of climate change has been considered throughout the preparation of the Annual report and accounts. In particular, in the Strategic report the TCFD disclosures contain information on the four recommendations and 11 recommended disclosures of the FCA LR 9.8.6(8). Consideration in respect of the Consolidated \ufb01nancial statements focused on: \u2022 Critical accounting judgements \u2022 Impairment of assets \u2022 Going concern and viability \u2022 Useful economic lives of \ufb01xed assets Further information on these areas can be found in note 3.8 to the Consolidated \ufb01nancial statements. Going concern The Group\u2019s business activities, along with future developments that may affect its \ufb01nancial performance, position and cash flows, are discussed within the Strategic report on pages 4 to 91 of this Annual report and accounts. The current energy market conditions and their impact on the Group are considered in the Financial review on page 20. In the Viability statement on pages 75 to 76, the Directors state 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 \ufb01ve years based on forecasts and projections that take into account reasonably possible changes in trading performance and other key assumptions. Consequently, the Directors also have a reasonable expectation that the Group will continue in existence for the next 12 months from the date of signing these Consolidated \ufb01nancial statements and have therefore adopted the going concern basis in preparing these Consolidated \ufb01nancial statements. Basis of consolidation These Consolidated \ufb01nancial statements incorporate the \ufb01nancial 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 of an entity 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 pro\ufb01ts 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 identi\ufb01ed separately from the Group\u2019s 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\u2019 proportionate share of the fair value of the acquiree\u2019s identi\ufb01able 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\u2019 share of subsequent changes in equity. Pro\ufb01t or loss and each component of OCI are attributed to the owners of the Parent Company and to the non-controlling interests. Pro\ufb01t or loss and each component of OCI of the subsidiaries is 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 de\ufb01cit balance. See note 4.5 for the accounting policy and further details on the Group\u2019s accounting for non-controlling interests. Joint arrangements are contractual arrangements where two or more parties have joint control over the arrangement. Joint arrangements are classi\ufb01ed 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 only 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. These amounts are recognised within the appropriate Consolidated \ufb01nancial statement line items in accordance with the IFRS applicable for that line item. Associates are those entities in which the Group has signi\ufb01cant influence, but not control or joint control, over the \ufb01nancial 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\u2019s share of after tax pro\ufb01t or loss and 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 \u00a3nil, the Group only recognises its share of losses of 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\u2019s 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 Income from associates in the Consolidated income statement. Accounting policies The signi\ufb01cant accounting policies for the measurement of an individual item in the Consolidated \ufb01nancial statements are described in the note to the Consolidated \ufb01nancial statements relating to the item concerned (see contents on page 166). The accounting policies adopted in the preparation of the Consolidated \ufb01nancial statements are consistent with those followed in the preparation of the Group\u2019s Consolidated \ufb01nancial statements for the year ended 31 December 2021, except for the change in accounting policy for Software as a Service (SaaS) costs (see Change in accounting policy section below for further details) and the adoption of new standards and amendments effective as of 1 January 2022. 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 \ufb01nancial statements is presented in note 8.2. The application of these new requirements has not had a material effect on the Consolidated \ufb01nancial statements. Change in accounting policy In 2021, the IFRS Interpretations Committee (IFRIC) \ufb01nalised its agenda decision regarding how to account for costs of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement that conveys to the customer the right to receive access to the supplier\u2019s application software over the contract term. The agenda decision concluded that the right to receive access does not provide the customer with a software asset and therefore, the access to the software is a service that the customer receives over the contract term. The agenda decision also concluded that often the con\ufb01guration and customisation costs do not result in an intangible asset belonging to the customer. Therefore, these costs should be recognised as an expense over the period to which they relate. In limited circumstances, certain con\ufb01guration and customisation activities may result in separate assets controlled by the customer. If this is the case the asset should be assessed to determine whether it is separately identi\ufb01able and if it meets the recognition criteria of IAS 38. Any changes resulting from this agenda decision are a change in accounting policy. Assessing the impact of the agenda decision on the Group required detailed analysis of the historical amounts capitalised. The Group has now concluded its analysis on the impact of this agenda decision and has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised as intangible assets by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. As the impact of this change in accounting policy is immaterial, and the new policy has been applied prospectively from 1 January 2022, no restatement of prior periods has been necessary. These assets have been written off in the current period as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. Judgements and estimates The preparation of these Consolidated \ufb01nancial statements requires judgement to be made in selecting and applying the Group\u2019s 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. The judgements which have the most signi\ufb01cant effect on the amounts recognised in the Consolidated \ufb01nancial statements, and the key estimates and assumptions that have a signi\ufb01cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next \ufb01nancial year, are set out below. Further detail, including sensitivity analyses where appropriate for the key estimates and assumptions, is included in the related notes. Critical accounting judgements The critical judgements made in the process of applying the Group\u2019s accounting policies during the year that have the most signi\ufb01cant effect on the amounts recognised in the Consolidated \ufb01nancial statements are set out below. Certain remeasurements and exceptional items Each year management con\ufb01rms the judgements made regarding transactions to exclude from the Adjusted results of the Group, as described under Alternative performance measures below. The judgement as to whether a transaction or group of transactions should or should not be classi\ufb01ed as a certain remeasurement or an exceptional item can have a signi\ufb01cant impact on the Adjusted results of the Group. An internal policy governs the judgements made by management and in all instances, these judgements are approved by the Audit Committee as set out on page 120. See note 2.7 on page 203 Accounting for biomass purchase and sale contracts The Group buys and sells biomass for operational requirements in its Pellet Production and Generation segments. The Group\u2019s risk management policies also permit some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain circumstances. As such, the Group undertook 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 would result in these contracts being recognised at fair value as derivative \ufb01nancial 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 \ufb01nancial 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 contracts cannot be readily converted into cash. The lack of an active spot market means market participants cannot readily seek to make trading pro\ufb01ts 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. Had the Group concluded biomass contracts were within the scope of IFRS 9, a \u00a31 per tonne increase or decrease in the market price of biomass purchases would result in a \u00a320.5 million fair value gain or loss respectively being recognised. The Group continues to assess developments in the biomass market on an ongoing basis to identify any impact on this assessment. Capitalisation of development project costs As the Group executes its strategy, as outlined on page 16, signi\ufb01cant investment is likely to be required in large development projects, including bioenergy carbon capture and storage in the UK (UK BECCS) and the development of Cruachan 2. 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 are based around the expectation that it is probable that economic bene\ufb01t 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 \ufb01nance. At 31 December 2022 the Group had capitalised \u00a324.5 million relating to the UK BECCS development project, including \u00a319.1 million in 2022. Had it been judged that the criteria for capitalisation had not yet been met, these costs would have been expensed as incurred. The Group has not capitalised any costs in relation to Cruachan 2 or any global BECCS projects as the recognition criteria of IAS 16 have not been judged to have been met. Key sources of estimation uncertainty The following are the key sources of estimation uncertainty that carry a signi\ufb01cant risk of resulting in a material adjustment to the carrying values of assets and liabilities within the next \ufb01nancial 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 \ufb01nancial statements. 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 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\u2019s 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. Once certainty over UK BECCS at Drax Power Station is achieved, UELs will be reassessed. The net book value of \ufb01xed assets being depreciated at Drax Power Station at 31 December 2022 is \u00a3911.5 million and depreciation on these assets in the year, based on the UELs disclosed in note 3.1, was \u00a374.6 million. If the UELs of assets, that are limited to the current assumed end of station life of 2039, were to increase by ten years the impact on the depreciation charge for the year would be a reduction of approximately \u00a314.2 million. See note 3.1 on page 211 Pension liabilities The Group records a net surplus or liability in its Consolidated balance sheet for the fair value of assets held by the pension schemes, less its obligation to provide bene\ufb01ts under approved de\ufb01ned bene\ufb01t pension schemes. The actuarial valuations of the schemes\u2019 liabilities are performed annually by an independent quali\ufb01ed actuary and contain assumptions regarding interest rates, inflation, future salary and pension increases, mortality and other factors, any of which are subject to future change. Three of the key estimates within the valuation are the discount and inflation rates, and life expectancy. Sensitivities in the valuations are discussed in note 6.3. The value of the pension surplus recognised by the Group at 31 December 2022 in relation to the DPG ESPS scheme is \u00a332.4 million and the value of the pension surplus recognised in relation to the Drax 2019 scheme is \u00a36 .1 million. See note 6.3 on page 245 Derivative valuations Derivative \ufb01nancial instruments are recorded in the Group\u2019s Consolidated balance sheet at fair value. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third- party sources. However, any forward curve is based, at least in part, upon assumptions about future transactions and market movements. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. More detail on the assumptions used in the assessment of fair values is provided in note 7.1, and a range of sensitivities is provided in note 7.2. Alternative performance measures (APMs) The Group uses APMs throughout the Annual report and accounts that are not de\ufb01ned within IFRS but provide additional information about \ufb01nancial performance and position that is used by the Board to evaluate the Group\u2019s performance. These measures have been de\ufb01ned 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 de\ufb01ned by IFRS. Such measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure. De\ufb01ned below are the key APMs used by the Board to assess performance. The APMs glossary table on page 287 provides details of all APMs used, including the APM\u2019s closest IFRS equivalent, the reason why the APM is used by the Group and a de\ufb01nition of how each APM is calculated. Adjusted results The Group\u2019s \ufb01nancial 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\u2019s Adjusted results are consistent with the way Executive management and the Board assess the performance of the Group. Adjusted results are intended to reflect the underlying trading performance of the Group\u2019s businesses and are presented to assist users of the Consolidated \ufb01nancial statements in evaluating the Group\u2019s trading performance and performance against strategic objectives. Adjusted basic earnings per share Adjusted basic earnings per share (Adjusted basic EPS) is Adjusted pro\ufb01t from continuing and discontinued operations attributable to the owners of the Parent Company divided by the weighted average number of shares outstanding. This is the same denominator used when calculating basic EPS. This metric is used in discussions with the investor community. Adjusted EBITDA Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, excluding the impact of exceptional items and certain remeasurements (de\ufb01ned in note 2.7). Adjusted EBITDA excludes gains or losses in disposal of \ufb01xed assets, income from associates and amounts directly attributable to non-controlling interests. Adjusted EBITDA is the primary measure used by Executive management and the Board to assess the \ufb01nancial performance of the Group as it provides a more comparable assessment of the Group\u2019s year-on-year trading performance. It is also a key metric used by the investor community to assess the performance of the Group\u2019s operations. 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. Presentation of a transaction as exceptional is approved by the Audit Committee in accordance with an agreed policy. There has been no change to the policy during the year ended 31 December 2022. During the year, the application guidance for this policy was enhanced, in particular setting de minimis thresholds for classifying items as exceptional. These enhancements would not have materially changed the transactions classi\ufb01ed as exceptional in the comparative period contained within these Consolidated \ufb01nancial statements. Certain remeasurements comprise fair value gains and losses on derivative forward 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 accounts with useful information as this removes the volatility caused by movements in 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 pro\ufb01ts 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), taking into account the impact of associated \ufb01nancial derivative contracts (such as forward foreign currency purchases), in Adjusted results at the time the transaction takes place. See note 2.7 on page 203 Net debt The Group de\ufb01nes Net debt as total borrowings less cash and cash equivalents. Borrowings denominated in foreign currencies, and where the Group has entered into hedging arrangements associated with this currency exposure, are translated at the hedged rate. This is to take into account the effect of \ufb01nancial 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. Total borrowings includes external \ufb01nancial debt, such as loan notes, term loans and amounts drawn in cash under revolving credit facilities (RCFs) (see note 4.2) but excludes other \ufb01nancial liabilities such as pension obligations (see note 6.3), trade and other payables (see note 3.5) and lease liabilities calculated in accordance with IFRS 16 (see note 3.2). Net debt excludes the proportion of cash and borrowings in non-wholly owned entities that would be attributable to the non-controlling interests. As noted above, the Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This reflects the nature of the contracts included in this balance which are predominantly entered into for operating purposes rather than as a way to \ufb01nance the purchase of an asset. The exclusion of lease liabilities from the calculation of Net debt is also consistent with the Group\u2019s covenant reporting requirements. 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 current obligations. Prior to 2022, the Group\u2019s de\ufb01nition of Net debt did not include translating borrowings denominated in foreign currencies, for which the Group had entered into hedging arrangements associated with the currency exposure at the hedged rate. The impact of relevant hedging instruments was presented alongside the Net debt \ufb01gures rather than being included in the de\ufb01nition. In 2022, the Group has updated its de\ufb01nition of Net debt, which now includes translating borrowings at the hedged rate. This is deemed to provide more useful information and to better reflect the economic reality, as it includes the sterling value of borrowings that will ultimately be settled. The table below shows Net debt calculated using both the current and prior year de\ufb01nitions: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Current de\ufb01nition 1,206.0 1,10 8 .0 Previous de\ufb01nition 1,203.6 1,043.6 Net debt to Adjusted EBITDA ratio 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 Group\u2019s 2.0 times target has not changed as a result of the update in the de\ufb01nition of Net debt described above, nor has the Group\u2019s expectations in regard to meeting this target. The Net debt to Adjusted EBITDA ratio gives an indication of the size of the Group\u2019s Net debt in relation to its trading performance. 8.2 Adoption of new and revised accounting standards The following amendments became effective for the \ufb01rst time in 2022. The Group adopted the following from 1 January 2022: \u2022 Annual Improvements 2018-2020 Cycle \u2013 effective from 1 January 2022. \u2022 IAS 37 (amended) \u2013 Onerous Contracts: Cost of Ful\ufb01lling a Contract \u2013 effective from 1 January 2022. \u2022 IAS 16 (amended) \u2013 Property, Plant and Equipment \u2013 Proceeds before Intended Use \u2013 effective from 1 January 2022. \u2022 IFRS 3 (amended) \u2013 Reference to the Conceptual Framework \u2013 effective from 1 January 2022. The adoption of these amendments in the current year has not had a material impact on the Consolidated \ufb01nancial statements. At the date of approval of this report, the following new or amended standards and relevant interpretations, which have not been applied in these Consolidated \ufb01nancial statements, were in issue but not yet effective. \u2022 IFRS 10 (amended) \u2013 Consolidated Financial Statements \u2013 effective date deferred inde\ufb01nitely.* \u2022 IAS 28 (amended) \u2013 Investments in Associates and Joint Ventures (2011) \u2013 effective date deferred inde\ufb01nitely.* \u2022 IFRS 16 (amended) \u2013 Lease Liability in a Sale and Leaseback \u2013 effective from 1 January 2024.* \u2022 IFRS 17 Insurance Contracts \u2013 effective from 1 January 2023. \u2022 IAS 1 (amended) \u2013 Classi\ufb01cation of Liabilities as Current or Non-Current \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Non-current Liabilities with Covenants \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Disclosure of Accounting Policies \u2013 effective from 1 January 2023. \u2022 IAS 8 (amended) \u2013 De\ufb01nition of Accounting Estimates \u2013 effective from 1 January 2023. \u2022 IAS 12 (amended) \u2013 Deferred Tax related to Assets and Liabilities arising from a single Transaction \u2013 effective from 1 January 2023. * Pending endorsement by the UK Endorsement Board (UKEB). Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the Consolidated \ufb01nancial statements of the Group. The Group will continue to monitor the developments of these new or amended standards as and when they are endorsed for use in the United Kingdom. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-634": { "value": "The Consolidated \ufb01nancial statements have been prepared in accordance with the United Kingdom adopted International Accounting Standards (as issued by the UK Endorsement Board) and in conformity with the requirements of the Companies Act 2006. The Consolidated \ufb01nancial statements have been prepared on the historical cost basis, except for certain assets and liabilities that are measured at fair value (principally derivative \ufb01nancial instruments) and the assets and liabilities of the Group\u2019s de\ufb01ned bene\ufb01t pension schemes (measured at fair value and using the projected unit credit method respectively). ", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-595": { "value": "Foreign currency transactions Transactions in foreign currencies are translated into sterling 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 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 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 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 unless they relate to qualifying cash flow hedges. Foreign exchange gains and losses on qualifying cash flow hedges are recognised within the Consolidated statement of comprehensive income, within Other comprehensive income (OCI) and deferred within equity, to the extent the hedges are effective, until the hedged item impacts the Consolidated income statement. 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 operation\u2019s net assets, and its results for the year, are recognised in OCI. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-598": { "value": "
Accounting policies
The signi\ufb01cant accounting policies for the measurement of an
individual item in the Consolidated \ufb01nancial statements are
described in the note to the Consolidated \ufb01nancial statements
relating to the item concerned (see contents on page 166).
The accounting policies adopted in the preparation of the
Consolidated \ufb01nancial statements are consistent with those
followed in the preparation of the Group\u2019s Consolidated \ufb01nancial
statements for the year ended 31 December 2021, except for the
change in accounting policy for Software as a Service (SaaS)
costs (see Change in accounting policy section below for further
details) and the adoption of new standards and amendments
effective as of 1 January 2022. 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
\ufb01nancial statements is presented in note 8.2. The application
of these new requirements has not had a material effect on the
Consolidated \ufb01nancial statements.
Change in accounting policy
In 2021, the IFRS Interpretations Committee (IFRIC) \ufb01nalised
its agenda decision regarding how to account for costs of
con\ufb01guring or customising a supplier\u2019s application software in
a SaaS arrangement that conveys to the customer the right to
receive access to the supplier\u2019s application software over the
contract term.
The agenda decision concluded that the right to receive access
does not provide the customer with a software asset and
therefore, the access to the software is a service that the
customer receives over the contract term. The agenda decision
also concluded that often the con\ufb01guration and customisation
costs do not result in an intangible asset belonging to the
customer. Therefore, these costs should be recognised as an
expense over the period to which they relate.
In limited circumstances, certain con\ufb01guration and customisation
activities may result in separate assets controlled by the
customer. If this is the case the asset should be assessed
to determine whether it is separately identi\ufb01able and if it meets
the recognition criteria of IAS 38.
Any changes resulting from this agenda decision are a change in
accounting policy. Assessing the impact of the agenda decision
on the Group required detailed analysis of the historical amounts
capitalised. The Group has now concluded its analysis on the
impact of this agenda decision and has subsequently applied a
new accounting policy for SaaS costs, consistent with the agenda
decision, from 1 January 2022.
SaaS costs capitalised as intangible assets by the Group at 1
January 2022, and impacted by this change in accounting policy,
had a net book value of \u00a35.7 million. As the impact of this change
in accounting policy is immaterial, and the new policy has been
applied prospectively from 1 January 2022, no restatement of
prior periods has been necessary. These assets have been written
off in the current period as an exceptional cost (see note 2.7).
SaaS costs incurred from 1 January 2022 have been recognised
in Operating and administrative expenses.
Had the Group concluded biomass contracts were within the scope of IFRS 9, a \u00a31 per tonne increase or decrease in the market price of biomass purchases would result in a \u00a320.5 million fair value gain or loss respectively being recognised. The Group continues to assess developments in the biomass market on an ongoing basis to identify any impact on this assessment. Capitalisation of development project costs As the Group executes its strategy, as outlined on page 16, signi\ufb01cant investment is likely to be required in large development projects, including bioenergy carbon capture and storage in the UK (UK BECCS) and the development of Cruachan 2. 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 are based around the expectation that it is probable that economic bene\ufb01t 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 \ufb01nance. At 31 December 2022 the Group had capitalised \u00a324.5 million relating to the UK BECCS development project, including \u00a319.1 million in 2022. Had it been judged that the criteria for capitalisation had not yet been met, these costs would have been expensed as incurred. The Group has not capitalised any costs in relation to Cruachan 2 or any global BECCS projects as the recognition criteria of IAS 16 have not been judged to have been met. Key sources of estimation uncertainty The following are the key sources of estimation uncertainty that carry a signi\ufb01cant risk of resulting in a material adjustment to the carrying values of assets and liabilities within the next \ufb01nancial 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 \ufb01nancial statements. 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 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\u2019s 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. Once certainty over UK BECCS at Drax Power Station is achieved, UELs will be reassessed. The net book value of \ufb01xed assets being depreciated at Drax Power Station at 31 December 2022 is \u00a3911.5 million and depreciation on these assets in the year, based on the UELs disclosed in note 3.1, was \u00a374.6 million. If the UELs of assets, that are limited to the current assumed end of station life of 2039, were to increase by ten years the impact on the depreciation charge for the year would be a reduction of approximately \u00a314.2 million. See note 3.1 on page 211 Judgements and estimates The preparation of these Consolidated \ufb01nancial statements requires judgement to be made in selecting and applying the Group\u2019s 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. The judgements which have the most signi\ufb01cant effect on the amounts recognised in the Consolidated \ufb01nancial statements, and the key estimates and assumptions that have a signi\ufb01cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next \ufb01nancial year, are set out below. Further detail, including sensitivity analyses where appropriate for the key estimates and assumptions, is included in the related notes. Critical accounting judgements The critical judgements made in the process of applying the Group\u2019s accounting policies during the year that have the most signi\ufb01cant effect on the amounts recognised in the Consolidated \ufb01nancial statements are set out below. Certain remeasurements and exceptional items Each year management con\ufb01rms the judgements made regarding transactions to exclude from the Adjusted results of the Group, as described under Alternative performance measures below. The judgement as to whether a transaction or group of transactions should or should not be classi\ufb01ed as a certain remeasurement or an exceptional item can have a signi\ufb01cant impact on the Adjusted results of the Group. An internal policy governs the judgements made by management and in all instances, these judgements are approved by the Audit Committee as set out on page 120. See note 2.7 on page 203 Accounting for biomass purchase and sale contracts The Group buys and sells biomass for operational requirements in its Pellet Production and Generation segments. The Group\u2019s risk management policies also permit some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain circumstances. As such, the Group undertook 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 would result in these contracts being recognised at fair value as derivative \ufb01nancial 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 \ufb01nancial 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 contracts cannot be readily converted into cash. The lack of an active spot market means market participants cannot readily seek to make trading pro\ufb01ts 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.
Pension liabilities
The Group records a net surplus or liability in its Consolidated
balance sheet for the fair value of assets held by the pension
schemes, less its obligation to provide bene\ufb01ts under approved
de\ufb01ned bene\ufb01t pension schemes. The actuarial valuations of the
schemes\u2019 liabilities are performed annually by an independent
quali\ufb01ed actuary and contain assumptions regarding interest
rates, inflation, future salary and pension increases, mortality and
other factors, any of which are subject to future change. Three of
the key estimates within the valuation are the discount and
inflation rates, and life expectancy. Sensitivities in the valuations
are discussed in note 6.3. The value of the pension surplus
recognised by the Group at 31 December 2022 in relation to the
DPG ESPS scheme is \u00a332.4 million and the value of the pension
surplus recognised in relation to the Drax 2019 scheme is
\u00a36 .1 million.
See note 6.3 on page 245
Derivative valuations
Derivative \ufb01nancial instruments are recorded in the Group\u2019s
Consolidated balance sheet at fair value. The assessment of fair
value is derived in part by reference to a market price for the
instrument in question. The Group bases its assessment of
market prices upon forward curves that are largely derived from
readily obtainable quotations and published prices from third-
party sources. However, any forward curve is based, at least in
part, upon assumptions about future transactions and market
movements. Where such instruments extend beyond the liquid
portion of the forward curve, the level of estimation increases as
the number of observable transactions decreases. More detail on
the assumptions used in the assessment of fair values is provided
in note 7.1, and a range of sensitivities is provided in note 7.2.
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 speci\ufb01ed good or service prior to the transfer to the customer. A summary of the Group\u2019s 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 below. Further details on signi\ufb01cant elements of revenue, principally how the Contract for Difference (CfD) and Renewable Obligation (RO) schemes operate and the related accounting, are provided below the table. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties Pellet sales (Pellet Production) The Group produces biomass pellets which are sold to external customers. Customers generally obtain control of the pellets at the point the pellets are loaded onto the shipping vessel for freight on board (FOB) sales. Where freight is also arranged for the customer, these sales are known as Cost, insurance and freight (CIF) sales. The freight component is considered a separate performance obligation. Invoices are raised in line with contractual terms and are usually payable within four-10 days. Revenue is recognised at the point that the pellets are loaded onto the shipping vessel. The amount of revenue recognised is based on the contracted price of the pellets. For CIF sales, revenue for the freight portion is recognised over the period the vessel sails. Electricity sales (Generation) The Group\u2019s Generation business has contracts for wholesale electricity sales. Performance obligations for these contracts are deemed to be a series of distinct goods that are substantially the same and transfer consecutively. Control is deemed to have passed to the customer at the point that the electricity has been supplied. This is measured based on energy supplied to the customer with the amount billed based on the units of electricity supplied. Invoices are raised in line with the Grid Trade Master Agreement (GTMA) contractual terms and are payable on the \ufb01fth banking day following the date of invoice. Revenues are measured based upon metered output at rates speci\ufb01ed under contract terms or prevailing market rates as applicable. These are recognised under the output method, whereby revenue is recognised based on the value transferred to the customer. Renewable certi\ufb01cate sales (Generation) Renewable Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origins (REGOs) are sold to counterparties at a point in time. ROCs sold to optimise working capital are invoiced in line with contractual terms and are usually payable within two days. Invoices for ROC sales to third parties are raised when the ROCs are transferred, typically four-\ufb01ve months following the end of the compliance period in which they were generated. Invoices are usually payable within seven days. External ROC and REGO sales are recognised at the point the relevant certi\ufb01cates are transferred to the counterparty. See below for further details. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties CfD income/payment (Generation) The Group is party to a CfD with the Low Carbon Contracts Company (LCCC), a Government- owned entity responsible for delivering elements of the Government\u2019s Electricity Market Reform Programme. Under the contract, the Group makes or receives payments in respect of electricity dispatched from a speci\ufb01c biomass- fuelled generating unit. Invoices are raised seven days following the date of supply and are settled within 10-28 days. The Group recognises the income or costs arising from the CfD in the Consolidated income statement as a component of revenue at the point the Group meets its performance obligation under the CfD contract. This is considered to be the point at which the relevant generation is delivered and the payment becomes contractually due. See below for further details. Ancillary services (Generation) Ancillary services refers to the provision of a range of system support services to National Grid. Most contracts are for the delivery of a speci\ufb01c service either continually or on an ad-hoc basis over a period of time. Invoices are raised and subsequently settled in line with National Grid Company Ancillary Services settlement calendar, typically monthly. Revenue is recognised by reference to the stage of completion of the contractual performance obligations, which are calculated by reference to the amount of the contract term that has elapsed. Depending on contract terms, this approach may require judgement in estimating probable future outcomes. Other income (All segments) Other income is derived from the sale of goods (for example, by-products from electricity generation such as ash and gypsum) or the provision of services. The customer obtains control typically at the point of delivery to their premises or upon collection. Revenue is recognised at the point the control of the goods is transferred to the customer. Electricity and gas sales (Customers) The Group\u2019s Customers business sells electricity and gas directly to business customers. Energy supplied is measured based upon metered consumption and contractual rates. The Customers business also has long-term contracts for the sale of electricity and gas, which are deemed as being satis\ufb01ed over time in line with the progress of the contracts. Invoices are raised in line with contractual terms. For small and medium-sized enterprise (SME) customers, payment is generally due within 10-14 days . For Industrial and Commercial (I&C) customers, payment is generally due between 28-90 days. Revenue is recognised on the supply of electricity or gas when a contract exists, supply has taken place, a quanti\ufb01able price has been established or can be determined and the amounts receivable are expected to be recovered. Where supply has taken place but has not yet been measured or billed, revenue is estimated based on consumption statistics and selling price estimates and is recognised as accrued income. This estimate is not considered to be a key source of estimation uncertainty because historical experience has demonstrated that these estimates are materially accurate based on the subsequent billings and settlements. Where contracts for the sale of electricity and gas are held, revenue is recognised in line with the progress of the contracts. The revenue recognised per unit of energy supplied is based on the total estimated revenue and cost inputs for \ufb01xed price contracts and contracted prices for variable price contracts. Assumptions are applied consistently but third-party costs can vary, therefore actual outcomes may vary from initial estimates. EBRS income (Customers) The UK Government introduced the EBRS, running from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period will have a discount applied for the customer under the scheme to cap their energy tariff. The Customers business is claiming this discount back from the Government. Payment is due 10 days post submission of a claim, which typically occurs monthly. The discounted price of electricity and gas supplied under the EBRS is recognised in revenue as it is supplied. The discount amount claimed back from the UK Government is recognised within revenue over the same period as the underlying discounted revenue it relates to is recognised. The revenue received from the UK Government is included within EBRS income in the table on page 192. The Group does not recognise any additional revenue from the scheme than it would have done if it were not introduced. Renewable certi\ufb01cate sales The generation and sale of renewable certi\ufb01cates, primarily ROCs and REGOs, is a key driver of the Group\u2019s \ufb01nancial performance. The Renewable 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 certi\ufb01cates issued to generators of renewable electricity which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have ful\ufb01lled 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 2022 the Group is operating in CP21. 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 CP21 is \u00a352.88 (2021: CP20 \u00a350.80). ROCs are typically procured in arm\u2019s-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 a CP. The \ufb01nancial bene\ufb01t of a ROC recognised in the Consolidated income statement at the point of generation is comprised of two parts: the expected value to be obtained in a sale transaction with a third-party supplier relating to the buy-out price, and the expected value of the recycle fund bene\ufb01t to be received at the end of the CP. During the year, the Group also made sales and related purchases of ROCs to help optimise its working capital position. External sales of ROCs in the table below includes \u00a3604.5 million of such sales (2021: \u00a3339.8 million), with a similar value reflected in cost of sales. REGOs are certi\ufb01cates 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 energy they generate. See note 3.3 for further details of ROCs and REGOs generated and sold by the Generation business and those utilised by the Customers business during the year.
Accounting policy
Goodwill is tested for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group\u2019s
cash-generating units (CGUs) or group of CGUs expected to bene\ufb01t from the synergies of the business combination.
The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGUs) whenever there is an indication that
an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at least annually.
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 market participant (fair value less costs to sell). The initial
assessment of the recoverable amount is normally based on value in use.
The assessment of future cash flows is based on the approved long-term forecasts used to support the Board\u2019s strategic planning
process. It includes all of the necessary costs expected to be incurred to generate the cash inflows from the CGU\u2019s 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\u2019s cash flow hedging activities and as a result the carrying amount of each CGU includes
the mark-to-market value of those cash flow 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, electri\ufb01cation and the impact of relevant policies on longer-term
supply and demand pro\ufb01les.
As required by IAS 36, the additional value that could be obtained from enhancing the Group\u2019s assets and the potential bene\ufb01t of any
future restructuring or reorganisation that the Group is not yet committed to, is not reflected in the value in use calculation. In
determining value in use, the estimate of future cash flows is discounted to present value using a pre-tax nominal discount rate
reflecting the speci\ufb01c risks attributable to the asset or CGU in question.
The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell, based on its value in use and what a market
participant would pay. If the recoverable amount is less than the current carrying amount in the Consolidated \ufb01nancial statements, an
impairment charge is recorded 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.
An impairment loss relating to a CGU is allocated \ufb01rst to reduce the carrying amount of any goodwill allocated 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
will be limited to reducing the assets, 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-\ufb01nancial 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 identi\ufb01ed, this is reversed immediately in the Consolidated income statement.
Accounting policy
Current tax includes UK corporation tax, corporate income tax in Canada and US income tax. It is based on the taxable pro\ufb01t or loss for
the year in the relevant jurisdiction. Taxable pro\ufb01t or loss differs from pro\ufb01t 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\u2019s 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 independent tax advice. No uncertain tax provisions have been recognised
in the current or prior year.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised.
Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they
relate to items that are recognised in OCI 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 .
The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime,
research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t
within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against
total corporation tax payable.
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 advisers. These
assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax
asset or liability position for each jurisdiction.
Accounting policy
Property, plant and equipment is stated at net book value, which is its cost less any accumulated depreciation less impairment,
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 the 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 brought into use and over its UEL. Where relevant, this is limited to the expected
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 way intended by management.
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 identi\ufb01ed asset is controlled by the Group for a period of time. If the Group is deemed to have control of an identi\ufb01ed 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 speci\ufb01c 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 speci\ufb01c proxies for risk-free rates, such as UK Gilt curves, and an adjustment for credit risk based on the Group\u2019s credit rating. The liability is subsequently adjusted for interest, repayments and other modi\ufb01cations. 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 modi\ufb01cations 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 modi\ufb01cation 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 scope of the lease. All other modi\ufb01cations 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 probable that the option will be exercised. Leases with a term shorter than 12 months, or where the identi\ufb01ed asset has a value below \u00a33,500, are expensed to the Consolidated income statement on a straight-line basis over the term of the agreement. Accounting policy Renewable certi\ufb01cates, principally ROCs and REGOs, are \ufb01rst recognised as current assets in the period they are generated. The Group uses their fair value at initial recognition, based on anticipated sales prices, as deemed cost. The value of renewable certi\ufb01cates earned is recognised in the Consolidated income statement as a reduction to cost of sales in the same period they are earned. Where the Customers business incurs an obligation to deliver renewable certi\ufb01cates, that obligation is provided for in the period incurred within cost of sales. ROCs and REGOs valuation 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 to cover the renewable certi\ufb01cates generated in a period, then they are recognised at the contracted price. Any renewable certi\ufb01cates generated above this, or to be utilised by the Customers 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.
ROC valuations are comprised of two parts: the expected value to be obtained in a sales transaction with a third-party supplier relating
to the buy-out price; and an estimate of the future bene\ufb01t that may be obtained from the ROC recycle fund at the end of the CP, which
runs from April to March each year. The recycle fund provides a bene\ufb01t where supplier buy-out charges (incurred by suppliers who
do not procure suf\ufb01cient 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 and also the demand
for ROCs over the CP, and is thus subject to some uncertainty. The Group utilises external sources of information 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.
At each reporting date, the Group reviews the carrying value of renewable certi\ufb01cate 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, the likely utilisation of renewable certi\ufb01cates generated to settle the Group\u2019s own obligations, and any relevant
information about the levels of wider renewable generation. Any impairment loss is recognised in the Consolidated income statement
in the period incurred.
Accounting policy
The Group\u2019s raw materials and fuel inventory are valued at the lower of the weighted average cost to purchase and net realisable value.
The cost of purchased fuel inventories includes all direct costs and overheads incurred in bringing the fuel to its 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 when they arise.
Both biomass and coal inventories are weighed when entering, moving within or exiting the Group\u2019s sites using technology regularly
calibrated to industry standards. Fuel burn in the electricity generation process is calculated using a combination of weights and
thermal ef\ufb01ciency calculations to provide closing inventory volumes. Both calibrated weighers and ef\ufb01ciency calculations are subject
to a range of tolerable error. All fuel inventories are subject to regular surveys to ensure these measurements are suf\ufb01ciently 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 \ufb01re prevention purposes and thus cannot be surveyed using traditional methods. Biomass
inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy of the weights and ef\ufb01ciency
methods outlined above.
The cost of manufactured fuel inventories includes all direct costs incurred in production and conversion including raw materials,
labour, direct overheads and other costs incurred in bringing the inventories to their existing condition and location. It also includes
an allocation of overheads, including depreciation and other indirect costs. 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.
The valuation of \ufb01bre inventory involves estimations of the conversion rates to determine the volume of residual \ufb01bre 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.
Accounting policy Trade and other receivables are initially measured at the transaction price and subsequently measured at amortised cost. The Group has access to a receivables monetisation facility under which amounts receivable can be sold to a third-party on a non- recourse basis. Receivables sold under such facilities 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 \ufb01nancial assets. These receivables are derecognised at the point of sale which is shortly after the initial recognition of the receivable balance. As a result, no fair value gains or losses have been recognised. Fees are recognised in the Consolidated income statement as incurred within interest payable and similar charges. At 31 December 2022, the receivables sold under this facility were \u00a3400.0 million (2021: \u00a3200.0 million), reflecting the increase in the size of the facility during the year. Refer to note 4.3 for further information about the facility. Contingent consideration receivable is a \ufb01nancial asset. As the cash flows are not solely payments of principal and interest, it does not meet the criteria for recognition at either amortised cost or FVOCI, and is therefore recognised at fair value through pro\ufb01t and loss (FVTPL). The UK Government introduced the Energy Bill Relief Scheme (EBRS) from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period has a discount applied under the EBRS. The Group claims this discount back from the Government. The amount the Group is entitled to claim from the Government is either recognised in other receivables, if it has been claimed but has not yet been received from the Government, or accrued income if not yet claimed at the reporting date. See note 2.2 for details of energy supplied under the EBRS within the Consolidated income statement. Accounting policy The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group\u2019s \ufb01nancial assets including trade receivables, accrued income, contract assets and other \ufb01nancial 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 \ufb01nancial assets, the Group recognises a lifetime expected credit loss provision when there has been a signi\ufb01cant increase in credit risk since initial recognition. If the credit risk of the \ufb01nancial instrument has not increased signi\ufb01cantly since initial recognition, the Group recognises a 12-month expected credit loss provision. The greatest concentration of credit risk exists in the Customers business. For the larger consumers within the Customers business (and also customers within the Generation and Pellet Production businesses) a provision matrix method is adopted. For the SME consumers within the Customers business, the risk is higher due to the wide range of customer characteristics within the portfolio. The loss provisioning for these customers is complex and requires a provisioning tool that is more dynamic than the provision matrix method and so a combined probability method is applied. Both of these approaches are described in more detail below. Under the Group\u2019s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally for recovery of the balance. The Group writes off a \ufb01nancial 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. 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: Accounting policy Trade and other payables are measured at amortised cost. The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring under which certain suppliers can obtain early access to payments. There are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease. The amount due is recognised in trade payables. The Group also has access to payment facilities, utilised to leverage scale and ef\ufb01ciencies in transaction processing. Under these facilities the Group bene\ufb01ts from an extension to payment terms of less than 12 months for a small fee. The original liability is derecognised and 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, in the period incurred. The Group does not include trade and other payables in its calculation of Net debt (see note 2.7). Accounting policy The Group measures all debt instruments (whether \ufb01nancial assets or \ufb01nancial liabilities) initially at fair value, which equates to the principal value of the consideration paid or received. 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 \ufb01nancial 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 payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, with a \ufb01xed repayment date regardless of when the loan is drawn down, are recognised on a systematic basis over the period the Group is able to draw down if draw down is probable. Loan commitment fees payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, where the loan has the same \ufb01xed term regardless of when the loan is drawn down, are deferred until draw down and are recognised over the life of the instrument as part of the effective interest rate if draw down is probable. 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 draw down can vary at the Group\u2019s discretion, such as 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 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 \ufb01x 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 statement of comprehensive income within either foreign exchange gains/(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. 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 \ufb01nancing 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 \ufb01nancing activities. Accounting policy Ordinary shares are classi\ufb01ed 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. 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 identi\ufb01able 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 pro\ufb01ts. At 31 December 2022, the Group has two (2021: three) subsidiary undertakings with NCIs. These subsidiaries were acquired during the prior year through the acquisition of Pinnacle. During the year, the Group purchased the remaining 10% of NCI in Alabama Pellets LLC increasing the Group\u2019s interest in the subsidiary to 100%. See the Transactions with NCI section below for further information.
Accounting policy
Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point
the Group obtains control of the target (the acquisition date). The consideration transferred, the identi\ufb01able 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 pro\ufb01t or loss 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:
\u2022 consideration transferred; less
\u2022 amount of any non-controlling interest in the acquired entity; and
\u2022 acquisition date fair value of any previous equity interest in the acquired entity;
over the fair value of the identi\ufb01able net assets acquired.
Share-based payment awards held by employees of the acquired business that are voluntarily replaced are recognised as post-
acquisition remuneration. Share-based payment awards held by employees of the acquired business that are obliged to be replaced
are allocated between post-acquisition remuneration, which is treated as an expense, and pre-acquisition remuneration, which is
treated as part of the overall consideration.
Accounting policy
Goodwill is measured as the excess of the:
\u2022 consideration transferred;
\u2022 amount of any non-controlling interest in the acquired entity; and
\u2022 acquisition date fair value of any previous equity interest in the acquired entity;
over the fair value of the identi\ufb01able 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 translated at the rate
prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of
comprehensive income.
Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4).
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 to bring
the asset into the condition and location required for use as intended by management.
Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were
made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below.
Accounting policy Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount required to settle the obligation. Speci\ufb01cally, a provision is made for the estimated decommissioning costs at the end of the UEL of the Group\u2019s generating assets, when a legal or constructive obligation arises, on a discounted basis. The amount provided is calculated on a site-by-site basis and represents the present value of the expected future costs. An amount equivalent to the discounted provision is capitalised within property, plant and equipment and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges. The Group recognises a restructuring provision when it has developed a detailed formal plan for the restructuring and has raised a valid expectation that it will carry out the restructuring either by starting to implement the plan or announcing its main features to those affected by it. The restructuring provision includes only the direct expenditures arising from the restructuring programme. These are costs that would have been avoided if the restructuring programme did not go ahead. Any costs to be incurred relating to the ongoing activities of the Group are excluded from the provision. A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination bene\ufb01t and when the Group recognises any related restructuring costs.
Accounting policy
The component is classi\ufb01ed as a discontinued operation at the earlier of when it is disposed of or when the component meets the held
for sale criteria.
When an operation is classi\ufb01ed as a discontinued operation its results are presented separately in the Consolidated income statement.
The results of the discontinued operation are also re-presented in the Consolidated income statement as discontinued in the
comparative period.
Accounting policy The LTIP, PSP, DSP, One Drax Awards and SAYE share-based payment schemes are equity-settled. In accordance with IFRS 2, equity-settled share-based payments are measured at the fair value of the equity instrument at the date of grant. The corresponding expense is recognised in the Consolidated income statement on a straight-line basis over the relevant vesting period, based on an estimate of the number of shares that will ultimately vest as a result of the effect of non-market based vesting conditions, which is revised at each reporting date. Market based conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. Accounting policy Payments to de\ufb01ned contribution schemes are recognised as an expense when employees have rendered services that entitle them to the contributions. The Consolidated income statement charge for the de\ufb01ned contribution scheme represents the total contributions to be paid by the Group in respect of the current period. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-635": { "value": "Change in accounting policy In 2021, the IFRS Interpretations Committee (IFRIC) \ufb01nalised its agenda decision regarding how to account for costs of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement that conveys to the customer the right to receive access to the supplier\u2019s application software over the contract term. The agenda decision concluded that the right to receive access does not provide the customer with a software asset and therefore, the access to the software is a service that the customer receives over the contract term. The agenda decision also concluded that often the con\ufb01guration and customisation costs do not result in an intangible asset belonging to the customer. Therefore, these costs should be recognised as an expense over the period to which they relate. In limited circumstances, certain con\ufb01guration and customisation activities may result in separate assets controlled by the customer. If this is the case the asset should be assessed to determine whether it is separately identi\ufb01able and if it meets the recognition criteria of IAS 38. Any changes resulting from this agenda decision are a change in accounting policy. Assessing the impact of the agenda decision on the Group required detailed analysis of the historical amounts capitalised. The Group has now concluded its analysis on the impact of this agenda decision and has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised as intangible assets by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. As the impact of this change in accounting policy is immaterial, and the new policy has been applied prospectively from 1 January 2022, no restatement of prior periods has been necessary. These assets have been written off in the current period as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. ", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-668": { "value": "Change in accounting policy In 2021, the IFRS Interpretations Committee (IFRIC) \ufb01nalised its agenda decision regarding how to account for costs of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement that conveys to the customer the right to receive access to the supplier\u2019s application software over the contract term. The agenda decision concluded that the right to receive access does not provide the customer with a software asset and therefore, the access to the software is a service that the customer receives over the contract term. The agenda decision also concluded that often the con\ufb01guration and customisation costs do not result in an intangible asset belonging to the customer. Therefore, these costs should be recognised as an expense over the period to which they relate. In limited circumstances, certain con\ufb01guration and customisation activities may result in separate assets controlled by the customer. If this is the case the asset should be assessed to determine whether it is separately identi\ufb01able and if it meets the recognition criteria of IAS 38. Any changes resulting from this agenda decision are a change in accounting policy. Assessing the impact of the agenda decision on the Group required detailed analysis of the historical amounts capitalised. The Group has now concluded its analysis on the impact of this agenda decision and has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised as intangible assets by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. As the impact of this change in accounting policy is immaterial, and the new policy has been applied prospectively from 1 January 2022, no restatement of prior periods has been necessary. These assets have been written off in the current period as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. ", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-728": { "value": "Had the Group concluded biomass contracts were within the scope of IFRS 9, a \u00a31 per tonne increase or decrease in the market price of biomass purchases would result in a \u00a320.5 million fair value gain or loss respectively being recognised. The Group continues to assess developments in the biomass market on an ongoing basis to identify any impact on this assessment. Capitalisation of development project costs As the Group executes its strategy, as outlined on page 16, signi\ufb01cant investment is likely to be required in large development projects, including bioenergy carbon capture and storage in the UK (UK BECCS) and the development of Cruachan 2. 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 are based around the expectation that it is probable that economic bene\ufb01t 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 \ufb01nance. At 31 December 2022 the Group had capitalised \u00a324.5 million relating to the UK BECCS development project, including \u00a319.1 million in 2022. Had it been judged that the criteria for capitalisation had not yet been met, these costs would have been expensed as incurred. The Group has not capitalised any costs in relation to Cruachan 2 or any global BECCS projects as the recognition criteria of IAS 16 have not been judged to have been met. Key sources of estimation uncertainty The following are the key sources of estimation uncertainty that carry a signi\ufb01cant risk of resulting in a material adjustment to the carrying values of assets and liabilities within the next \ufb01nancial 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 \ufb01nancial statements. 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 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\u2019s 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. Once certainty over UK BECCS at Drax Power Station is achieved, UELs will be reassessed. The net book value of \ufb01xed assets being depreciated at Drax Power Station at 31 December 2022 is \u00a3911.5 million and depreciation on these assets in the year, based on the UELs disclosed in note 3.1, was \u00a374.6 million. If the UELs of assets, that are limited to the current assumed end of station life of 2039, were to increase by ten years the impact on the depreciation charge for the year would be a reduction of approximately \u00a314.2 million. See note 3.1 on page 211 Judgements and estimates The preparation of these Consolidated \ufb01nancial statements requires judgement to be made in selecting and applying the Group\u2019s 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. The judgements which have the most signi\ufb01cant effect on the amounts recognised in the Consolidated \ufb01nancial statements, and the key estimates and assumptions that have a signi\ufb01cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next \ufb01nancial year, are set out below. Further detail, including sensitivity analyses where appropriate for the key estimates and assumptions, is included in the related notes. Critical accounting judgements The critical judgements made in the process of applying the Group\u2019s accounting policies during the year that have the most signi\ufb01cant effect on the amounts recognised in the Consolidated \ufb01nancial statements are set out below. Certain remeasurements and exceptional items Each year management con\ufb01rms the judgements made regarding transactions to exclude from the Adjusted results of the Group, as described under Alternative performance measures below. The judgement as to whether a transaction or group of transactions should or should not be classi\ufb01ed as a certain remeasurement or an exceptional item can have a signi\ufb01cant impact on the Adjusted results of the Group. An internal policy governs the judgements made by management and in all instances, these judgements are approved by the Audit Committee as set out on page 120. See note 2.7 on page 203 Accounting for biomass purchase and sale contracts The Group buys and sells biomass for operational requirements in its Pellet Production and Generation segments. The Group\u2019s risk management policies also permit some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain circumstances. As such, the Group undertook 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 would result in these contracts being recognised at fair value as derivative \ufb01nancial 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 \ufb01nancial 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 contracts cannot be readily converted into cash. The lack of an active spot market means market participants cannot readily seek to make trading pro\ufb01ts 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. Pension liabilities The Group records a net surplus or liability in its Consolidated balance sheet for the fair value of assets held by the pension schemes, less its obligation to provide bene\ufb01ts under approved de\ufb01ned bene\ufb01t pension schemes. The actuarial valuations of the schemes\u2019 liabilities are performed annually by an independent quali\ufb01ed actuary and contain assumptions regarding interest rates, inflation, future salary and pension increases, mortality and other factors, any of which are subject to future change. Three of the key estimates within the valuation are the discount and inflation rates, and life expectancy. Sensitivities in the valuations are discussed in note 6.3. The value of the pension surplus recognised by the Group at 31 December 2022 in relation to the DPG ESPS scheme is \u00a332.4 million and the value of the pension surplus recognised in relation to the Drax 2019 scheme is \u00a36 .1 million. See note 6.3 on page 245 Derivative valuations Derivative \ufb01nancial instruments are recorded in the Group\u2019s Consolidated balance sheet at fair value. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third- party sources. However, any forward curve is based, at least in part, upon assumptions about future transactions and market movements. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. More detail on the assumptions used in the assessment of fair values is provided in note 7.1, and a range of sensitivities is provided in note 7.2. In these Consolidated \ufb01nancial statements, the following transactions have been designated as exceptional items and presented separately: \u2022 Impairment charges incurred on the application of the Group\u2019s new accounting policy for SaaS costs, consistent with the IFRIC agenda decision (see Change in accounting policy section in the Basis of preparation on page 177) (2022, All segments), and on costs associated with the Customers billing system (2022, Customers). See note 5.2 for further information. \u2022 Costs associated with the acquisition and integration of Pinnacle (2021, Pellet Production). \u2022 Costs relating to the restructuring of the Customers business (2021, Customers). \u2022 Operating expenditure which was incurred as a direct result of the decision to cease commercial coal generation (2021, Generation). \u2022 Impact of UK tax rate change on deferred tax balances (2022 and 2021, Generation and Customers). See note 2.6 for further information. Certain remeasurements comprise gains or 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. The effect of excluding certain remeasurements from Adjusted results is to reflect commodity sales and purchases at contracted prices i.e. at the all-in-hedged amount paid or received in respect of the delivery of the commodity in question, and \ufb01nancial contracts in the period they are intended to hedge, to reflect the underlying trading performance of the Group in Adjusted results. Signi\ufb01cant estimation uncertainty Assets\u2019 UELs are reviewed annually at each reporting date, taking into consideration the impact of climate and environmental change. See note 3.8 for further details. As disclosed on page 178, 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\u2019s net zero strategy becomes clearer, particularly in relation to UK BECCS, the Group will continue to assess any potential impact of these developments and whether the UEL of Drax Power Station is impacted. The continued rate of change in these areas increases the risk that UELs 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\u2019s biomass assets has been disclosed as a key source of estimation uncertainty. If UK BECCS is 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 currently limited to end of station life of 2039 were to increase by a further 10 years, the annual depreciation charge for the year would decrease by approximately \u00a314.2 million. Acquisition date fair values The Group\u2019s one year measurement period from the acquisition date, to \ufb01nalise the acquisition accounting, ended in the current reporting period. There were no changes to the provisional fair values of the identi\ufb01able assets acquired, liabilities assumed and NCI as at 13 April 2021 that were recognised in the 2021 Consolidated \ufb01nancial statements. Detailed below are the relevant acquisition values and the methods used to estimate them, as presented in the prior year. As at 13 April 2021 Fair value \u00a3m Property, plant and equipment and intangible assets 326.2 Right-of-use assets 60.4 Other non-current assets 4.3 Inventories 26.8 Trade and other receivables 29.4 Cash and cash equivalents 18.8 Trade and other payables (37.1) Lease liabilities (61.1) Borrowings (256.3) Deferred tax liabilities (12.1) Other liabilities (3.3) Net identi\ufb01able assets acquired 96.0 NCI (39.6) Goodwill 165.9 Net assets acquired 222.3 Signi\ufb01cant estimation uncertainty Measurement of the de\ufb01ned bene\ufb01t pension obligation using the projected unit credit method involves the use of key assumptions, including discount rates, inflation rates, salary and pension increases and mortality rates. These actuarial assumptions are reviewed annually and modi\ufb01ed as appropriate. The Group believes that the assumptions utilised in measuring obligations under the schemes are reasonable based on prior experience, market conditions and the advice of pension scheme actuaries. However, actual results may differ from such assumptions. The assumptions applied in 2022 have been prepared in accordance with independent actuarial advice received and are consistent with those applied in the prior period. Fair value measurement \u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated by reference to forward market prices at the reporting date. \u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward currency exchange market rates at the reporting date. \u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting date for the relevant interest index. \u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market rates and interest index for floating-to-\ufb01xed swaps. \u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting date for the relevant inflation index. Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts. The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent within the instrument. Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value. The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the host contract. The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore, these contracts are categorised as Level 2. There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs. The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required with each valuation. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-702": { "value": "Once certainty over UK BECCS at Drax Power Station is achieved, UELs will be reassessed. The net book value of \ufb01xed assets being depreciated at Drax Power Station at 31 December 2022 is \u00a3911.5 million and depreciation on these assets in the year, based on the UELs disclosed in note 3.1, was \u00a374.6 million. The value of the pension surplus recognised by the Group at 31 December 2022 in relation to the DPG ESPS scheme is \u00a332.4 million and the value of the pension surplus recognised in relation to the Drax 2019 scheme is \u00a36 .1 million. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are: As at 31 December 2022 \u00a3m 2021 \u00a3m Non-current derivative \ufb01nancial instrument assets 421.7 357.5 Current derivative \ufb01nancial instrument assets 796.3 888.6 Total derivative \ufb01nancial instrument assets 1,218.0 1,24 6 .1 Non-current derivative \ufb01nancial instrument liabilities (735.4) (541.8) Current derivative \ufb01nancial instrument liabilities (989.4) (962.7) Total derivative \ufb01nancial instrument liabilities (1,724.8) (1,504.5) Total net derivative \ufb01nancial instruments (506.8) (258.4) ", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-601": { "value": "Alternative performance measures (APMs) The Group uses APMs throughout the Annual report and accounts that are not de\ufb01ned within IFRS but provide additional information about \ufb01nancial performance and position that is used by the Board to evaluate the Group\u2019s performance. These measures have been de\ufb01ned 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 de\ufb01ned by IFRS. Such measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure. De\ufb01ned below are the key APMs used by the Board to assess performance. The APMs glossary table on page 287 provides details of all APMs used, including the APM\u2019s closest IFRS equivalent, the reason why the APM is used by the Group and a de\ufb01nition of how each APM is calculated. Adjusted results The Group\u2019s \ufb01nancial 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\u2019s Adjusted results are consistent with the way Executive management and the Board assess the performance of the Group. Adjusted results are intended to reflect the underlying trading performance of the Group\u2019s businesses and are presented to assist users of the Consolidated \ufb01nancial statements in evaluating the Group\u2019s trading performance and performance against strategic objectives. Adjusted basic earnings per share Adjusted basic earnings per share (Adjusted basic EPS) is Adjusted pro\ufb01t from continuing and discontinued operations attributable to the owners of the Parent Company divided by the weighted average number of shares outstanding. This is the same denominator used when calculating basic EPS. This metric is used in discussions with the investor community. Adjusted EBITDA Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, excluding the impact of exceptional items and certain remeasurements (de\ufb01ned in note 2.7). Adjusted EBITDA excludes gains or losses in disposal of \ufb01xed assets, income from associates and amounts directly attributable to non-controlling interests. Adjusted EBITDA is the primary measure used by Executive management and the Board to assess the \ufb01nancial performance of the Group as it provides a more comparable assessment of the Group\u2019s year-on-year trading performance. It is also a key metric used by the investor community to assess the performance of the Group\u2019s operations. 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. Presentation of a transaction as exceptional is approved by the Audit Committee in accordance with an agreed policy. There has been no change to the policy during the year ended 31 December 2022. During the year, the application guidance for this policy was enhanced, in particular setting de minimis thresholds for classifying items as exceptional. These enhancements would not have materially changed the transactions classi\ufb01ed as exceptional in the comparative period contained within these Consolidated \ufb01nancial statements. Certain remeasurements comprise fair value gains and losses on derivative forward 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 accounts with useful information as this removes the volatility caused by movements in 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 pro\ufb01ts 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), taking into account the impact of associated \ufb01nancial derivative contracts (such as forward foreign currency purchases), in Adjusted results at the time the transaction takes place. See note 2.7 on page 203 Prior to 2022, the Group\u2019s de\ufb01nition of Net debt did not include translating borrowings denominated in foreign currencies, for which the Group had entered into hedging arrangements associated with the currency exposure at the hedged rate. The impact of relevant hedging instruments was presented alongside the Net debt \ufb01gures rather than being included in the de\ufb01nition. In 2022, the Group has updated its de\ufb01nition of Net debt, which now includes translating borrowings at the hedged rate. This is deemed to provide more useful information and to better reflect the economic reality, as it includes the sterling value of borrowings that will ultimately be settled. The table below shows Net debt calculated using both the current and prior year de\ufb01nitions: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Current de\ufb01nition 1,206.0 1,10 8 .0 Previous de\ufb01nition 1,203.6 1,043.6 Net debt to Adjusted EBITDA ratio 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 Group\u2019s 2.0 times target has not changed as a result of the update in the de\ufb01nition of Net debt described above, nor has the Group\u2019s expectations in regard to meeting this target. The Net debt to Adjusted EBITDA ratio gives an indication of the size of the Group\u2019s Net debt in relation to its trading performance. Net debt The Group de\ufb01nes Net debt as total borrowings less cash and cash equivalents. Borrowings denominated in foreign currencies, and where the Group has entered into hedging arrangements associated with this currency exposure, are translated at the hedged rate. This is to take into account the effect of \ufb01nancial 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. Total borrowings includes external \ufb01nancial debt, such as loan notes, term loans and amounts drawn in cash under revolving credit facilities (RCFs) (see note 4.2) but excludes other \ufb01nancial liabilities such as pension obligations (see note 6.3), trade and other payables (see note 3.5) and lease liabilities calculated in accordance with IFRS 16 (see note 3.2). Net debt excludes the proportion of cash and borrowings in non-wholly owned entities that would be attributable to the non-controlling interests. As noted above, the Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This reflects the nature of the contracts included in this balance which are predominantly entered into for operating purposes rather than as a way to \ufb01nance the purchase of an asset. The exclusion of lease liabilities from the calculation of Net debt is also consistent with the Group\u2019s covenant reporting requirements. 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 current obligations. 2.7 Alternative performance measures The APMs glossary to these Consolidated \ufb01nancial statements on page 287 provides details of all APMs used, each APM\u2019s closest IFRS equivalent, the reason why the APM is used by the Group and a de\ufb01nition of how each APM is calculated. The Group presents Adjusted results in the Consolidated income statement. The Directors believe that this approach is useful as it provides a clear and consistent view of underlying trading performance. Certain remeasurements and exceptional items are excluded from Adjusted results and presented in a separate column. The Group believes that this presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way Executive management and the Board assess the performance of the business. The Group has a policy and framework for the determination of transactions to present as exceptional. All transactions presented as exceptional are approved by the Audit Committee. See the Audit Committee Report on page 116 for further details. In these Consolidated \ufb01nancial statements, the following transactions have been designated as exceptional items and presented separately: \u2022 Impairment charges incurred on the application of the Group\u2019s new accounting policy for SaaS costs, consistent with the IFRIC agenda decision (see Change in accounting policy section in the Basis of preparation on page 177) (2022, All segments), and on costs associated with the Customers billing system (2022, Customers). See note 5.2 for further information. \u2022 Costs associated with the acquisition and integration of Pinnacle (2021, Pellet Production). \u2022 Costs relating to the restructuring of the Customers business (2021, Customers). \u2022 Operating expenditure which was incurred as a direct result of the decision to cease commercial coal generation (2021, Generation). \u2022 Impact of UK tax rate change on deferred tax balances (2022 and 2021, Generation and Customers). See note 2.6 for further information. Certain remeasurements comprise gains or 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. The effect of excluding certain remeasurements from Adjusted results is to reflect commodity sales and purchases at contracted prices i.e. at the all-in-hedged amount paid or received in respect of the delivery of the commodity in question, and \ufb01nancial contracts in the period they are intended to hedge, to reflect the underlying trading performance of the Group in Adjusted results. Volatility in \ufb01nancial and commodity markets has continued in 2022, in part due to the conflict in Ukraine. This has resulted in signi\ufb01cant movements in the remeasurement gains and losses on certain derivative \ufb01nancial instruments which do not qualify for hedge accounting, or where hedge accounting is ineffective, as shown in the table below, principally relating to gas, certain foreign currency contracts, inflation and oil. Further detail on the Group\u2019s derivative \ufb01nancial instruments is provided in Section 7. Year ended 31 December 2022 \u00a3m 2021 (1) \u00a3m Exceptional items: Inventory provision as a result of coal closure \u2013 (0.3) Acquisition costs \u2013 ( 7.9) Restructuring costs \u2013 (5.2) Integration costs \u2013 (4 .1) Coal closure costs \u2013 (4.8) Impairment of non-current assets (24.9) \u2013 Exceptional items included within operating pro\ufb01t and pro\ufb01t before tax (24.9) (22.3) Tax on exceptional items 4.7 2.5 Impact of tax rate change (9.8) (50.2) Exceptional items after tax (30.0) (70.0) Certain remeasurements: Net fair value remeasurements on derivative contracts included in revenue (441.4) (7 7.0) Net remeasurements realised on maturity of derivative contracts included in revenue 107.7 (8.9) Net hedge ineffectiveness reclassi\ufb01ed to pro\ufb01t or loss included in revenue (50.2) \u2013 Net fair value remeasurements on derivative contracts included in cost of sales 32.6 36.6 Net remeasurements realised on maturity of derivative contracts included in cost of sales 53.1 98.0 Certain remeasurements included within operating pro\ufb01t (298.2) 48.7 Net remeasurements on maturity of derivative contracts included in interest payable and similar charges (0.4) (0.3) Net fair value remeasurements on derivative contracts included in foreign exchange gains/(losses) (3.8) (5.1) Certain remeasurements included in pro\ufb01t before tax (302.4) 43.3 Tax on certain remeasurements 57.5 (8.2) Impact of tax rate change 19.4 1.6 Certain remeasurements after tax (225.5) 36.7 Reconciliation of pro\ufb01t after tax from continuing operations: Adjusted pro\ufb01t after tax 338.0 88.4 Exceptional items after tax (30.0) (70.0) Certain remeasurements after tax (225.5) 36.7 Total pro\ufb01t after tax 82.5 55.1 (1) Comparative amounts for the year ended 31 December 2021 have been re-presented to split out the impact of tax rate change between exceptionals and certain remeasurements. For each item designated as exceptional or as a certain remeasurement, the table below summarises the impact of the item on the Adjusted pro\ufb01t after tax and Adjusted basic EPS from continuing operations and the total cash flow from continuing and discontinued operations. Year ended 31 December 2022 Revenue \u00a3m Gross pro\ufb01t \u00a3m Operating pro\ufb01t \u00a3m Pro\ufb01t before tax \u00a3m Tax credit/ (charge) \u00a3m Pro\ufb01t/(loss) for the period \u00a3m Basic earnings/ (loss) per share Pence Net cash from operating activities \u00a3m Total results IFRS measure 7,7 75.3 1,023.3 146.3 7 8 .1 4.4 82.5 21.3 207.7 Certain remeasurements: Net fair value remeasurement on derivative contracts 383.9 298.2 298.2 302.4 (57.5) 244.9 61.2 \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 (19.4) (19.4) (4.8) \u2013 Exceptional items: Impairment of non-current assets \u2013 \u2013 24.9 24.9 (4.7) 20.2 5.0 \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 9.8 9.8 2.4 \u2013 Total 383.9 298.2 32 3.1 327.3 (71.8) 255.5 63.8 \u2013 Adjusted results totals 8,159.2 1,321.5 469.4 405.4 (67.4) 338.0 8 5.1 2 07.7 Year ended 31 December 2021 (1) Revenue \u00a3m Gross pro\ufb01t/ (loss) \u00a3m Operating pro\ufb01t/(loss) \u00a3m Pro\ufb01t/(loss) before tax \u00a3m Tax (charge)/ credit \u00a3m Pro\ufb01t/(loss) for the period \u00a3m Basic earnings/ (loss) per share Pence Net cash from operating activities \u00a3m Total results IFRS measure 5,088.0 891.2 196.5 121.5 (66.4) 55.1 13.9 306.5 Certain remeasurements: Net fair value remeasurement on derivative contracts 85.9 (48.7) (48.7) (43.3) 8.2 ( 35.1) (8.8) \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 (1.6) (1.6) (0.4) \u2013 Exceptional items: Inventory provision as a result of coal closure \u2013 0.3 0.3 0.3 (0.1) 0.2 0.1 \u2013 Acquisition costs \u2013 \u2013 7.9 7.9 \u2013 7.9 1.8 7.9 Restructuring costs \u2013 \u2013 5.2 5.2 (0.8) 4.4 1.1 4.4 Integration costs \u2013 \u2013 4.1 4 .1 (0.8) 3.3 0.8 3.3 Coal closure costs \u2013 \u2013 4.8 4.8 (0.8) 4.0 1.2 \u2013 Impact of tax rate change \u2013 \u2013 \u2013 \u2013 50.2 50.2 12.6 \u2013 Total 85.9 (48.4) (26.4) (21.0) 54.3 33.3 8.4 15.6 Adjusted results totals 5,173.9 842.8 170.1 100.5 (12.1) 88.4 22.3 322.1 (1) Comparative amounts for the year ended 31 December 2021 have been re-presented to split out the impact of tax rate change between exceptionals and certain remeasurements. Adjusted EBITDA from continuing and discontinued operations is a key measure of performance for the Group. A reconciliation from Adjusted operating pro\ufb01t from continuing operations as per the Consolidated income statement is shown below: Year ended 31 December 2022 Attributable to Owners of the Parent Company \u00a3m NCI \u00a3m Total \u00a3m Adjusted operating pro\ufb01t/(loss) 472.0 (2.6) 469.4 Depreciation and amortisation 237. 2 2.2 239.4 Impairment losses on non-current assets 16.6 \u2013 16.6 Other losses 5.7 0.1 5.8 Income from associates (0.5) \u2013 (0.5) Adjusted EBITDA 731.0 (0.3) 730.7 Year ended 31 December 2021 Attributable to Owners of the Parent Company \u00a3m NCI \u00a3m Total \u00a3m Adjusted operating pro\ufb01t 170.6 (0.5) 170 .1 Depreciation and amortisation 198.3 0.6 198.9 Other losses 9.3 0 .1 9.4 Income from associates (0.3) \u2013 (0.3) Adjusted EBITDA from continuing operations 37 7.9 0.2 378 .1 Adjusted EBITDA from discontinued operations 20.3 \u2013 20.3 Adjusted EBITDA from continuing and discontinued operations 398.2 0.2 398.4 Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Total \u00a3m Segment Adjusted EBITDA: Continuing operations 133.7 695.5 25.8 (113.6) (10.4) 731.0 Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Total \u00a3m Segment Adjusted EBITDA: Continuing operations 85.7 351.5 5.7 (70.9) 5.9 37 7.9 Discontinued operations \u2013 20.3 \u2013 \u2013 \u2013 20.3 Total 85.7 371.8 5.7 (70.9) 5.9 398.2 Net debt Net debt is calculated by taking the Group\u2019s borrowings (note 4.2), adjusting for the impact of associated hedging instruments, and subtracting cash and cash equivalents (note 4.1). The Group has entered into cross-currency interest rate swaps, \ufb01xing the sterling value of the principal repayments and interest in respect of the Group\u2019s US dollar (USD) and euro (EUR) denominated debt (see note 4.2). USD and EUR balances are translated at the hedged rate, rather than the rate prevailing at the reporting date, which impacts the carrying amount of the Group\u2019s borrowings. Net debt excludes the share of borrowings and cash and cash equivalents attributable to NCI. See the APMs glossary and the APMs section within the Basis of preparation for further details on the calculation of Net debt. 2.7 Alternative performance measures continued As at 31 December 2022 \u00a3m 2021 \u00a3m Borrowings (1,440.9) (1,361.0) Cash and cash equivalents 238.0 317.4 Net cash and borrowings (1,202.9) (1,043.6) NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries (0.7) \u2013 Net debt excluding the impact of hedging instruments (1,203.6) (1,043.6) Impact of hedging instruments (2.4) (64.4) Net debt (1,206.0) (1,10 8 .0) Collateral posted/(received) 234.0 (172.8) Net debt excluding collateral (972.0) (1,280.8) The table below reconciles Net debt in terms of changes in these balances across the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Net debt at 1 January (1,10 8 .0) (8 19.1) (Decrease)/increase in cash and cash equivalents (85.6) 27.3 Increase in borrowings (8.6) (310.2) Effect of changes in foreign exchange rates (65.8) 15.2 Movement in the impact of hedging instruments 62.0 (21.2) Net debt at 31 December (1,206.0) (1,10 8 .0) Borrowings include listed bonds, bank debt and RCFs (to the extent drawn in cash), net of any deferred \ufb01nance costs. Borrowings do not include other \ufb01nancial liabilities such as lease liabilities and trade and other payables (including working capital facilities as described in note 3.7). The Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This reflects the nature of the contracts included in this balance which, prior to the application of IFRS 16, were predominantly not held on the Consolidated balance sheet and instead disclosed as operating commitments. The exclusion of lease liabilities from the calculation of Net debt is also consistent with the Group\u2019s covenant reporting requirements. The Group does not include balances related to supply chain \ufb01nancing or factoring in the de\ufb01nition of Net debt. These facilities do not increase the Group\u2019s working capital cycle beyond the Group\u2019s standard payment terms and are only short-term balances. Therefore, the balances do not meet the Group\u2019s de\ufb01nition of borrowings and so are excluded from Net debt. A reconciliation of the change in borrowings during the year is set out in the table on 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 2022 2021 Adjusted EBITDA (continuing and discontinued operations) (\u00a3m) 731.0 398.2 Net debt (\u00a3m) (1,206.0) (1,10 8 .0) Net debt excluding collateral (\u00a3m) (972.0) (1,280.8) Net debt to Adjusted EBITDA ratio 1.6 2.8 Net debt (excluding collateral) to Adjusted EBITDA ratio 1.3 3.2 Cash and committed facilities The below table reconciles the Group\u2019s available cash and committed facilities: As at 31 December 2022 \u00a3m 2021 \u00a3m Cash and cash equivalents (note 4.1) 238.0 317.4 RCF available but not utilised (1) 26 0.1 231.4 Liquidity facility available but not utilised 200.0 \u2013 Total cash and committed facilities 698 .1 548.8 (1) The Group\u2019s available balance on the RCF facility (includes \u00a3300 million and C$10 million RCF, see note 4.2) is reduced by letters of credit drawn under the RCF. At 31 December 2022 \u00a346.0 million letters of credit were drawn (2021: \u00a374.4 million). Further commentary on total cash and committed facilities is contained within the Financial review starting on page 20. 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Section 2: Financial performance
The \ufb01nancial performance section gives further information about the items in the Consolidated income statement. It includes a
summary of \ufb01nancial performance by each of the Group\u2019s businesses (see note 2.1), analysis of certain Consolidated income statement
items (notes 2.2\u20132.6) and information regarding the Adjusted and Total results, dividends and retained pro\ufb01ts (notes 2.7\u20132.10).
Further commentary on the Group\u2019s trading and operational performance during the year can be found in the Strategic report
on pages 1 to 91, 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. The Group is organised into three businesses, with a dedicated management team for each.
Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s
positions. The Board reviews the performance of each of these businesses separately, and each represents a reportable segment:
\u2022 Pellet Production: production and subsequent sale of biomass pellets at the Group\u2019s processing facilities in North America;
\u2022 Generation: power generation activities in the UK; and
\u2022 Customers: supply of electricity and gas to non-domestic customers in the UK.
Operating costs are allocated to the reportable segments to the extent they are directly attributable to the activities of that segment.
Central corporate function costs that are not directly attributable to the activities of a reportable segment are included within
Innovation, capital projects and other costs. Innovation, capital projects and other costs is not a reportable segment as it does
not earn revenues.
When de\ufb01ning gross pro\ufb01t within the Consolidated \ufb01nancial statements, the Group follows the principal trading considerations applied
by its Pellet Production, Generation and Customers businesses when making a sale. In respect of the Pellet Production business, this
reflects the direct costs of production, being \ufb01bre, fuel and drying costs, direct freight and port costs, or third-party pellet purchases.
In respect of Generation, this reflects the direct costs of the commodities to generate the power and the relevant grid connection
costs that arise. In respect of Customers, 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 in
inventories.
Seasonality of trading
The primary activities of the Group are affected by seasonality. Demand in the UK for electricity and gas is typically higher in the winter
period (October to March) when temperatures are lower, and thus drives higher prices and higher generation. Conversely, demand is
typically lower in the summer months (April to September) when temperatures are milder, and therefore prices are generally lower.
This trend is experienced by all of the Group\u2019s UK-based businesses, as they operate within the UK electricity and gas markets.
It is most notable within the Generation business due to its scale and the flexible operation of its thermal generation plant.
The Pellet Production business incurs certain costs that are higher in winter months due to the impact of weather conditions, such
as \ufb01bre drying costs and heating costs. Production volumes and margins are typically higher in the summer months. The business is
protected from demand fluctuations as a result of 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\u2019s performance by reportable segment for the year ended 31 December 2022. 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 adjustment required for unrealised pro\ufb01ts. The \ufb01nancial information in these tables is comprised solely of results from continuing operations. There were no amounts attributable to discontinued operations in the year ended 31 December 2022. Adjusted EBITDA by reportable segment is presented in note 2.7. Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 377.2 3,638.9 4,143.1 \u2013 \u2013 8,159. 2 (383.9) 7,7 75.3 Inter-segment sales 425.4 3,719.3 \u2013 \u2013 (4,14 4 .7 ) \u2013 \u2013 \u2013 Total revenue 802.6 7,358.2 4 ,143.1 \u2013 (4 ,14 4.7 ) 8 ,159. 2 (383.9) 7,775.3 Cost of sales (501.9) (6,479.2) (3,985.0) \u2013 4,128 . 4 (6, 837.7 ) 85.7 (6,752.0) Segment gross pro\ufb01t/(loss) 300.7 879.0 158 .1 \u2013 (16.3) 1,321.5 (298.2) 1,023.3 Operating and administrative expenses (167.3) (183.5) (84.3) (113.6) 5.9 (542.8) \u2013 (542.8) Impairment losses on \ufb01nancial assets \u2013 \u2013 (48.0) \u2013 \u2013 (48.0) \u2013 (48.0) Depreciation and amortisation (119.9) (98.6) (25.5) (3.3) 7.9 (239.4) \u2013 (239.4) Impairment of non-current assets \u2013 (16.6) \u2013 \u2013 \u2013 (16.6) (24.9) (41.5) Other losses (2.0) (3.8) \u2013 \u2013 \u2013 (5.8) \u2013 (5.8) Income from associates 0.5 \u2013 \u2013 \u2013 \u2013 0.5 \u2013 0.5 Operating pro\ufb01t/(loss) 12.0 576.5 0.3 (116.9) (2.5) 469.4 ( 323.1) 146.3 Further information on the main revenue streams of each segment is presented in note 2.2. The impact of exceptional items and certain remeasurements is set out in note 2.7. The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2021: Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 163.1 2,651.2 2,359.6 \u2013 \u2013 5,173.9 (85.9) 5,088.0 Inter-segment sales 286.7 2 , 031.1 \u2013 \u2013 (2,317.8) \u2013 \u2013 \u2013 Total revenue 449.8 4,682.3 2,359.6 \u2013 (2 ,317. 8) 5,173.9 (85.9) 5,088.0 Cost of sales (267.0) (4 ,131. 9) (2,255.9) \u2013 2,323.7 (4, 331.1) 134.3 (4 ,19 6 . 8) Segment gross pro\ufb01t 182.8 550.4 103.7 \u2013 5.9 842.8 48.4 891.2 Operating and administrative expenses (96.9) (198.9) (81.7) (70.9) \u2013 (448.4) (21.5) (469.9) Impairment losses on \ufb01nancial assets \u2013 \u2013 (16.3) \u2013 \u2013 (16.3) \u2013 (16.3) Depreciation and amortisation (61.4) (103.4) (30.5) (3.6) \u2013 (198.9) (0.5) (199.4) Other losses (1.0) (7.8) (0.4) (0.2) \u2013 (9.4) \u2013 (9.4) Income from associates 0.3 \u2013 \u2013 \u2013 \u2013 0.3 \u2013 0.3 Operating pro\ufb01t/(loss) 23.8 240.3 (25.2) (74.7) 5.9 170 .1 26.4 196.5 Adjusted operating pro\ufb01t from discontinued operations for the year ended 31 December 2021 was \u00a320.3 million. This amount was attributable entirely to the Generation segment and is described in further detail in note 5.4. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements.
Capital expenditure by reportable segment
Assets and working capital are monitored on a consolidated basis; however, capital expenditure is monitored by reportable segment.
Year ended 31 December
Additions to intangible assets
Additions to property, plant and
equipment
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Pellet Production \u2013 8.2 66.0 108.6
Generation 2.8 3.4 171.5 103.2
Customers 2.3 8.9 0.3 0 .1
Innovation, capital projects and other 4.3 1.8 8.2 3.6
Total 9.4 22.3 246.0 215.5
Total cash outflows in relation to capital expenditure during the year for continuing operations were \u00a3174.7 million (2021:
\u00a3209.7 million). In 2022, the cash outflow in relation to property, plant and equipment is lower than the cost capitalised in property,
plant and equipment (see note 3.1) predominantly as a result of \u00a364.6 million (2021: \u00a3nil) of deferred letters of credits issued in relation
to the construction of the OCGT assets.
Intra-group trading
Intra-group transactions are carried out at management\u2019s best estimate of arm\u2019s-length, commercial terms that, where possible,
equate to market prices. During 2022, the Pellet Production segment sold biomass pellets and provided associated services with a
total value of \u00a3425.4 million (2021: \u00a3286.7 million) to the Generation segment and the Generation segment sold electricity, gas and
renewable energy certi\ufb01cates with a total value of \u00a33,719.3 million (2021: \u00a32,031.1 million) to the Customers segment.
The impact of all intra-group transactions, including any unrealised pro\ufb01t arising, is eliminated on consolidation.
Major customers
There was no individual customer, in either the current or previous \ufb01nancial year, that represented 10% or more of total revenue.
Geographical analysis of revenue and non-current assets
The geographic information analyses the Group\u2019s revenue and non-current assets by the entity\u2019s 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\u2019s revenue and non-current assets for the Generation and Customers segments are all UK based. The Group\u2019s Pellet
Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s
non-current assets are located in North America, in both Canada and the US.
Revenue from continuing operations
(based on location of customer)
31 December
2022
\u00a3m
31 December
2021
\u00a3m
North America (Canada and US) 10.6 11.5
Europe 27.6 39.1
Asia 275.4 93.0
UK 7,4 61.7 4,944.4
Total 7,775. 3 5,088.0
Non-current assets
(1)
(based on asset\u2019s location)
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Canada 542.6 513.6
US 502.6 473.8
UK 2,054.5 2,053.5
Total 3,099.7 3,040.9
(1) Non-current assets comprise goodwill, intangible assets, property, plant and equipment, right-of-use assets and investments.
2.2 Revenue
The majority of the Group\u2019s revenue is within the scope of IFRS 15. The other sources of the Group\u2019s revenue outside the scope of
IFRS 15 comprise certain remeasurements, amounts reclassi\ufb01ed to revenue for gains and losses on UK CPI inflation swaps and income
from the Government\u2019s Energy Bill Relief Scheme (EBRS). See note 2.7 for further details of certain remeasurements and note 7.2 for
inflation risk management.
Year ended 31 December 2022 Year ended 31 December 2021
Adjusted
results
\u00a3m
Exceptional
items and
certain
remeasurements
\u00a3m
Total
results
\u00a3m
Adjusted
results
\u00a3m
Exceptional
items and
certain
remeasurements
\u00a3m
Total
results
\u00a3m
Revenue from contracts with customers 7,882.5 \u2013 7,882.5 5,170 .3 \u2013 5,170 . 3
Other revenue 276.7 (383.9) (107.2) 3.6 (85.9) (82.3)
Total revenue 8 ,159. 2 (383.9) 7,775.3 5,173 .9 (85.9) 5,088.0
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 speci\ufb01ed good or service prior to the transfer to the customer.
A summary of the Group\u2019s 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 below. Further details on signi\ufb01cant elements
of revenue, principally how the Contract for Difference (CfD) and Renewable Obligation (RO) schemes operate and the related
accounting, are provided below the table.
Revenue stream
(Segment)
Nature and timing of performance obligations,
including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties
Pellet sales
(Pellet Production)
The Group produces biomass pellets which are
sold to external customers. Customers generally
obtain control of the pellets at the point the
pellets are loaded onto the shipping vessel for
freight on board (FOB) sales.
Where freight is also arranged for the customer,
these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is
considered a separate performance obligation.
Invoices are raised in line with contractual terms
and are usually payable within four-10 days.
Revenue is recognised at the point that the pellets
are loaded onto the shipping vessel. The amount of
revenue recognised is based on the contracted price
of the pellets.
For CIF sales, revenue for the freight portion is
recognised over the period the vessel sails.
Electricity sales
(Generation)
The Group\u2019s Generation business has contracts
for wholesale electricity sales. Performance
obligations for these contracts are deemed to be
a series of distinct goods that are substantially
the same and transfer consecutively. Control is
deemed to have passed to the customer at the
point that the electricity has been supplied. This is
measured based on energy supplied to the
customer with the amount billed based on the
units of electricity supplied.
Invoices are raised in line with the Grid Trade
Master Agreement (GTMA) contractual terms and
are payable on the \ufb01fth banking day following the
date of invoice.
Revenues are measured based upon metered output
at rates speci\ufb01ed under contract terms or prevailing
market rates as applicable. These are recognised
under the output method, whereby revenue
is recognised based on the value transferred
to the customer.
Renewable certi\ufb01cate
sales
(Generation)
Renewable Obligation Certi\ufb01cates (ROCs) and
Renewable Energy Guarantees of Origins (REGOs)
are sold to counterparties at a point in time.
ROCs sold to optimise working capital are
invoiced in line with contractual terms and are
usually payable within two days.
Invoices for ROC sales to third parties are raised
when the ROCs are transferred, typically four-\ufb01ve
months following the end of the compliance
period in which they were generated. Invoices are
usually payable within seven days.
External ROC and REGO sales are recognised
at the point the relevant certi\ufb01cates are transferred
to the counterparty.
See below for further details.
Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties CfD income/payment (Generation) The Group is party to a CfD with the Low Carbon Contracts Company (LCCC), a Government- owned entity responsible for delivering elements of the Government\u2019s Electricity Market Reform Programme. Under the contract, the Group makes or receives payments in respect of electricity dispatched from a speci\ufb01c biomass- fuelled generating unit. Invoices are raised seven days following the date of supply and are settled within 10-28 days. The Group recognises the income or costs arising from the CfD in the Consolidated income statement as a component of revenue at the point the Group meets its performance obligation under the CfD contract. This is considered to be the point at which the relevant generation is delivered and the payment becomes contractually due. See below for further details. Ancillary services (Generation) Ancillary services refers to the provision of a range of system support services to National Grid. Most contracts are for the delivery of a speci\ufb01c service either continually or on an ad-hoc basis over a period of time. Invoices are raised and subsequently settled in line with National Grid Company Ancillary Services settlement calendar, typically monthly. Revenue is recognised by reference to the stage of completion of the contractual performance obligations, which are calculated by reference to the amount of the contract term that has elapsed. Depending on contract terms, this approach may require judgement in estimating probable future outcomes. Other income (All segments) Other income is derived from the sale of goods (for example, by-products from electricity generation such as ash and gypsum) or the provision of services. The customer obtains control typically at the point of delivery to their premises or upon collection. Revenue is recognised at the point the control of the goods is transferred to the customer. Electricity and gas sales (Customers) The Group\u2019s Customers business sells electricity and gas directly to business customers. Energy supplied is measured based upon metered consumption and contractual rates. The Customers business also has long-term contracts for the sale of electricity and gas, which are deemed as being satis\ufb01ed over time in line with the progress of the contracts. Invoices are raised in line with contractual terms. For small and medium-sized enterprise (SME) customers, payment is generally due within 10-14 days . For Industrial and Commercial (I&C) customers, payment is generally due between 28-90 days. Revenue is recognised on the supply of electricity or gas when a contract exists, supply has taken place, a quanti\ufb01able price has been established or can be determined and the amounts receivable are expected to be recovered. Where supply has taken place but has not yet been measured or billed, revenue is estimated based on consumption statistics and selling price estimates and is recognised as accrued income. This estimate is not considered to be a key source of estimation uncertainty because historical experience has demonstrated that these estimates are materially accurate based on the subsequent billings and settlements. Where contracts for the sale of electricity and gas are held, revenue is recognised in line with the progress of the contracts. The revenue recognised per unit of energy supplied is based on the total estimated revenue and cost inputs for \ufb01xed price contracts and contracted prices for variable price contracts. Assumptions are applied consistently but third-party costs can vary, therefore actual outcomes may vary from initial estimates. EBRS income (Customers) The UK Government introduced the EBRS, running from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period will have a discount applied for the customer under the scheme to cap their energy tariff. The Customers business is claiming this discount back from the Government. Payment is due 10 days post submission of a claim, which typically occurs monthly. The discounted price of electricity and gas supplied under the EBRS is recognised in revenue as it is supplied. The discount amount claimed back from the UK Government is recognised within revenue over the same period as the underlying discounted revenue it relates to is recognised. The revenue received from the UK Government is included within EBRS income in the table on page 192. The Group does not recognise any additional revenue from the scheme than it would have done if it were not introduced. Renewable certi\ufb01cate sales The generation and sale of renewable certi\ufb01cates, primarily ROCs and REGOs, is a key driver of the Group\u2019s \ufb01nancial performance. The Renewable 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 certi\ufb01cates issued to generators of renewable electricity which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have ful\ufb01lled 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 2022 the Group is operating in CP21. 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 CP21 is \u00a352.88 (2021: CP20 \u00a350.80). ROCs are typically procured in arm\u2019s-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 a CP. The \ufb01nancial bene\ufb01t of a ROC recognised in the Consolidated income statement at the point of generation is comprised of two parts: the expected value to be obtained in a sale transaction with a third-party supplier relating to the buy-out price, and the expected value of the recycle fund bene\ufb01t to be received at the end of the CP. During the year, the Group also made sales and related purchases of ROCs to help optimise its working capital position. External sales of ROCs in the table below includes \u00a3604.5 million of such sales (2021: \u00a3339.8 million), with a similar value reflected in cost of sales. REGOs are certi\ufb01cates 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 energy they generate. See note 3.3 for further details of ROCs and REGOs generated and sold by the Generation business and those utilised by the Customers business during the year. CfD income/payment The 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 2022 was \u00a3126.37 per MWh (2021: \u00a3118.54). 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 are in addition to amounts received from the sale of the associated power in the wholesale market. Gas sales To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Customers business. Having already ceased acquiring new gas customers, following internal processes and a regulatory driven 60-day grace period, no renewal contracts will be offered after May 2023. It is anticipated that the portfolio will reduce by over 50% by the end of 2023 and be almost entirely gone by the end of 2024.
Further analysis of revenue for the year ended 31 December 2022 is provided in the table below:
Year ended 31 December 2022
External
\u00a3m
Inter-segment
\u00a3m
Total
\u00a3m
Pellet Production
Pellet sales 369.3 425.2 794.5
Other income 7.9 0.2 8 .1
Total Pellet Production 377.2 425.4 802.6
Generation
Electricity sales 2, 633.1 3,293.3 5,926.4
Renewable certi\ufb01cate sales 851.5 426.0 1,27 7. 5
CfD payment (45.7) \u2013 (45.7)
Ancillary services 73.0 \u2013 73.0
Other income 127. 0 \u2013 127. 0
Total Generation 3,638.9 3,719.3 7,358.2
Customers
Electricity and gas sales 3, 853.1 \u2013 3, 8 53.1
EBRS income 289.2 \u2013 289.2
Other income 0.8 \u2013 0.8
Total Customers 4,143.1 \u2013 4 ,143.1
Elimination of inter-segment sales \u2013 (4,14 4.7) (4,14 4 .7 )
Total consolidated revenue in Adjusted results 8,159.2 \u2013 8,159. 2
Certain remeasurements (383.9) \u2013 (383.9)
Total consolidated revenue in Total results 7,775. 3 \u2013 7,775. 3
Certain remeasurements losses of \u00a3383.9 million (2021: \u00a385.9 million) is comprised of gains and losses on derivative contracts that are
used to manage risk exposures associated with the Group\u2019s 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 \u00a36.6 million (2021:
\u00a35.4 million). See note 3.7 for further details on contract liabilities.
Revenue recognised in the period from performance obligations satis\ufb01ed or partly satis\ufb01ed in the previous period was \u00a3nil in the
current and previous \ufb01nancial year.
Electricity sales in the Generation segment were net of a \u00a36.1 million payment to a Voluntary Energy Redress Fund.
The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2021:
Year ended 31 December 2021
External
\u00a3m
Inter-segment
\u00a3m
Total
\u00a3m
Pellet Production
Pellet sales 157. 4 286.5 443.9
Other income 5.7 0.2 5.9
Total Pellet Production 163.1 286.7 449.8
Generation
Electricity sales 1,790.2 1,688.5 3,478.7
Renewable certi\ufb01cate sales 538.6 342.6 881.2
CfD income 234.9 \u2013 234.9
Ancillary services 50.6 \u2013 50.6
Other income 36.9 \u2013 36.9
Total Generation 2,651.2 2 ,031.1 4,682.3
Customers
Electricity and gas sales 2,358.9 \u2013 2,358.9
Other income 0.7 \u2013 0.7
Total Customers 2,359.6 \u2013 2,359.6
Elimination of inter-segment sales \u2013 (2,317. 8) (2 ,317. 8)
Total consolidated revenue in Adjusted results 5,173.9 \u2013 5,173.9
Certain remeasurements (85.9) \u2013 (85.9)
Total consolidated revenue in Total results 5,088.0 \u2013 5,088.0
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 a customer is at an amount that corresponds directly with the value to the customer of the Group\u2019s performance completed to date. For accounting policies and other disclosures related to contract assets and liabilities, please see notes 3.5 and 3.7. For accounting policies and other disclosures related to costs incurred to acquire customer contracts, please see note 3.6. 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\u2019s external auditor, Deloitte LLP, in respect of services they provided to the Group during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m The following expenditure has been charged in arriving at operating pro\ufb01t: Staff costs (note 6.1) 248.9 218.6 Repairs and maintenance expenditure on property, plant and equipment 110.3 10 9.1 Other operating and administrative expenses 183.6 142.2 Total operating and administrative expenses 542.8 469.9 Auditor\u2019s remuneration Year ended 31 December 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Audit fees: Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements 1375.0 1,250.0 Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts 40.0 40.0 Total audit fees 1,415.0 1,290.0 Other fees: Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements 115.0 110.0 Assurance services provided to non-material af\ufb01liates 18.0 16.4 Other services 46.2 42.3 Total audit and audit-related fees 1,594.2 1,458.7 Other assurance services 65.0 469.0 Total non-audit fees 65.0 469.0 Total auditor\u2019s remuneration 1,659.2 1,927.7 The fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements above relates to the audit of all of the Group\u2019s subsidiaries to a statutory materiality. In addition, certain head of\ufb01ce companies are not required for the Group audit opinion, the allocation of which is included in the fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. During 2022 there was a decrease in the level of non-audit services provided by Deloitte LLP in 2022. 2021 fees included agreed upon procedures and other assurance services provided in connection with the acquisition of Pinnacle Renewable Energy Inc. (Pinnacle). See note 5.1 for more information on the acquisition. See the Audit Committee report on page 116 for further details on other assurance services provided by Deloitte LLP. 2.4 Impairment review of \ufb01xed 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\u2019s cash-generating units (CGUs) or group of CGUs expected to bene\ufb01t from the synergies of the business combination. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGUs) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at least annually. 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 market participant (fair value less costs to sell). The initial assessment of the recoverable amount is normally based on value in use. The assessment of future cash flows is based on the approved long-term forecasts used to support the Board\u2019s strategic planning process. It includes all of the necessary costs expected to be incurred to generate the cash inflows from the CGU\u2019s 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\u2019s cash flow hedging activities and as a result the carrying amount of each CGU includes the mark-to-market value of those cash flow 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, electri\ufb01cation and the impact of relevant policies on longer-term supply and demand pro\ufb01les. As required by IAS 36, the additional value that could be obtained from enhancing the Group\u2019s assets and the potential bene\ufb01t of any future restructuring or reorganisation that the Group is not yet committed to, is not reflected in the value in use calculation. In determining value in use, the estimate of future cash flows is discounted to present value using a pre-tax nominal discount rate reflecting the speci\ufb01c risks attributable to the asset or CGU in question. The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell, based on its value in use and what a market participant would pay. If the recoverable amount is less than the current carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recorded 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. An impairment loss relating to a CGU is allocated \ufb01rst to reduce the carrying amount of any goodwill allocated 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 will be limited to reducing the assets, 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-\ufb01nancial 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 identi\ufb01ed, this is reversed immediately in the Consolidated income statement. CGUs Year ended 31 December 2022 Segment name CGUs contained within segment Goodwill \u00a3m Pellet Production Northern Operations and Southern Operations 176.0 Generation Drax Power Station (biomass) \u2013 Lanark 11.3 Galloway 4 0.1 Cruachan 26.9 OCGTs \u2013 Daldowie \u2013 Customers Drax Energy Solutions 10.7 Opus Energy 159.2 424.2 The Pellet Production business consists of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill recognised on the acquisition of Pinnacle was allocated to the Pellet Production segment due to the pellet operations as a whole being expected to bene\ufb01t from the synergies of the larger, combined pellet operations. In respect of the Generation business, 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. Drax Power Station is comprised of two separate CGUs, one for biomass generation assets and one for coal generation assets. The coal CGU was previously fully written down following the decision to cease commercial coal generation. At the request of the UK Government, the Group has entered into an agreement with National Grid to keep its two coal units available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and will only operate if, and when, instructed to do so by National Grid. Had no impairment loss been previously recognised on the coal assets, they would have already been fully depreciated at the time the contract with National Grid was agreed. As such, management have assessed the impact of this agreement on the coal CGU and determined no reversal of any prior impairment is required. In respect of the Customers business, the Group considers the smallest groups of assets that generate independent cash inflows to be equivalent to the operating entities within those businesses. The OCGT development projects are considered one CGU due to the intention to operate and contract the plants using a portfolio approach, resulting in forecast cash inflows that are interdependent. The Innovation, capital projects and other function does not have any external cash inflows and therefore does not meet the de\ufb01nition of a CGU and so is not included in the assessment below. Assessment of indicators of impairment CGU Goodwill? Impairment indicators identi\ufb01ed? Impairment review required? Northern Operations and Southern Operations Y N Y Drax Power Station (biomass) N N N Lanark Y N Y Galloway Y N Y Cruachan Y N Y OCGTs N Y Y Daldowie N Y Y Drax Energy Solutions Y N Y Opus Energy Y N Y A review of the Group\u2019s CGUs gave rise to an indicator of impairment for two CGUs: the Daldowie fuel plant, due to the increase in energy prices resulting in a signi\ufb01cant increase in input costs, and the OCGTs, due to a strategic review conducted during the year concluding that it was unlikely the Group\u2019s fourth OCGT project at Abergelli would be developed. In determining that no indicators of impairment existed in respect of the remaining 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 the impact of such changes on the Group\u2019s long-term planning models and future forecast cash flows. In particular, consideration was given to the impact of higher commodity prices and the changes in the economic environment, including market interest rates and inflation. Whilst higher commodity prices (e.g. power, gas and \ufb01bre) were an impairment indicator for Daldowie, they were not deemed an impairment indicator for other CGUs which are less exposed to the impact of these higher prices. This is due to the nature of the industries in which they operate and the corresponding impact on revenues. In the Generation and Customers businesses, higher energy costs are an input cost but these are offset by higher revenues. Additionally, in the Pellet Production segment, higher \ufb01bre costs and energy prices have been offset by increased revenues, reflecting strong demand for biomass pellets. In considering the economic environment, management concluded the Group\u2019s CGUs tend to be less sensitive to changes in the economy, as energy and pellet production are required to power and heat homes and businesses in the UK and abroad, which are generally considered essential spend. The Generation, Pellet Production and Drax Energy Solutions CGUs also contract with high quality, stable counterparties. For the Opus Energy CGU, customers are typically in the SME sector and therefore the impact of the economic environment, combined with higher market prices could potentially impact the recoverability of debt. However this impact is offset by the work done to improve the average credit quality of customers, along with achieved operational ef\ufb01ciencies and so was not deemed to be an impairment indicator. Higher interest rates were also considered, including their impact on discount rates. In the prior year, only the Galloway CGU was sensitive to changes in the discount rate. Therefore, whilst interest rates have increased, any impact on discount rates was not considered to be an impairment indicator. For the Galloway CGU, the impact of increases to power prices during 2022 would more than offset the impact of a higher discount rate and therefore this was not considered to be an impairment indicator. Consideration was also given to assumptions regarding biomass generation and biomass prices post-2027, when current subsidies for biomass generation at Drax Power Station are due to expire, and whether that was an indicator of impairment (See the Principal risks section starting on page 77 for further details on biomass acceptability). The Group aims to reduce biomass costs over time, as part of a strategy to secure a long-term future for biomass generation. Whilst management\u2019s forecasts extend beyond 2027, they indicate that a majority of the carrying amount of the Drax Power Station (biomass) CGU is supported by pre-2027 cash flows. Accordingly, the end of current subsidies in 2027 was not deemed to be an indicator of impairment. Drax Power Station is currently deemed to have a useful life until at least 2039 and an expectation of continuing to be in operation until that time. Impairment review For the purpose of impairment reviews the recoverable amounts of these CGUs, or groups of CGUs, were measured based on value in use calculations using the Group\u2019s established planning models. These calculations depend on a broad range of assumptions, the most signi\ufb01cant of which are outlined below for each CGU, or Group of CGUs, to which an impairment test has been performed in the current year. Management\u2019s bases for these estimates are also outlined below. CGUs Signi\ufb01cant assumptions for value in use calculation Management\u2019s bases for determining estimates used in value in use calculation Northern Operations and Southern Operations \u2022 Production costs \u2022 Production volumes \u2022 Sales prices \u2022 Discount rate \u2022 Future production costs are estimated based on current year actual production costs plus in\ufb02ation. \u2022 Production volumes are estimated based on the current capacity of the Group\u2019s pellet plants and the historical operational performance of the plants. \u2022 Sales prices are estimated based on contractual sales agreements. \u2022 See below for details of the basis used to estimate discount rates. Drax Energy Solutions and Opus Energy \u2022 Customer margins \u2022 Supply volumes \u2022 Collection rates \u2022 Power prices \u2022 Third party cost estimates \u2022 Discount rate \u2022 Customer margin estimates are based on previously achieved pro\ufb01tability. \u2022 The expectation of future organic volumes is based on past performance and management\u2019s expectations of market development. \u2022 Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are liquid), gas market prices as a proxy for power for another two years, then the Group\u2019s long-term power price forecast, which is prepared using externally provided gas price forecast and demand inputs. \u2022 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. \u2022 Collection rates are estimated based on historical data and adjusted for expected changes in future circumstances. \u2022 See below for details of the basis used to estimate discount rates. OCGTs, Lanark, Galloway and Cruachan \u2022 Power prices \u2022 Sources of stability income \u2022 Volume of generation (hydros only) \u2022 Construction cost (OCGTs only) \u2022 Discount rate \u2022 Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are liquid), gas market prices as a proxy for power for another two years, then the Group\u2019s long term power price forecast, which is prepared using externally provided gas price forecast and demand inputs. \u2022 Stability income assumptions are based on past performance and current agreed prices with National Grid. \u2022 Volume of generation for the hydro assets is derived from historical rainfall averages. \u2022 Construction costs are estimated based on agreed contracted prices and obtained quotes. \u2022 See below for details of the basis used to estimate discount rates. Daldowie \u2022 Gas prices \u2022 Estimated contract end date \u2022 Discount rate \u2022 Future wholesale gas price estimates are based on market traded prices for around \ufb01ve years (the period they are liquid). \u2022 The end date of the current contract is based on the contractual term and expectations about future extensions or changes to the contract term. \u2022 See below for details of the basis used to estimate discount rates. For each group of CGUs, management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the industries in which the Group operates. These longer-term structural changes are mainly linked to climate change and the transition to more renewable forms of energy and net zero. They are explained in more detail in each section below. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2% in all models. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The 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 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 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. As the Group does not believe that any reasonably possible change in the key assumptions would result in an impairment it is not considered a key source of estimation uncertainty and therefore any sensitivities provided below are for additional information only. Further details on the assessments for each group of CGUs are given below. Pellet Production The recoverable amount of the Pellet Production group of CGUs, consisting of the Northern Operations and Southern Operations CGUs, is measured at least annually due to the goodwill allocated to the group of CGUs. These CGUs are principally engaged in the production and sale of biomass pellets. Management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the pellet industry such as climate change and the expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the pellet industry. Group of CGUs Carrying amount (including allocated goodwill) \u00a3m Discount rate Pellet Production 1,024.7 10.5% The pre-tax nominal discount rate of 10.5% (2021: 8.5%) was calculated based on independent analysis commissioned by the Group. The value in use for the Pellet Production group of CGUs was signi\ufb01cantly in excess of its carrying amount. An increase in production costs of $20 per tonne in the calculation would reduce the headroom by \u00a3711.4 million and a 15% decrease in production volumes would reduce the headroom by \u00a3572.3 million. Neither scenario would result in an impairment. No reasonably possible change in the key assumptions would result in a recoverable amount that was lower than its carrying amount. Drax Energy Solutions and Opus Energy The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured annually due to the existence of goodwill allocated to these CGUs. These businesses are principally focused on renewable electricity sales and therefore consideration of climate and environmental impacts are already a key feature of the business models. Management has projected detailed cash flows based on a period of \ufb01ve years, consistent with the period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement. Cash flows beyond the \ufb01ve-year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the energy supply industry. The carrying amounts and discount rates applied to each CGU are set out in the table below: CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Drax Energy Solutions 25.7 10.3% Opus Energy 230.5 10.3% The expected future cash flows of the Drax Energy Solutions CGU were discounted using a pre-tax nominal discount rate of 10.3% (2021: 8.7%), calculated based on independent analysis commissioned by the Group, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s Customers business. The Group believes that this rate reflects the prospects for a well-established Customers business, reflecting the comparatively long trading record and customer bases the business holds. The value in use of the Drax Energy Solutions CGU was signi\ufb01cantly in excess of its carrying amount. An increase in the discount rate to 11.4% combined with factoring in 0% growth in the calculation would reduce the headroom by \u00a336.0 million, which would not result in an impairment. Reflecting the signi\ufb01cant headroom in the analysis, the Group does not believe that any reasonably possible change in the key assumptions would result in a recoverable amount for the Drax Energy Solutions CGU that was lower than its carrying amount. The expected future cash flows of the Opus Energy CGU were also discounted using a pre-tax nominal discount rate of 10.3% (2021: 8.7%). The forecast future cash flows of the CGU are adjusted to reflect the relative risk pro\ufb01le of its customer base compared to Drax Energy Solutions, for example by incorporating higher levels of expected credit losses. Opus Energy operates in the same industry, under the same macro-economic conditions and is impacted by the same commodity prices and impacts of climate change as Drax Energy Solutions. As such, it is considered appropriate to use the same discount rate for both CGUs, supported by independent analysis. The value in use of the Opus Energy CGU was signi\ufb01cantly in excess of its carrying amount. An increase in the discount rate to 11.4% combined with factoring in 0% growth in the calculation would reduce the headroom by \u00a357.9 million. This would not result in an impairment. Reflecting the signi\ufb01cant headroom in the analysis and sensitivities performed, the Group does not believe that any reasonably possible change in the key assumptions would result in a recoverable amount for the Opus Energy CGU that was lower than its carrying amount. Lanark, Galloway and Cruachan The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment annually due to the existence of goodwill allocated to these CGUs. These CGUs are engaged in hydro and pumped storage power generation. Management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the generation industry in the models used, such as climate change, changing weather patterns, and the continued transition to renewable forms of energy and net zero. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the generation industry. CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Lanark 49.9 8.5% Galloway 169.8 8.5% Cruachan 250.6 8.5% The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 8.5% (2021: 7.3%) The discount rates were calculated based on independent analysis commissioned by the Group, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s hydro and pumped storage generation operations. The value in use for all three CGUs (Lanark, Galloway and Cruachan) was in excess of their carrying amounts. An increase in the discount rate to 15% in each of the calculations would reduce the headroom for Lanark, Galloway and Cruachan by \u00a326.0 million, \u00a387.2 million and \u00a3257.6 million respectively. A decrease in power prices of 25% in each of the calculations would reduce the headroom for Lanark, Galloway and Cruachan by \u00a328.9 million, \u00a3 101.1 million and \u00a3154.4 million respectively. None of these changes would result in an impairment. No reasonably possible change in the key assumptions would result in a recoverable amount that was lower than their carrying amount. Daldowie The Daldowie CGU does not have any goodwill allocated to it but in the current year had an indicator of impairment present. The impairment indicator was due to higher energy input costs resulting in a reduction in the forecast earnings. A full impairment review was carried out as a result of this impairment indicator. This CGU is engaged in processing wastewater sludge into biomass pellets. Management has projected detailed cash flows based on a period of three years, reflecting the expected contract end date. The carrying amount and discount rate applied to the CGU is set out in the table below: CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Daldowie 8.9 8.9% An independent analysis commissioned by the Group calculated a pre-tax nominal discount rate of 8.9% which was applied to the expected future cash flows to determine the value in use of the fuel plant. The carrying amount of \u00a316.9 million was higher than the value in use calculation and so an impairment charge was therefore recorded. As there is no goodwill associated with the Daldowie fuel plant, this charge of \u00a38.0 million was applied to its \ufb01xed assets on a pro rata basis as described in the accounting policy section of this note. An increase in estimated energy input costs of 25% in the value in use calculation would increase the impairment by \u00a34.2 million. OCGTs The OCGT CGU does not have any goodwill allocated to it but in the current year had an indicator of impairment present. Following a strategic review during the year, it was concluded that it was currently unlikely that the Group would develop its fourth OCGT project at Abergelli. The Abergelli OCGT development does not hold a Capacity Market contract. As a result of this strategic review, the Group has recognised an impairment charge of \u00a38.6 million, representing the previously capitalised development costs for the individual project. The impairment indicator was speci\ufb01c to the Abergelli assets with the CGU. No impairment indicators were identi\ufb01ed in relation to the other assets within the CGU, or the CGU as a whole, and therefore a full impairment assessment was not required. Impairment of non-current assets Due to a change in accounting policy in the current year an impairment charge has been recognised on intangible assets relating to SaaS costs previously capitalised (See Change in accounting policy section in the Basis of preparation on page 177 for further details). An impairment charge has also been recognised on a billing system where the Group has stopped development and is engaged in active discussion with the supplier reflecting the supplier\u2019s failure to perform under this contract. See note 5.2 for further details. The Group has incurred impairment losses in the year. It is the Group\u2019s policy that any impairments of assets that have not yet been brought into use and depreciated or amortised are reflected in the cost of the asset being impaired. For impairments of assets that have already been brought into use, the impairment is reflected as an accelerated charge in the accumulated depreciation or amortisation of the asset. Impairment Daldowie \u00a3m OCGTs \u00a3m Customers billing system \u00a3m SaaS assets \u00a3m Total \u00a3m Property, plant and equipment \u2013 cost \u2013 6.9 \u2013 \u2013 6.9 Property, plant and equipment \u2013 accumulated depreciation 8.0 \u2013 \u2013 \u2013 8.0 Intangible assets \u2013 cost \u2013 1.7 19.2 \u2013 20.9 Intangible assets \u2013 accumulated amortisation \u2013 \u2013 \u2013 5.7 5.7 Total impairment of non-current assets 8.0 8.6 19.2 5.7 41.5 The total impairments for the year of \u00a341.5 million are recognised in the impairment of non-current assets line in the Consolidated income statement. The impairment of SaaS intangible assets and the Customers billing system, totalling \u00a324.9 million, have been treated as exceptional items. See note 2.7 for further details. 2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. 2.6 Current and deferred tax The tax credit or charge includes both current and deferred tax. It reflects the estimated tax on the pro\ufb01t before tax for the Group for the year ended 31 December 2022 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 pro\ufb01t or loss for the year in the relevant jurisdiction. Taxable pro\ufb01t or loss differs from pro\ufb01t 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\u2019s 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 independent tax advice. No uncertain tax provisions have been recognised in the current or prior year. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 . The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime, research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against total corporation tax payable. 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total tax credit/(charge) from continuing operations comprises: Current tax \u2013 Current year (66.0) (7.7) \u2013 Adjustments in respect of prior periods 1.9 (1.4) Deferred tax \u2013 Before impact of tax rate changes 61.9 (7.3) \u2013 Adjustments in respect of prior periods (0.1) (1.0) \u2013 Effect of changes in tax rate 6.7 (49.0) Total tax credit/(charge) 4.4 (66.4)
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Tax credited/(charged) on items recognised in other comprehensive income:
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme 6 .1 (7.2)
Deferred tax on share-based payments \u2013 5.4
Deferred tax on cash \ufb02ow hedges (5.6) 41.2
Deferred tax on cost of hedging 2.2 (7.7)
Total tax credit 2.7 31.7
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Tax credited/(charged) on items released directly from equity:
Deferred tax on cost of hedging 7.2 5.4
Deferred tax on cash \ufb02ow hedges 4.8 ( 7.5)
Deferred tax on share-based payments 7.4 \u2013
Total tax credit/(charge) 19.4 (2.1)
UK corporation tax is the main income tax for the Group and is calculated at 19% (2021: 19%) of the assessable pro\ufb01t or loss
for the year.
Due to the Group\u2019s overseas operations, the US income tax rate of 21% (2021: 21%) and the Canadian corporate income tax rate
of 27% (2021: 27%) are also relevant to the Group\u2019s tax charge.
The tax rate for the full year, before the impact of changes in tax rates, is lower than the standard corporation tax rate applicable in the
UK, principally due to the tax bene\ufb01t arising from UK Patent Box claims and the UK super-deduction introduced in the Finance Act
2021, which allows for a 130% in-year deduction for tax purposes against the cost of qualifying capital expenditure on plant and
machinery incurred between 1 April 2021 and 31 March 2023.
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% to pro\ufb01ts derived from utilisation of the patented technology.
The Finance Act 2021 also contained legislation to increase the main rate of UK corporation tax from 19% to 25% with effect from
1 April 2023. The impact of this rate increase is a net \u00a36.7 million deferred tax credit through Total results in the Consolidated income
statement (2021: \u00a349.0 million charge).
The Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows:
Year ended 31 December 2022 Year ended 31 December 2021
Adjusted
results
\u00a3m
Exceptional
items
and certain
remeasurements
\u00a3m
Total
results
\u00a3m
Adjusted
results
\u00a3m
Exceptional
items
and certain
remeasurements
\u00a3m
Total
results
\u00a3m
Pro\ufb01t/(loss) before tax from
continuing operations 405.4 ( 327.3) 78.1 100.5 21.0 121.5
Pro\ufb01t/(loss) before tax multiplied by the rate of
corporation tax in the UK of 19% (2021: 19%) 7 7. 0 (62.2) 14.8 19.2 4.0 23.2
Effects of:
Adjustments in respect of prior periods (1.8) \u2013 (1.8) 2.4 \u2013 2.4
Expenses not deductible for tax purposes 4.5 \u2013 4.5 2.8 1.7 4.5
Impact of tax rate change 2.9 (9.6) (6.7) 0.4 48.6 49.0
Difference in overseas tax rates (1.3) \u2013 (1.3) (1.1) \u2013 (1.1)
Patent Box bene\ufb01t (9.6) \u2013 (9.6) (8.0) \u2013 (8.0)
Tax effect of RDEC credit (0.8) \u2013 (0.8) (0.9) \u2013 (0.9)
UK super-deduction (3.5) \u2013 (3.5) (2.7) \u2013 (2.7)
Total tax charge/(credit) 67.4 (71.8) (4.4) 12.1 54.3 66.4
The movements in deferred tax assets and liabilities during each year are shown below. Financial instruments \u00a3m Accelerated capital allowances \u00a3m Non-trade losses \u00a3m Intangible assets \u00a3m Trade losses \u00a3m Other liabilities \u00a3m Other assets \u00a3m Total \u00a3m At 1 January 2021 13.0 (183.0) 2.3 (15.7) 33.5 (23.3) 16.5 (156.7) (Charged)/credited to the income statement (5.6) (64.4) \u2013 (3.5) 11.7 5.4 (0.9) (57. 3) Charged to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.2) (7.2) Credited to other comprehensive income in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 5.4 Credited to other comprehensive income in respect of cash \ufb02ow hedges 41.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 41.2 Charged to other comprehensive income in respect of cost of hedging ( 7.7) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.7) Charged to equity in respect of cash flow hedges (7.5) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.5) Credited to equity in respect of cost of hedging 5.4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 Impact of acquisition \u2013 (44.7) \u2013 (0.6) 14.4 (0.8) 19.6 (12.1) Effect of changes in foreign exchange rates \u2013 (0.5) \u2013 (0.1) 0.4 \u2013 0.1 (0.1) At 1 January 2022 38.8 (292.6) 2.3 (19.9) 60.0 (18.7) 33.5 (196.6) Credited/(charged)to the income statement 77.3 (24.9) (1.8) 7.0 15.7 (20.7) 16.0 68.6 Credited to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 6 .1 \u2013 6.1 Charged to other comprehensive income in respect of cash \ufb02ow hedges ( 5.6) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (5.6) Credited to other comprehensive income in respect of cost of hedging 2.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 2.2 Credited to equity in respect of cash flow hedges 4.8 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4.8 Credited to equity in respect of cost of hedging 7. 2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7. 2 Credited to equity in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7.4 7.4 Impact of acquisition \u2013 (0.8) \u2013 \u2013 \u2013 \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates \u2013 (3.0) \u2013 \u2013 4.4 \u2013 1.0 2.4 At 31 December 2022 124.7 (321.3) 0.5 (12.9) 8 0 .1 (33.3) 57.9 (104.3) Deferred tax balances (after offset) for \ufb01nancial reporting purposes: Net Canadian deferred tax asset at 31 December 2022 \u2013 (49.6) \u2013 0.2 27.1 (1.0) 32.7 9.4 Net US deferred tax asset at 31 December 2022 \u2013 (30.6) \u2013 \u2013 53.0 \u2013 5.5 27.9 Net UK deferred tax liability at 31 December 2022 124.7 (241.1) 0.5 (13.1) \u2013 (32.3) 19.7 (141.6) Net Canadian deferred tax asset at 31 December 2021 \u2013 ( 3 8 .1) \u2013 (0.2) 17.5 (0.4) 26.6 5.4 Net US deferred tax asset at 31 December 2021 \u2013 (27.6) \u2013 \u2013 42.5 (0.3) 8.7 23.3 Net UK deferred tax liability at 31 December 2021 38.8 (226.9) 2.3 (19.7) \u2013 (18.0) (1.8) (225.3) Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so, otherwise they are shown separately in the Consolidated balance sheet. Within the above trade losses deferred tax asset of \u00a380.1 million (2021: \u00a360.0 million) there is \u00a353.0 million (2021: \u00a342.5 million) in relation to losses in the US Pellet Production business. The remaining \u00a327.1 million relates to losses of the Canadian Pellet Production business (2021: \u00a317.5 million). The future expected reversal of accelerated capital allowances and other timing differences, coupled with the pro\ufb01tability (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 suf\ufb01cient pro\ufb01ts in the short to medium term against which to utilise the deferred tax assets. The estimates used when assessing the future pro\ufb01tability of the US and Canadian businesses have been approved by the Board and are consistent with estimates used in the going concern assessment and in the Viability statement on page 75. As at 31 December 2022 the Group held \u00a379.2 million (2021: \u00a379.2 million) of 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. 2.7 Alternative performance measures The APMs glossary to these Consolidated \ufb01nancial statements on page 287 provides details of all APMs used, each APM\u2019s closest IFRS equivalent, the reason why the APM is used by the Group and a de\ufb01nition of how each APM is calculated. The Group presents Adjusted results in the Consolidated income statement. The Directors believe that this approach is useful as it provides a clear and consistent view of underlying trading performance. Certain remeasurements and exceptional items are excluded from Adjusted results and presented in a separate column. The Group believes that this presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way Executive management and the Board assess the performance of the business. The Group has a policy and framework for the determination of transactions to present as exceptional. All transactions presented as exceptional are approved by the Audit Committee. See the Audit Committee Report on page 116 for further details. In these Consolidated \ufb01nancial statements, the following transactions have been designated as exceptional items and presented separately: \u2022 Impairment charges incurred on the application of the Group\u2019s new accounting policy for SaaS costs, consistent with the IFRIC agenda decision (see Change in accounting policy section in the Basis of preparation on page 177) (2022, All segments), and on costs associated with the Customers billing system (2022, Customers). See note 5.2 for further information. \u2022 Costs associated with the acquisition and integration of Pinnacle (2021, Pellet Production). \u2022 Costs relating to the restructuring of the Customers business (2021, Customers). \u2022 Operating expenditure which was incurred as a direct result of the decision to cease commercial coal generation (2021, Generation). \u2022 Impact of UK tax rate change on deferred tax balances (2022 and 2021, Generation and Customers). See note 2.6 for further information. Certain remeasurements comprise gains or 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. The effect of excluding certain remeasurements from Adjusted results is to reflect commodity sales and purchases at contracted prices i.e. at the all-in-hedged amount paid or received in respect of the delivery of the commodity in question, and \ufb01nancial contracts in the period they are intended to hedge, to reflect the underlying trading performance of the Group in Adjusted results. Volatility in \ufb01nancial and commodity markets has continued in 2022, in part due to the conflict in Ukraine. This has resulted in signi\ufb01cant movements in the remeasurement gains and losses on certain derivative \ufb01nancial instruments which do not qualify for hedge accounting, or where hedge accounting is ineffective, as shown in the table below, principally relating to gas, certain foreign currency contracts, inflation and oil. Further detail on the Group\u2019s derivative \ufb01nancial instruments is provided in Section 7. Year ended 31 December 2022 \u00a3m 2021 (1) \u00a3m Exceptional items: Inventory provision as a result of coal closure \u2013 (0.3) Acquisition costs \u2013 ( 7.9) Restructuring costs \u2013 (5.2) Integration costs \u2013 (4 .1) Coal closure costs \u2013 (4.8) Impairment of non-current assets (24.9) \u2013 Exceptional items included within operating pro\ufb01t and pro\ufb01t before tax (24.9) (22.3) Tax on exceptional items 4.7 2.5 Impact of tax rate change (9.8) (50.2) Exceptional items after tax (30.0) (70.0) Certain remeasurements: Net fair value remeasurements on derivative contracts included in revenue (441.4) (7 7.0) Net remeasurements realised on maturity of derivative contracts included in revenue 107.7 (8.9) Net hedge ineffectiveness reclassi\ufb01ed to pro\ufb01t or loss included in revenue (50.2) \u2013 Net fair value remeasurements on derivative contracts included in cost of sales 32.6 36.6 Net remeasurements realised on maturity of derivative contracts included in cost of sales 53.1 98.0 Certain remeasurements included within operating pro\ufb01t (298.2) 48.7 Net remeasurements on maturity of derivative contracts included in interest payable and similar charges (0.4) (0.3) Net fair value remeasurements on derivative contracts included in foreign exchange gains/(losses) (3.8) (5.1) Certain remeasurements included in pro\ufb01t before tax (302.4) 43.3 Tax on certain remeasurements 57.5 (8.2) Impact of tax rate change 19.4 1.6 Certain remeasurements after tax (225.5) 36.7 Reconciliation of pro\ufb01t after tax from continuing operations: Adjusted pro\ufb01t after tax 338.0 88.4 Exceptional items after tax (30.0) (70.0) Certain remeasurements after tax (225.5) 36.7 Total pro\ufb01t after tax 82.5 55.1 (1) Comparative amounts for the year ended 31 December 2021 have been re-presented to split out the impact of tax rate change between exceptionals and certain remeasurements.
For each item designated as exceptional or as a certain remeasurement, the table below summarises the impact of the item
on the Adjusted pro\ufb01t after tax and Adjusted basic EPS from continuing operations and the total cash flow from continuing and
discontinued operations.
Year ended 31 December 2022
Revenue
\u00a3m
Gross pro\ufb01t
\u00a3m
Operating
pro\ufb01t
\u00a3m
Pro\ufb01t
before tax
\u00a3m
Tax credit/
(charge)
\u00a3m
Pro\ufb01t/(loss)
for the
period
\u00a3m
Basic
earnings/
(loss)
per
share
Pence
Net cash
from
operating
activities
\u00a3m
Total results IFRS measure 7,7 75.3 1,023.3 146.3 7 8 .1 4.4 82.5 21.3 207.7
Certain remeasurements:
Net fair value remeasurement on derivative
contracts 383.9 298.2 298.2 302.4 (57.5) 244.9 61.2 \u2013
Impact of tax rate change \u2013 \u2013 \u2013 \u2013 (19.4) (19.4) (4.8) \u2013
Exceptional items:
Impairment of non-current assets \u2013 \u2013 24.9 24.9 (4.7) 20.2 5.0 \u2013
Impact of tax rate change \u2013 \u2013 \u2013 \u2013 9.8 9.8 2.4 \u2013
Total 383.9 298.2 32 3.1 327.3 (71.8) 255.5 63.8 \u2013
Adjusted results totals 8,159.2 1,321.5 469.4 405.4 (67.4) 338.0 8 5.1 2 07.7
Year ended 31 December 2021
(1)
Revenue
\u00a3m
Gross pro\ufb01t/
(loss)
\u00a3m
Operating
pro\ufb01t/(loss)
\u00a3m
Pro\ufb01t/(loss)
before tax
\u00a3m
Tax (charge)/
credit
\u00a3m
Pro\ufb01t/(loss)
for the
period
\u00a3m
Basic
earnings/
(loss) per
share
Pence
Net cash
from
operating
activities
\u00a3m
Total results IFRS measure 5,088.0 891.2 196.5 121.5 (66.4) 55.1 13.9 306.5
Certain remeasurements:
Net fair value remeasurement on derivative
contracts 85.9 (48.7) (48.7) (43.3) 8.2 ( 35.1) (8.8) \u2013
Impact of tax rate change \u2013 \u2013 \u2013 \u2013 (1.6) (1.6) (0.4) \u2013
Exceptional items:
Inventory provision as a result of coal closure \u2013 0.3 0.3 0.3 (0.1) 0.2 0.1 \u2013
Acquisition costs \u2013 \u2013 7.9 7.9 \u2013 7.9 1.8 7.9
Restructuring costs \u2013 \u2013 5.2 5.2 (0.8) 4.4 1.1 4.4
Integration costs \u2013 \u2013 4.1 4 .1 (0.8) 3.3 0.8 3.3
Coal closure costs \u2013 \u2013 4.8 4.8 (0.8) 4.0 1.2 \u2013
Impact of tax rate change \u2013 \u2013 \u2013 \u2013 50.2 50.2 12.6 \u2013
Total 85.9 (48.4) (26.4) (21.0) 54.3 33.3 8.4 15.6
Adjusted results totals 5,173.9 842.8 170.1 100.5 (12.1) 88.4 22.3 322.1
(1)
Comparative amounts for the year ended 31 December 2021 have been re-presented to split out the impact of tax rate change between exceptionals
and certain remeasurements.
Adjusted EBITDA from continuing and discontinued operations is a key measure of performance for the Group. A reconciliation from Adjusted operating pro\ufb01t from continuing operations as per the Consolidated income statement is shown below: Year ended 31 December 2022 Attributable to Owners of the Parent Company \u00a3m NCI \u00a3m Total \u00a3m Adjusted operating pro\ufb01t/(loss) 472.0 (2.6) 469.4 Depreciation and amortisation 237. 2 2.2 239.4 Impairment losses on non-current assets 16.6 \u2013 16.6 Other losses 5.7 0.1 5.8 Income from associates (0.5) \u2013 (0.5) Adjusted EBITDA 731.0 (0.3) 730.7 Year ended 31 December 2021 Attributable to Owners of the Parent Company \u00a3m NCI \u00a3m Total \u00a3m Adjusted operating pro\ufb01t 170.6 (0.5) 170 .1 Depreciation and amortisation 198.3 0.6 198.9 Other losses 9.3 0 .1 9.4 Income from associates (0.3) \u2013 (0.3) Adjusted EBITDA from continuing operations 37 7.9 0.2 378 .1 Adjusted EBITDA from discontinued operations 20.3 \u2013 20.3 Adjusted EBITDA from continuing and discontinued operations 398.2 0.2 398.4 Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Total \u00a3m Segment Adjusted EBITDA: Continuing operations 133.7 695.5 25.8 (113.6) (10.4) 731.0 Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Total \u00a3m Segment Adjusted EBITDA: Continuing operations 85.7 351.5 5.7 (70.9) 5.9 37 7.9 Discontinued operations \u2013 20.3 \u2013 \u2013 \u2013 20.3 Total 85.7 371.8 5.7 (70.9) 5.9 398.2 Net debt Net debt is calculated by taking the Group\u2019s borrowings (note 4.2), adjusting for the impact of associated hedging instruments, and subtracting cash and cash equivalents (note 4.1). The Group has entered into cross-currency interest rate swaps, \ufb01xing the sterling value of the principal repayments and interest in respect of the Group\u2019s US dollar (USD) and euro (EUR) denominated debt (see note 4.2). USD and EUR balances are translated at the hedged rate, rather than the rate prevailing at the reporting date, which impacts the carrying amount of the Group\u2019s borrowings. Net debt excludes the share of borrowings and cash and cash equivalents attributable to NCI. See the APMs glossary and the APMs section within the Basis of preparation for further details on the calculation of Net debt. As at 31 December 2022 \u00a3m 2021 \u00a3m Borrowings (1,440.9) (1,361.0) Cash and cash equivalents 238.0 317.4 Net cash and borrowings (1,202.9) (1,043.6) NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries (0.7) \u2013 Net debt excluding the impact of hedging instruments (1,203.6) (1,043.6) Impact of hedging instruments (2.4) (64.4) Net debt (1,206.0) (1,10 8 .0) Collateral posted/(received) 234.0 (172.8) Net debt excluding collateral (972.0) (1,280.8) The table below reconciles Net debt in terms of changes in these balances across the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Net debt at 1 January (1,10 8 .0) (8 19.1) (Decrease)/increase in cash and cash equivalents (85.6) 27.3 Increase in borrowings (8.6) (310.2) Effect of changes in foreign exchange rates (65.8) 15.2 Movement in the impact of hedging instruments 62.0 (21.2) Net debt at 31 December (1,206.0) (1,10 8 .0) Borrowings include listed bonds, bank debt and RCFs (to the extent drawn in cash), net of any deferred \ufb01nance costs. Borrowings do not include other \ufb01nancial liabilities such as lease liabilities and trade and other payables (including working capital facilities as described in note 3.7). The Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This reflects the nature of the contracts included in this balance which, prior to the application of IFRS 16, were predominantly not held on the Consolidated balance sheet and instead disclosed as operating commitments. The exclusion of lease liabilities from the calculation of Net debt is also consistent with the Group\u2019s covenant reporting requirements. The Group does not include balances related to supply chain \ufb01nancing or factoring in the de\ufb01nition of Net debt. These facilities do not increase the Group\u2019s working capital cycle beyond the Group\u2019s standard payment terms and are only short-term balances. Therefore, the balances do not meet the Group\u2019s de\ufb01nition of borrowings and so are excluded from Net debt. A reconciliation of the change in borrowings during the year is set out in the table on 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 2022 2021 Adjusted EBITDA (continuing and discontinued operations) (\u00a3m) 731.0 398.2 Net debt (\u00a3m) (1,206.0) (1,10 8 .0) Net debt excluding collateral (\u00a3m) (972.0) (1,280.8) Net debt to Adjusted EBITDA ratio 1.6 2.8 Net debt (excluding collateral) to Adjusted EBITDA ratio 1.3 3.2
Cash and committed facilities
The below table reconciles the Group\u2019s available cash and committed facilities:
As at 31 December
2022
\u00a3m
2021
\u00a3m
Cash and cash equivalents (note 4.1) 238.0 317.4
RCF available but not utilised
(1)
26 0.1 231.4
Liquidity facility available but not utilised 200.0 \u2013
Total cash and committed facilities 698 .1 548.8
(1) The Group\u2019s available balance on the RCF facility (includes \u00a3300 million and C$10 million RCF, see note 4.2) is reduced by letters of credit drawn under the RCF.
At 31 December 2022 \u00a346.0 million letters of credit were drawn (2021: \u00a374.4 million).
Further commentary on total cash and committed facilities is contained within the Financial review starting on page 20.
2.8 Earnings per share
Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to each ordinary share in issue.
Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the Parent Company (pro\ufb01t or loss after tax in
accordance with IFRS excluding amounts attributable to NCI) by the weighted average number of ordinary shares that were in issue
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 contingency period (such as those to be
issued under employee share schemes \u2013 see note 6.2), were exercised and treated as ordinary shares as at the reporting date.
Repurchased shares of 13.8 million (2021: 13.8 million) held in the Treasury shares reserve (see note 4.4) are not included in the
weighted average calculation of shares. 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
2022 2021
Earnings attributable to equity holders of the Parent Company for the purposes of basic and diluted
earnings per share (\u00a3m), made up of: 85.1 79.7
Net result from continuing operations 85.1 55.6
Net result from discontinued operations \u2013 24 .1
Number of shares (millions):
Weighted average number of ordinary shares for the purposes of basic earnings per share 400.4 398.4
Effect of dilutive potential ordinary shares under share plans 14.0 14.2
Weighted average number of ordinary shares for the purposes of diluted earnings per share 414.4 412.6
Year ended 31 December
2022 2021
Earnings per share attributable to the owners of the Parent Company Adjusted results Total results Adjusted results Total results
Earnings \u2013 pro\ufb01t after tax (\u00a3m) 340.6 85.1 105.6 79.7
Earnings per share \u2013 basic (pence) 85.1 21.3 26.5 20.0
Earnings per share \u2013 diluted (pence) 82.2 20.5 25.6 19.3
Year ended 31 December
2022 2021
Earnings per share from continuing operations attributable to the
owners of the Parent Company
Adjusted results Total results Adjusted results Total results
Earnings \u2013 pro\ufb01t after tax (\u00a3m) 340.6 85.1 88.9 55.6
Earnings per share \u2013 basic (pence) 85.1 21.3 22.3 13.9
Earnings per share \u2013 diluted (pence) 82.2 20.5 21.5 13.5
There were no discontinued operations in the year. The Total pro\ufb01t after tax from discontinued operations in 2021 of \u00a324.1 million,
resulted in Total basic EPS of 6.1 pence and Total diluted EPS of 5.8 pence. Application of the same calculation to Adjusted pro\ufb01t after
tax from discontinued operations in 2021 of \u00a316.7 million, resulted in Adjusted basic EPS of 4.2 pence and Adjusted diluted EPS of
4.1 pence.
2.9 Dividends
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
Amounts recognised as distributions to equity holders in the year (based on the number of shares
in issue at the record date):
Interim dividend for the year ended 31 December 2022 of 8.4 pence per share paid on 7 October 2022
(2021: 7.5 pence per share paid on 8 October 2021) 33.7 29.9
Final dividend for the year ended 31 December 2021 of 11.3 pence per share paid on 13 May 2022
(2020: 10.3 pence per share paid on 14 May 2021) 45.2 41.0
Total distributions 78.9 70.9
At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a resolution is passed to approve
payment of a \ufb01nal dividend for the year ended 31 December 2022 of 1 2.6 pence per share (equivalent to approximately \u00a350 million)
payable on or before 19 May 2023. The \ufb01nal dividend has not been included as a liability as at 31 December 2022. This would bring
total dividends payable in respect of the 2022 \ufb01nancial year to approximately \u00a384 million.
The Group has a long-standing capital allocation policy. This policy is based on a commitment to robust \ufb01nancial metrics that underpin
the Group\u2019s strong credit rating: investment in the core business; paying a sustainable and growing dividend; and returning surplus
capital to shareholders. The Board is con\ufb01dent that the dividend is sustainable and expects it to grow as the implementation of the
Group\u2019s 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\u2019s commodity-linked
revenue streams.
In future years, if there is a build-up of capital in excess of the Group\u2019s investment needs, the Board will consider the most appropriate
mechanism to return this to shareholders.
Consideration of sustainability, including a link to the Group\u2019s dividend, can be found in the Market context section on pages 4 and 5.
2.10 Retained pro\ufb01ts
Retained pro\ufb01ts are a component of equity reserves. The overall balance reflects the total pro\ufb01ts the Group has generated over its
lifetime that are attributable to the equity holders of the Parent Company, reduced by the amount of that pro\ufb01t distributed to
shareholders. The table below sets out the movements in retained pro\ufb01ts during the year:
Year ended 31 December
2022
\u00a3m
2021
\u00a3m
At 1 January 198.3 153.4
Pro\ufb01t for the year 85.1 79.7
Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3) (24.4) 30.7
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6) 6 .1 (7.2)
Deferred tax on share-based payments (note 2.6) 7.4 5.4
Equity dividends paid (note 2.9) (78.9) (70.9)
Movements in equity associated with share-based payments (note 6.2) 9.5 7.4
Acquisition of NCI without a change in control (note 4.5) (9.3) (0.2)
At 31 December 193.8 198.3
Distributable reserves
The capacity of the Group to make dividend payments is primarily determined by the availability of retained distributable pro\ufb01ts and
cash resources.
The Parent Company\u2019s \ufb01nancial statements are set out on pages 277 to 283 of this Annual report, disclose the Parent Company\u2019s
distributable reserves of \u00a3306.3 million. Suf\ufb01cient reserves are available across the Group as a whole to make future distributions in
accordance with the Group\u2019s dividend policy for the foreseeable future.
The majority of the Group\u2019s 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
that the Parent Company has access to these reserves.
The immediate cash resources of the Group of \u00a3238.0 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\u2019s \ufb01nancing facilities (see note 4.2) place customary conditions on the amount of dividend payments to 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 the Viability statement on page 75 and note 4.2 for further details on the covenants relating to the \ufb01nancing facilities.
", "dimensions": { "concept": "draxgroupplc:DisclosureOfFinancialPerformance", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-599": { "value": "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. The Group is organised into three businesses, with a dedicated management team for each. Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s positions. The Board reviews the performance of each of these businesses separately, and each represents a reportable segment: \u2022 Pellet Production: production and subsequent sale of biomass pellets at the Group\u2019s processing facilities in North America; \u2022 Generation: power generation activities in the UK; and \u2022 Customers: supply of electricity and gas to non-domestic customers in the UK. Operating costs are allocated to the reportable segments to the extent they are directly attributable to the activities of that segment. Central corporate function costs that are not directly attributable to the activities of a reportable segment are included within Innovation, capital projects and other costs. Innovation, capital projects and other costs is not a reportable segment as it does not earn revenues. When de\ufb01ning gross pro\ufb01t within the Consolidated \ufb01nancial statements, the Group follows the principal trading considerations applied by its Pellet Production, Generation and Customers businesses when making a sale. In respect of the Pellet Production business, this reflects the direct costs of production, being \ufb01bre, fuel and drying costs, direct freight and port costs, or third-party pellet purchases. In respect of Generation, this reflects the direct costs of the commodities to generate the power and the relevant grid connection costs that arise. In respect of Customers, 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 in inventories. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-602": { "value": "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. The Group is organised into three businesses, with a dedicated management team for each. Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s positions. The Board reviews the performance of each of these businesses separately, and each represents a reportable segment: \u2022 Pellet Production: production and subsequent sale of biomass pellets at the Group\u2019s processing facilities in North America; \u2022 Generation: power generation activities in the UK; and \u2022 Customers: supply of electricity and gas to non-domestic customers in the UK. Operating costs are allocated to the reportable segments to the extent they are directly attributable to the activities of that segment. Central corporate function costs that are not directly attributable to the activities of a reportable segment are included within Innovation, capital projects and other costs. Innovation, capital projects and other costs is not a reportable segment as it does not earn revenues. When de\ufb01ning gross pro\ufb01t within the Consolidated \ufb01nancial statements, the Group follows the principal trading considerations applied by its Pellet Production, Generation and Customers businesses when making a sale. In respect of the Pellet Production business, this reflects the direct costs of production, being \ufb01bre, fuel and drying costs, direct freight and port costs, or third-party pellet purchases. In respect of Generation, this reflects the direct costs of the commodities to generate the power and the relevant grid connection costs that arise. In respect of Customers, 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 in inventories. Seasonality of trading The primary activities of the Group are affected by seasonality. Demand in the UK for electricity and gas is typically higher in the winter period (October to March) when temperatures are lower, and thus drives higher prices and higher generation. Conversely, demand is typically lower in the summer months (April to September) when temperatures are milder, and therefore prices are generally lower. This trend is experienced by all of the Group\u2019s UK-based businesses, as they operate within the UK electricity and gas markets. It is most notable within the Generation business due to its scale and the flexible operation of its thermal generation plant. The Pellet Production business incurs certain costs that are higher in winter months due to the impact of weather conditions, such as \ufb01bre drying costs and heating costs. Production volumes and margins are typically higher in the summer months. The business is protected from demand fluctuations as a result of 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\u2019s performance by reportable segment for the year ended 31 December 2022. 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 adjustment required for unrealised pro\ufb01ts. The \ufb01nancial information in these tables is comprised solely of results from continuing operations. There were no amounts attributable to discontinued operations in the year ended 31 December 2022. Adjusted EBITDA by reportable segment is presented in note 2.7. Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 377.2 3,638.9 4,143.1 \u2013 \u2013 8,159. 2 (383.9) 7,7 75.3 Inter-segment sales 425.4 3,719.3 \u2013 \u2013 (4,14 4 .7 ) \u2013 \u2013 \u2013 Total revenue 802.6 7,358.2 4 ,143.1 \u2013 (4 ,14 4.7 ) 8 ,159. 2 (383.9) 7,775.3 Cost of sales (501.9) (6,479.2) (3,985.0) \u2013 4,128 . 4 (6, 837.7 ) 85.7 (6,752.0) Segment gross pro\ufb01t/(loss) 300.7 879.0 158 .1 \u2013 (16.3) 1,321.5 (298.2) 1,023.3 Operating and administrative expenses (167.3) (183.5) (84.3) (113.6) 5.9 (542.8) \u2013 (542.8) Impairment losses on \ufb01nancial assets \u2013 \u2013 (48.0) \u2013 \u2013 (48.0) \u2013 (48.0) Depreciation and amortisation (119.9) (98.6) (25.5) (3.3) 7.9 (239.4) \u2013 (239.4) Impairment of non-current assets \u2013 (16.6) \u2013 \u2013 \u2013 (16.6) (24.9) (41.5) Other losses (2.0) (3.8) \u2013 \u2013 \u2013 (5.8) \u2013 (5.8) Income from associates 0.5 \u2013 \u2013 \u2013 \u2013 0.5 \u2013 0.5 Operating pro\ufb01t/(loss) 12.0 576.5 0.3 (116.9) (2.5) 469.4 ( 323.1) 146.3 Further information on the main revenue streams of each segment is presented in note 2.2. The impact of exceptional items and certain remeasurements is set out in note 2.7. The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2021: Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 163.1 2,651.2 2,359.6 \u2013 \u2013 5,173.9 (85.9) 5,088.0 Inter-segment sales 286.7 2 , 031.1 \u2013 \u2013 (2,317.8) \u2013 \u2013 \u2013 Total revenue 449.8 4,682.3 2,359.6 \u2013 (2 ,317. 8) 5,173.9 (85.9) 5,088.0 Cost of sales (267.0) (4 ,131. 9) (2,255.9) \u2013 2,323.7 (4, 331.1) 134.3 (4 ,19 6 . 8) Segment gross pro\ufb01t 182.8 550.4 103.7 \u2013 5.9 842.8 48.4 891.2 Operating and administrative expenses (96.9) (198.9) (81.7) (70.9) \u2013 (448.4) (21.5) (469.9) Impairment losses on \ufb01nancial assets \u2013 \u2013 (16.3) \u2013 \u2013 (16.3) \u2013 (16.3) Depreciation and amortisation (61.4) (103.4) (30.5) (3.6) \u2013 (198.9) (0.5) (199.4) Other losses (1.0) (7.8) (0.4) (0.2) \u2013 (9.4) \u2013 (9.4) Income from associates 0.3 \u2013 \u2013 \u2013 \u2013 0.3 \u2013 0.3 Operating pro\ufb01t/(loss) 23.8 240.3 (25.2) (74.7) 5.9 170 .1 26.4 196.5 Adjusted operating pro\ufb01t from discontinued operations for the year ended 31 December 2021 was \u00a320.3 million. This amount was attributable entirely to the Generation segment and is described in further detail in note 5.4. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements. Capital expenditure by reportable segment Assets and working capital are monitored on a consolidated basis; however, capital expenditure is monitored by reportable segment. Year ended 31 December Additions to intangible assets Additions to property, plant and equipment 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Pellet Production \u2013 8.2 66.0 108.6 Generation 2.8 3.4 171.5 103.2 Customers 2.3 8.9 0.3 0 .1 Innovation, capital projects and other 4.3 1.8 8.2 3.6 Total 9.4 22.3 246.0 215.5 Total cash outflows in relation to capital expenditure during the year for continuing operations were \u00a3174.7 million (2021: \u00a3209.7 million). In 2022, the cash outflow in relation to property, plant and equipment is lower than the cost capitalised in property, plant and equipment (see note 3.1) predominantly as a result of \u00a364.6 million (2021: \u00a3nil) of deferred letters of credits issued in relation to the construction of the OCGT assets. Intra-group trading Intra-group transactions are carried out at management\u2019s best estimate of arm\u2019s-length, commercial terms that, where possible, equate to market prices. During 2022, the Pellet Production segment sold biomass pellets and provided associated services with a total value of \u00a3425.4 million (2021: \u00a3286.7 million) to the Generation segment and the Generation segment sold electricity, gas and renewable energy certi\ufb01cates with a total value of \u00a33,719.3 million (2021: \u00a32,031.1 million) to the Customers segment. The impact of all intra-group transactions, including any unrealised pro\ufb01t arising, is eliminated on consolidation. Major customers There was no individual customer, in either the current or previous \ufb01nancial year, that represented 10% or more of total revenue. Geographical analysis of revenue and non-current assets The geographic information analyses the Group\u2019s revenue and non-current assets by the entity\u2019s 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\u2019s revenue and non-current assets for the Generation and Customers segments are all UK based. The Group\u2019s Pellet Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s non-current assets are located in North America, in both Canada and the US. Revenue from continuing operations (based on location of customer) 31 December 2022 \u00a3m 31 December 2021 \u00a3m North America (Canada and US) 10.6 11.5 Europe 27.6 39.1 Asia 275.4 93.0 UK 7,4 61.7 4,944.4 Total 7,775. 3 5,088.0 Non-current assets (1) (based on asset\u2019s location) 31 December 2022 \u00a3m 31 December 2021 \u00a3m Canada 542.6 513.6 US 502.6 473.8 UK 2,054.5 2,053.5 Total 3,099.7 3,040.9 (1) Non-current assets comprise goodwill, intangible assets, property, plant and equipment, right-of-use assets and investments. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-636": { "value": "When de\ufb01ning gross pro\ufb01t within the Consolidated \ufb01nancial statements, the Group follows the principal trading considerations applied by its Pellet Production, Generation and Customers businesses when making a sale. In respect of the Pellet Production business, this reflects the direct costs of production, being \ufb01bre, fuel and drying costs, direct freight and port costs, or third-party pellet purchases. In respect of Generation, this reflects the direct costs of the commodities to generate the power and the relevant grid connection costs that arise. In respect of Customers, 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 in inventories. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCostOfSalesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-703": { "value": "Segment revenues and results The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2022. 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 adjustment required for unrealised pro\ufb01ts. The \ufb01nancial information in these tables is comprised solely of results from continuing operations. There were no amounts attributable to discontinued operations in the year ended 31 December 2022. Adjusted EBITDA by reportable segment is presented in note 2.7. Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 377.2 3,638.9 4,143.1 \u2013 \u2013 8,159. 2 (383.9) 7,7 75.3 Inter-segment sales 425.4 3,719.3 \u2013 \u2013 (4,14 4 .7 ) \u2013 \u2013 \u2013 Total revenue 802.6 7,358.2 4 ,143.1 \u2013 (4 ,14 4.7 ) 8 ,159. 2 (383.9) 7,775.3 Cost of sales (501.9) (6,479.2) (3,985.0) \u2013 4,128 . 4 (6, 837.7 ) 85.7 (6,752.0) Segment gross pro\ufb01t/(loss) 300.7 879.0 158 .1 \u2013 (16.3) 1,321.5 (298.2) 1,023.3 Operating and administrative expenses (167.3) (183.5) (84.3) (113.6) 5.9 (542.8) \u2013 (542.8) Impairment losses on \ufb01nancial assets \u2013 \u2013 (48.0) \u2013 \u2013 (48.0) \u2013 (48.0) Depreciation and amortisation (119.9) (98.6) (25.5) (3.3) 7.9 (239.4) \u2013 (239.4) Impairment of non-current assets \u2013 (16.6) \u2013 \u2013 \u2013 (16.6) (24.9) (41.5) Other losses (2.0) (3.8) \u2013 \u2013 \u2013 (5.8) \u2013 (5.8) Income from associates 0.5 \u2013 \u2013 \u2013 \u2013 0.5 \u2013 0.5 Operating pro\ufb01t/(loss) 12.0 576.5 0.3 (116.9) (2.5) 469.4 ( 323.1) 146.3 Further information on the main revenue streams of each segment is presented in note 2.2. The impact of exceptional items and certain remeasurements is set out in note 2.7. The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2021: Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 163.1 2,651.2 2,359.6 \u2013 \u2013 5,173.9 (85.9) 5,088.0 Inter-segment sales 286.7 2 , 031.1 \u2013 \u2013 (2,317.8) \u2013 \u2013 \u2013 Total revenue 449.8 4,682.3 2,359.6 \u2013 (2 ,317. 8) 5,173.9 (85.9) 5,088.0 Cost of sales (267.0) (4 ,131. 9) (2,255.9) \u2013 2,323.7 (4, 331.1) 134.3 (4 ,19 6 . 8) Segment gross pro\ufb01t 182.8 550.4 103.7 \u2013 5.9 842.8 48.4 891.2 Operating and administrative expenses (96.9) (198.9) (81.7) (70.9) \u2013 (448.4) (21.5) (469.9) Impairment losses on \ufb01nancial assets \u2013 \u2013 (16.3) \u2013 \u2013 (16.3) \u2013 (16.3) Depreciation and amortisation (61.4) (103.4) (30.5) (3.6) \u2013 (198.9) (0.5) (199.4) Other losses (1.0) (7.8) (0.4) (0.2) \u2013 (9.4) \u2013 (9.4) Income from associates 0.3 \u2013 \u2013 \u2013 \u2013 0.3 \u2013 0.3 Operating pro\ufb01t/(loss) 23.8 240.3 (25.2) (74.7) 5.9 170 .1 26.4 196.5 Adjusted operating pro\ufb01t from discontinued operations for the year ended 31 December 2021 was \u00a320.3 million. This amount was attributable entirely to the Generation segment and is described in further detail in note 5.4. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements. 2.2 Revenue The majority of the Group\u2019s revenue is within the scope of IFRS 15. The other sources of the Group\u2019s revenue outside the scope of IFRS 15 comprise certain remeasurements, amounts reclassi\ufb01ed to revenue for gains and losses on UK CPI inflation swaps and income from the Government\u2019s Energy Bill Relief Scheme (EBRS). See note 2.7 for further details of certain remeasurements and note 7.2 for inflation risk management. Year ended 31 December 2022 Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue from contracts with customers 7,882.5 \u2013 7,882.5 5,170 .3 \u2013 5,170 . 3 Other revenue 276.7 (383.9) (107.2) 3.6 (85.9) (82.3) Total revenue 8 ,159. 2 (383.9) 7,775.3 5,173 .9 (85.9) 5,088.0 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 speci\ufb01ed good or service prior to the transfer to the customer. A summary of the Group\u2019s 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 below. Further details on signi\ufb01cant elements of revenue, principally how the Contract for Difference (CfD) and Renewable Obligation (RO) schemes operate and the related accounting, are provided below the table. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties Pellet sales (Pellet Production) The Group produces biomass pellets which are sold to external customers. Customers generally obtain control of the pellets at the point the pellets are loaded onto the shipping vessel for freight on board (FOB) sales. Where freight is also arranged for the customer, these sales are known as Cost, insurance and freight (CIF) sales. The freight component is considered a separate performance obligation. Invoices are raised in line with contractual terms and are usually payable within four-10 days. Revenue is recognised at the point that the pellets are loaded onto the shipping vessel. The amount of revenue recognised is based on the contracted price of the pellets. For CIF sales, revenue for the freight portion is recognised over the period the vessel sails. Electricity sales (Generation) The Group\u2019s Generation business has contracts for wholesale electricity sales. Performance obligations for these contracts are deemed to be a series of distinct goods that are substantially the same and transfer consecutively. Control is deemed to have passed to the customer at the point that the electricity has been supplied. This is measured based on energy supplied to the customer with the amount billed based on the units of electricity supplied. Invoices are raised in line with the Grid Trade Master Agreement (GTMA) contractual terms and are payable on the \ufb01fth banking day following the date of invoice. Revenues are measured based upon metered output at rates speci\ufb01ed under contract terms or prevailing market rates as applicable. These are recognised under the output method, whereby revenue is recognised based on the value transferred to the customer. Renewable certi\ufb01cate sales (Generation) Renewable Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origins (REGOs) are sold to counterparties at a point in time. ROCs sold to optimise working capital are invoiced in line with contractual terms and are usually payable within two days. Invoices for ROC sales to third parties are raised when the ROCs are transferred, typically four-\ufb01ve months following the end of the compliance period in which they were generated. Invoices are usually payable within seven days. External ROC and REGO sales are recognised at the point the relevant certi\ufb01cates are transferred to the counterparty. See below for further details. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties CfD income/payment (Generation) The Group is party to a CfD with the Low Carbon Contracts Company (LCCC), a Government- owned entity responsible for delivering elements of the Government\u2019s Electricity Market Reform Programme. Under the contract, the Group makes or receives payments in respect of electricity dispatched from a speci\ufb01c biomass- fuelled generating unit. Invoices are raised seven days following the date of supply and are settled within 10-28 days. The Group recognises the income or costs arising from the CfD in the Consolidated income statement as a component of revenue at the point the Group meets its performance obligation under the CfD contract. This is considered to be the point at which the relevant generation is delivered and the payment becomes contractually due. See below for further details. Ancillary services (Generation) Ancillary services refers to the provision of a range of system support services to National Grid. Most contracts are for the delivery of a speci\ufb01c service either continually or on an ad-hoc basis over a period of time. Invoices are raised and subsequently settled in line with National Grid Company Ancillary Services settlement calendar, typically monthly. Revenue is recognised by reference to the stage of completion of the contractual performance obligations, which are calculated by reference to the amount of the contract term that has elapsed. Depending on contract terms, this approach may require judgement in estimating probable future outcomes. Other income (All segments) Other income is derived from the sale of goods (for example, by-products from electricity generation such as ash and gypsum) or the provision of services. The customer obtains control typically at the point of delivery to their premises or upon collection. Revenue is recognised at the point the control of the goods is transferred to the customer. Electricity and gas sales (Customers) The Group\u2019s Customers business sells electricity and gas directly to business customers. Energy supplied is measured based upon metered consumption and contractual rates. The Customers business also has long-term contracts for the sale of electricity and gas, which are deemed as being satis\ufb01ed over time in line with the progress of the contracts. Invoices are raised in line with contractual terms. For small and medium-sized enterprise (SME) customers, payment is generally due within 10-14 days . For Industrial and Commercial (I&C) customers, payment is generally due between 28-90 days. Revenue is recognised on the supply of electricity or gas when a contract exists, supply has taken place, a quanti\ufb01able price has been established or can be determined and the amounts receivable are expected to be recovered. Where supply has taken place but has not yet been measured or billed, revenue is estimated based on consumption statistics and selling price estimates and is recognised as accrued income. This estimate is not considered to be a key source of estimation uncertainty because historical experience has demonstrated that these estimates are materially accurate based on the subsequent billings and settlements. Where contracts for the sale of electricity and gas are held, revenue is recognised in line with the progress of the contracts. The revenue recognised per unit of energy supplied is based on the total estimated revenue and cost inputs for \ufb01xed price contracts and contracted prices for variable price contracts. Assumptions are applied consistently but third-party costs can vary, therefore actual outcomes may vary from initial estimates. EBRS income (Customers) The UK Government introduced the EBRS, running from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period will have a discount applied for the customer under the scheme to cap their energy tariff. The Customers business is claiming this discount back from the Government. Payment is due 10 days post submission of a claim, which typically occurs monthly. The discounted price of electricity and gas supplied under the EBRS is recognised in revenue as it is supplied. The discount amount claimed back from the UK Government is recognised within revenue over the same period as the underlying discounted revenue it relates to is recognised. The revenue received from the UK Government is included within EBRS income in the table on page 192. The Group does not recognise any additional revenue from the scheme than it would have done if it were not introduced. Renewable certi\ufb01cate sales The generation and sale of renewable certi\ufb01cates, primarily ROCs and REGOs, is a key driver of the Group\u2019s \ufb01nancial performance. The Renewable 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 certi\ufb01cates issued to generators of renewable electricity which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have ful\ufb01lled 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 2022 the Group is operating in CP21. 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 CP21 is \u00a352.88 (2021: CP20 \u00a350.80). ROCs are typically procured in arm\u2019s-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 a CP. The \ufb01nancial bene\ufb01t of a ROC recognised in the Consolidated income statement at the point of generation is comprised of two parts: the expected value to be obtained in a sale transaction with a third-party supplier relating to the buy-out price, and the expected value of the recycle fund bene\ufb01t to be received at the end of the CP. During the year, the Group also made sales and related purchases of ROCs to help optimise its working capital position. External sales of ROCs in the table below includes \u00a3604.5 million of such sales (2021: \u00a3339.8 million), with a similar value reflected in cost of sales. REGOs are certi\ufb01cates 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 energy they generate. See note 3.3 for further details of ROCs and REGOs generated and sold by the Generation business and those utilised by the Customers business during the year. CfD income/payment The 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 2022 was \u00a3126.37 per MWh (2021: \u00a3118.54). 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 are in addition to amounts received from the sale of the associated power in the wholesale market. Gas sales To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Customers business. Having already ceased acquiring new gas customers, following internal processes and a regulatory driven 60-day grace period, no renewal contracts will be offered after May 2023. It is anticipated that the portfolio will reduce by over 50% by the end of 2023 and be almost entirely gone by the end of 2024. Further analysis of revenue for the year ended 31 December 2022 is provided in the table below: Year ended 31 December 2022 External \u00a3m Inter-segment \u00a3m Total \u00a3m Pellet Production Pellet sales 369.3 425.2 794.5 Other income 7.9 0.2 8 .1 Total Pellet Production 377.2 425.4 802.6 Generation Electricity sales 2, 633.1 3,293.3 5,926.4 Renewable certi\ufb01cate sales 851.5 426.0 1,27 7. 5 CfD payment (45.7) \u2013 (45.7) Ancillary services 73.0 \u2013 73.0 Other income 127. 0 \u2013 127. 0 Total Generation 3,638.9 3,719.3 7,358.2 Customers Electricity and gas sales 3, 853.1 \u2013 3, 8 53.1 EBRS income 289.2 \u2013 289.2 Other income 0.8 \u2013 0.8 Total Customers 4,143.1 \u2013 4 ,143.1 Elimination of inter-segment sales \u2013 (4,14 4.7) (4,14 4 .7 ) Total consolidated revenue in Adjusted results 8,159.2 \u2013 8,159. 2 Certain remeasurements (383.9) \u2013 (383.9) Total consolidated revenue in Total results 7,775. 3 \u2013 7,775. 3 Certain remeasurements losses of \u00a3383.9 million (2021: \u00a385.9 million) is comprised of gains and losses on derivative contracts that are used to manage risk exposures associated with the Group\u2019s 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 \u00a36.6 million (2021: \u00a35.4 million). See note 3.7 for further details on contract liabilities. Revenue recognised in the period from performance obligations satis\ufb01ed or partly satis\ufb01ed in the previous period was \u00a3nil in the current and previous \ufb01nancial year. Electricity sales in the Generation segment were net of a \u00a36.1 million payment to a Voluntary Energy Redress Fund. The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2021: Year ended 31 December 2021 External \u00a3m Inter-segment \u00a3m Total \u00a3m Pellet Production Pellet sales 157. 4 286.5 443.9 Other income 5.7 0.2 5.9 Total Pellet Production 163.1 286.7 449.8 Generation Electricity sales 1,790.2 1,688.5 3,478.7 Renewable certi\ufb01cate sales 538.6 342.6 881.2 CfD income 234.9 \u2013 234.9 Ancillary services 50.6 \u2013 50.6 Other income 36.9 \u2013 36.9 Total Generation 2,651.2 2 ,031.1 4,682.3 Customers Electricity and gas sales 2,358.9 \u2013 2,358.9 Other income 0.7 \u2013 0.7 Total Customers 2,359.6 \u2013 2,359.6 Elimination of inter-segment sales \u2013 (2,317. 8) (2 ,317. 8) Total consolidated revenue in Adjusted results 5,173.9 \u2013 5,173.9 Certain remeasurements (85.9) \u2013 (85.9) Total consolidated revenue in Total results 5,088.0 \u2013 5,088.0 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 a customer is at an amount that corresponds directly with the value to the customer of the Group\u2019s performance completed to date. For accounting policies and other disclosures related to contract assets and liabilities, please see notes 3.5 and 3.7. For accounting policies and other disclosures related to costs incurred to acquire customer contracts, please see note 3.6. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-718": { "value": "Year ended 31 December 2022 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 377.2 3,638.9 4,143.1 \u2013 \u2013 8,159. 2 (383.9) 7,7 75.3 Inter-segment sales 425.4 3,719.3 \u2013 \u2013 (4,14 4 .7 ) \u2013 \u2013 \u2013 Total revenue 802.6 7,358.2 4 ,143.1 \u2013 (4 ,14 4.7 ) 8 ,159. 2 (383.9) 7,775.3 Cost of sales (501.9) (6,479.2) (3,985.0) \u2013 4,128 . 4 (6, 837.7 ) 85.7 (6,752.0) Segment gross pro\ufb01t/(loss) 300.7 879.0 158 .1 \u2013 (16.3) 1,321.5 (298.2) 1,023.3 Operating and administrative expenses (167.3) (183.5) (84.3) (113.6) 5.9 (542.8) \u2013 (542.8) Impairment losses on \ufb01nancial assets \u2013 \u2013 (48.0) \u2013 \u2013 (48.0) \u2013 (48.0) Depreciation and amortisation (119.9) (98.6) (25.5) (3.3) 7.9 (239.4) \u2013 (239.4) Impairment of non-current assets \u2013 (16.6) \u2013 \u2013 \u2013 (16.6) (24.9) (41.5) Other losses (2.0) (3.8) \u2013 \u2013 \u2013 (5.8) \u2013 (5.8) Income from associates 0.5 \u2013 \u2013 \u2013 \u2013 0.5 \u2013 0.5 Operating pro\ufb01t/(loss) 12.0 576.5 0.3 (116.9) (2.5) 469.4 ( 323.1) 146.3 Year ended 31 December 2021 Pellet Production \u00a3m Generation \u00a3m Customers \u00a3m Innovation, capital projects and other \u00a3m Intra-group eliminations \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue External sales 163.1 2,651.2 2,359.6 \u2013 \u2013 5,173.9 (85.9) 5,088.0 Inter-segment sales 286.7 2 , 031.1 \u2013 \u2013 (2,317.8) \u2013 \u2013 \u2013 Total revenue 449.8 4,682.3 2,359.6 \u2013 (2 ,317. 8) 5,173.9 (85.9) 5,088.0 Cost of sales (267.0) (4 ,131. 9) (2,255.9) \u2013 2,323.7 (4, 331.1) 134.3 (4 ,19 6 . 8) Segment gross pro\ufb01t 182.8 550.4 103.7 \u2013 5.9 842.8 48.4 891.2 Operating and administrative expenses (96.9) (198.9) (81.7) (70.9) \u2013 (448.4) (21.5) (469.9) Impairment losses on \ufb01nancial assets \u2013 \u2013 (16.3) \u2013 \u2013 (16.3) \u2013 (16.3) Depreciation and amortisation (61.4) (103.4) (30.5) (3.6) \u2013 (198.9) (0.5) (199.4) Other losses (1.0) (7.8) (0.4) (0.2) \u2013 (9.4) \u2013 (9.4) Income from associates 0.3 \u2013 \u2013 \u2013 \u2013 0.3 \u2013 0.3 Operating pro\ufb01t/(loss) 23.8 240.3 (25.2) (74.7) 5.9 170 .1 26.4 196.5 ", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-717": { "value": "Adjusted operating pro\ufb01t from discontinued operations for the year ended 31 December 2021 was \u00a320.3 million. This amount was attributable entirely to the Generation segment and is described in further detail in note 5.4. There were no discontinued operations in the year. The Total pro\ufb01t after tax from discontinued operations in 2021 of \u00a324.1 million, resulted in Total basic EPS of 6.1 pence and Total diluted EPS of 5.8 pence. Application of the same calculation to Adjusted pro\ufb01t after tax from discontinued operations in 2021 of \u00a316.7 million, resulted in Adjusted basic EPS of 4.2 pence and Adjusted diluted EPS of 4.1 pence. 5.4 Discontinued operations A discontinued operation is a component of the Group that has been disposed of or classi\ufb01ed as held for sale and meets one of the following criteria outlined in IFRS 5: \u2022 represents a separate major line of business or geographic area of operations; \u2022 is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or \u2022 is a subsidiary acquired exclusively with a view to resale. Accounting policy The component is classi\ufb01ed as a discontinued operation at the earlier of when it is disposed of or when the component meets the held for sale criteria. When an operation is classi\ufb01ed as a discontinued operation its results are presented separately in the Consolidated income statement. The results of the discontinued operation are also re-presented in the Consolidated income statement as discontinued in the comparative period. Sale of CCGT portfolio On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited for cash consideration of up to \u00a3193 million, subject to customary adjustments. This included \u00a329 million of contingent consideration associated with the option to develop the site at Damhead Creek (see notes 3.5 and 7.1). The sale price represented a return over the Group\u2019s period of ownership signi\ufb01cantly ahead of the Group\u2019s weighted average cost of capital. The Group received initial consideration of \u00a3188 million in February 2021 which was amended to \u00a3186 million in July 2021 following conclusion of the completion accounts process. The Group recognised an overall net gain on disposal of \u00a38.5 million spread across the \ufb01nancial years ending 31 December 2020 and 31 December 2021. The Group recognised certain transaction-related and mark-to-market costs, as incurred, during the year ended 31 December 2020. As a result, recognition of the net gain on disposal in the Group\u2019s Consolidated income statement is spread across 2020 and 2021, as illustrated below. No amounts have been recognised in the current \ufb01nancial year in relation to this disposal. Year ended 31 December 2022 \u00a3m 2021 \u00a3m 2020 \u00a3m Total \u00a3m Gross gain on disposal \u2013 17.1 \u2013 17.1 Transaction costs \u2013 (0.9) (3.3) (4.2) Mark-to-market costs \u2013 (1.1) (3.3) (4.4) Net gain/(loss) on disposal \u2013 15.1 (6.6) 8.5 Discontinued operations The income and expenditure of the CCGT generation portfolio were classi\ufb01ed as discontinued operations in the comparative period. There are no items of income or expenditure from discontinued operations in the current \ufb01nancial year. Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue 51.8 (2.5) 49.3 Cost of sales (31.6) (7.2) (38.8) Gross pro\ufb01t/(loss) 20.2 (9.7) 10.5 Operating and administrative expenses 0.1 (1.9) (1.8) Adjusted EBITDA 20.3 Other gains \u2013 17.1 17.1 Operating pro\ufb01t 20.3 5.5 25.8 Pro\ufb01t before tax on discontinued operations 20.3 5.5 25.8 Total tax (charge)/credit (3.6) 1.9 (1.7) Pro\ufb01t after tax from discontinued operations and total pro\ufb01t from discontinued operations 16.7 7.4 24 .1 Earnings per share Pence Pence For net pro\ufb01t for the period from discontinued operations attributable to owners of the Parent Company \u2013 Basic 4.2 6 .1 \u2013 Diluted 4.1 5.8 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-669": { "value": "2.2 Revenue The majority of the Group\u2019s revenue is within the scope of IFRS 15. The other sources of the Group\u2019s revenue outside the scope of IFRS 15 comprise certain remeasurements, amounts reclassi\ufb01ed to revenue for gains and losses on UK CPI inflation swaps and income from the Government\u2019s Energy Bill Relief Scheme (EBRS). See note 2.7 for further details of certain remeasurements and note 7.2 for inflation risk management. Year ended 31 December 2022 Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue from contracts with customers 7,882.5 \u2013 7,882.5 5,170 .3 \u2013 5,170 . 3 Other revenue 276.7 (383.9) (107.2) 3.6 (85.9) (82.3) Total revenue 8 ,159. 2 (383.9) 7,775.3 5,173 .9 (85.9) 5,088.0 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 speci\ufb01ed good or service prior to the transfer to the customer. A summary of the Group\u2019s 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 below. Further details on signi\ufb01cant elements of revenue, principally how the Contract for Difference (CfD) and Renewable Obligation (RO) schemes operate and the related accounting, are provided below the table. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties Pellet sales (Pellet Production) The Group produces biomass pellets which are sold to external customers. Customers generally obtain control of the pellets at the point the pellets are loaded onto the shipping vessel for freight on board (FOB) sales. Where freight is also arranged for the customer, these sales are known as Cost, insurance and freight (CIF) sales. The freight component is considered a separate performance obligation. Invoices are raised in line with contractual terms and are usually payable within four-10 days. Revenue is recognised at the point that the pellets are loaded onto the shipping vessel. The amount of revenue recognised is based on the contracted price of the pellets. For CIF sales, revenue for the freight portion is recognised over the period the vessel sails. Electricity sales (Generation) The Group\u2019s Generation business has contracts for wholesale electricity sales. Performance obligations for these contracts are deemed to be a series of distinct goods that are substantially the same and transfer consecutively. Control is deemed to have passed to the customer at the point that the electricity has been supplied. This is measured based on energy supplied to the customer with the amount billed based on the units of electricity supplied. Invoices are raised in line with the Grid Trade Master Agreement (GTMA) contractual terms and are payable on the \ufb01fth banking day following the date of invoice. Revenues are measured based upon metered output at rates speci\ufb01ed under contract terms or prevailing market rates as applicable. These are recognised under the output method, whereby revenue is recognised based on the value transferred to the customer. Renewable certi\ufb01cate sales (Generation) Renewable Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origins (REGOs) are sold to counterparties at a point in time. ROCs sold to optimise working capital are invoiced in line with contractual terms and are usually payable within two days. Invoices for ROC sales to third parties are raised when the ROCs are transferred, typically four-\ufb01ve months following the end of the compliance period in which they were generated. Invoices are usually payable within seven days. External ROC and REGO sales are recognised at the point the relevant certi\ufb01cates are transferred to the counterparty. See below for further details. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties CfD income/payment (Generation) The Group is party to a CfD with the Low Carbon Contracts Company (LCCC), a Government- owned entity responsible for delivering elements of the Government\u2019s Electricity Market Reform Programme. Under the contract, the Group makes or receives payments in respect of electricity dispatched from a speci\ufb01c biomass- fuelled generating unit. Invoices are raised seven days following the date of supply and are settled within 10-28 days. The Group recognises the income or costs arising from the CfD in the Consolidated income statement as a component of revenue at the point the Group meets its performance obligation under the CfD contract. This is considered to be the point at which the relevant generation is delivered and the payment becomes contractually due. See below for further details. Ancillary services (Generation) Ancillary services refers to the provision of a range of system support services to National Grid. Most contracts are for the delivery of a speci\ufb01c service either continually or on an ad-hoc basis over a period of time. Invoices are raised and subsequently settled in line with National Grid Company Ancillary Services settlement calendar, typically monthly. Revenue is recognised by reference to the stage of completion of the contractual performance obligations, which are calculated by reference to the amount of the contract term that has elapsed. Depending on contract terms, this approach may require judgement in estimating probable future outcomes. Other income (All segments) Other income is derived from the sale of goods (for example, by-products from electricity generation such as ash and gypsum) or the provision of services. The customer obtains control typically at the point of delivery to their premises or upon collection. Revenue is recognised at the point the control of the goods is transferred to the customer. Electricity and gas sales (Customers) The Group\u2019s Customers business sells electricity and gas directly to business customers. Energy supplied is measured based upon metered consumption and contractual rates. The Customers business also has long-term contracts for the sale of electricity and gas, which are deemed as being satis\ufb01ed over time in line with the progress of the contracts. Invoices are raised in line with contractual terms. For small and medium-sized enterprise (SME) customers, payment is generally due within 10-14 days . For Industrial and Commercial (I&C) customers, payment is generally due between 28-90 days. Revenue is recognised on the supply of electricity or gas when a contract exists, supply has taken place, a quanti\ufb01able price has been established or can be determined and the amounts receivable are expected to be recovered. Where supply has taken place but has not yet been measured or billed, revenue is estimated based on consumption statistics and selling price estimates and is recognised as accrued income. This estimate is not considered to be a key source of estimation uncertainty because historical experience has demonstrated that these estimates are materially accurate based on the subsequent billings and settlements. Where contracts for the sale of electricity and gas are held, revenue is recognised in line with the progress of the contracts. The revenue recognised per unit of energy supplied is based on the total estimated revenue and cost inputs for \ufb01xed price contracts and contracted prices for variable price contracts. Assumptions are applied consistently but third-party costs can vary, therefore actual outcomes may vary from initial estimates. EBRS income (Customers) The UK Government introduced the EBRS, running from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period will have a discount applied for the customer under the scheme to cap their energy tariff. The Customers business is claiming this discount back from the Government. Payment is due 10 days post submission of a claim, which typically occurs monthly. The discounted price of electricity and gas supplied under the EBRS is recognised in revenue as it is supplied. The discount amount claimed back from the UK Government is recognised within revenue over the same period as the underlying discounted revenue it relates to is recognised. The revenue received from the UK Government is included within EBRS income in the table on page 192. The Group does not recognise any additional revenue from the scheme than it would have done if it were not introduced. Renewable certi\ufb01cate sales The generation and sale of renewable certi\ufb01cates, primarily ROCs and REGOs, is a key driver of the Group\u2019s \ufb01nancial performance. The Renewable 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 certi\ufb01cates issued to generators of renewable electricity which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have ful\ufb01lled 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 2022 the Group is operating in CP21. 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 CP21 is \u00a352.88 (2021: CP20 \u00a350.80). ROCs are typically procured in arm\u2019s-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 a CP. The \ufb01nancial bene\ufb01t of a ROC recognised in the Consolidated income statement at the point of generation is comprised of two parts: the expected value to be obtained in a sale transaction with a third-party supplier relating to the buy-out price, and the expected value of the recycle fund bene\ufb01t to be received at the end of the CP. During the year, the Group also made sales and related purchases of ROCs to help optimise its working capital position. External sales of ROCs in the table below includes \u00a3604.5 million of such sales (2021: \u00a3339.8 million), with a similar value reflected in cost of sales. REGOs are certi\ufb01cates 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 energy they generate. See note 3.3 for further details of ROCs and REGOs generated and sold by the Generation business and those utilised by the Customers business during the year. CfD income/payment The 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 2022 was \u00a3126.37 per MWh (2021: \u00a3118.54). 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 are in addition to amounts received from the sale of the associated power in the wholesale market. Gas sales To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Customers business. Having already ceased acquiring new gas customers, following internal processes and a regulatory driven 60-day grace period, no renewal contracts will be offered after May 2023. It is anticipated that the portfolio will reduce by over 50% by the end of 2023 and be almost entirely gone by the end of 2024. Further analysis of revenue for the year ended 31 December 2022 is provided in the table below: Year ended 31 December 2022 External \u00a3m Inter-segment \u00a3m Total \u00a3m Pellet Production Pellet sales 369.3 425.2 794.5 Other income 7.9 0.2 8 .1 Total Pellet Production 377.2 425.4 802.6 Generation Electricity sales 2, 633.1 3,293.3 5,926.4 Renewable certi\ufb01cate sales 851.5 426.0 1,27 7. 5 CfD payment (45.7) \u2013 (45.7) Ancillary services 73.0 \u2013 73.0 Other income 127. 0 \u2013 127. 0 Total Generation 3,638.9 3,719.3 7,358.2 Customers Electricity and gas sales 3, 853.1 \u2013 3, 8 53.1 EBRS income 289.2 \u2013 289.2 Other income 0.8 \u2013 0.8 Total Customers 4,143.1 \u2013 4 ,143.1 Elimination of inter-segment sales \u2013 (4,14 4.7) (4,14 4 .7 ) Total consolidated revenue in Adjusted results 8,159.2 \u2013 8,159. 2 Certain remeasurements (383.9) \u2013 (383.9) Total consolidated revenue in Total results 7,775. 3 \u2013 7,775. 3 Certain remeasurements losses of \u00a3383.9 million (2021: \u00a385.9 million) is comprised of gains and losses on derivative contracts that are used to manage risk exposures associated with the Group\u2019s 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 \u00a36.6 million (2021: \u00a35.4 million). See note 3.7 for further details on contract liabilities. Revenue recognised in the period from performance obligations satis\ufb01ed or partly satis\ufb01ed in the previous period was \u00a3nil in the current and previous \ufb01nancial year. Electricity sales in the Generation segment were net of a \u00a36.1 million payment to a Voluntary Energy Redress Fund. The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2021: Year ended 31 December 2021 External \u00a3m Inter-segment \u00a3m Total \u00a3m Pellet Production Pellet sales 157. 4 286.5 443.9 Other income 5.7 0.2 5.9 Total Pellet Production 163.1 286.7 449.8 Generation Electricity sales 1,790.2 1,688.5 3,478.7 Renewable certi\ufb01cate sales 538.6 342.6 881.2 CfD income 234.9 \u2013 234.9 Ancillary services 50.6 \u2013 50.6 Other income 36.9 \u2013 36.9 Total Generation 2,651.2 2 ,031.1 4,682.3 Customers Electricity and gas sales 2,358.9 \u2013 2,358.9 Other income 0.7 \u2013 0.7 Total Customers 2,359.6 \u2013 2,359.6 Elimination of inter-segment sales \u2013 (2,317. 8) (2 ,317. 8) Total consolidated revenue in Adjusted results 5,173.9 \u2013 5,173.9 Certain remeasurements (85.9) \u2013 (85.9) Total consolidated revenue in Total results 5,088.0 \u2013 5,088.0 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 a customer is at an amount that corresponds directly with the value to the customer of the Group\u2019s performance completed to date. For accounting policies and other disclosures related to contract assets and liabilities, please see notes 3.5 and 3.7. For accounting policies and other disclosures related to costs incurred to acquire customer contracts, please see note 3.6. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-637": { "value": "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 speci\ufb01ed good or service prior to the transfer to the customer. A summary of the Group\u2019s 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 below. Further details on signi\ufb01cant elements of revenue, principally how the Contract for Difference (CfD) and Renewable Obligation (RO) schemes operate and the related accounting, are provided below the table. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties Pellet sales (Pellet Production) The Group produces biomass pellets which are sold to external customers. Customers generally obtain control of the pellets at the point the pellets are loaded onto the shipping vessel for freight on board (FOB) sales. Where freight is also arranged for the customer, these sales are known as Cost, insurance and freight (CIF) sales. The freight component is considered a separate performance obligation. Invoices are raised in line with contractual terms and are usually payable within four-10 days. Revenue is recognised at the point that the pellets are loaded onto the shipping vessel. The amount of revenue recognised is based on the contracted price of the pellets. For CIF sales, revenue for the freight portion is recognised over the period the vessel sails. Electricity sales (Generation) The Group\u2019s Generation business has contracts for wholesale electricity sales. Performance obligations for these contracts are deemed to be a series of distinct goods that are substantially the same and transfer consecutively. Control is deemed to have passed to the customer at the point that the electricity has been supplied. This is measured based on energy supplied to the customer with the amount billed based on the units of electricity supplied. Invoices are raised in line with the Grid Trade Master Agreement (GTMA) contractual terms and are payable on the \ufb01fth banking day following the date of invoice. Revenues are measured based upon metered output at rates speci\ufb01ed under contract terms or prevailing market rates as applicable. These are recognised under the output method, whereby revenue is recognised based on the value transferred to the customer. Renewable certi\ufb01cate sales (Generation) Renewable Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origins (REGOs) are sold to counterparties at a point in time. ROCs sold to optimise working capital are invoiced in line with contractual terms and are usually payable within two days. Invoices for ROC sales to third parties are raised when the ROCs are transferred, typically four-\ufb01ve months following the end of the compliance period in which they were generated. Invoices are usually payable within seven days. External ROC and REGO sales are recognised at the point the relevant certi\ufb01cates are transferred to the counterparty. See below for further details. Revenue stream (Segment) Nature and timing of performance obligations, including signi\ufb01cant payment terms Method of recognising revenue, including any estimation uncertainties CfD income/payment (Generation) The Group is party to a CfD with the Low Carbon Contracts Company (LCCC), a Government- owned entity responsible for delivering elements of the Government\u2019s Electricity Market Reform Programme. Under the contract, the Group makes or receives payments in respect of electricity dispatched from a speci\ufb01c biomass- fuelled generating unit. Invoices are raised seven days following the date of supply and are settled within 10-28 days. The Group recognises the income or costs arising from the CfD in the Consolidated income statement as a component of revenue at the point the Group meets its performance obligation under the CfD contract. This is considered to be the point at which the relevant generation is delivered and the payment becomes contractually due. See below for further details. Ancillary services (Generation) Ancillary services refers to the provision of a range of system support services to National Grid. Most contracts are for the delivery of a speci\ufb01c service either continually or on an ad-hoc basis over a period of time. Invoices are raised and subsequently settled in line with National Grid Company Ancillary Services settlement calendar, typically monthly. Revenue is recognised by reference to the stage of completion of the contractual performance obligations, which are calculated by reference to the amount of the contract term that has elapsed. Depending on contract terms, this approach may require judgement in estimating probable future outcomes. Other income (All segments) Other income is derived from the sale of goods (for example, by-products from electricity generation such as ash and gypsum) or the provision of services. The customer obtains control typically at the point of delivery to their premises or upon collection. Revenue is recognised at the point the control of the goods is transferred to the customer. Electricity and gas sales (Customers) The Group\u2019s Customers business sells electricity and gas directly to business customers. Energy supplied is measured based upon metered consumption and contractual rates. The Customers business also has long-term contracts for the sale of electricity and gas, which are deemed as being satis\ufb01ed over time in line with the progress of the contracts. Invoices are raised in line with contractual terms. For small and medium-sized enterprise (SME) customers, payment is generally due within 10-14 days . For Industrial and Commercial (I&C) customers, payment is generally due between 28-90 days. Revenue is recognised on the supply of electricity or gas when a contract exists, supply has taken place, a quanti\ufb01able price has been established or can be determined and the amounts receivable are expected to be recovered. Where supply has taken place but has not yet been measured or billed, revenue is estimated based on consumption statistics and selling price estimates and is recognised as accrued income. This estimate is not considered to be a key source of estimation uncertainty because historical experience has demonstrated that these estimates are materially accurate based on the subsequent billings and settlements. Where contracts for the sale of electricity and gas are held, revenue is recognised in line with the progress of the contracts. The revenue recognised per unit of energy supplied is based on the total estimated revenue and cost inputs for \ufb01xed price contracts and contracted prices for variable price contracts. Assumptions are applied consistently but third-party costs can vary, therefore actual outcomes may vary from initial estimates. EBRS income (Customers) The UK Government introduced the EBRS, running from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period will have a discount applied for the customer under the scheme to cap their energy tariff. The Customers business is claiming this discount back from the Government. Payment is due 10 days post submission of a claim, which typically occurs monthly. The discounted price of electricity and gas supplied under the EBRS is recognised in revenue as it is supplied. The discount amount claimed back from the UK Government is recognised within revenue over the same period as the underlying discounted revenue it relates to is recognised. The revenue received from the UK Government is included within EBRS income in the table on page 192. The Group does not recognise any additional revenue from the scheme than it would have done if it were not introduced. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-719": { "value": "Gas sales To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Customers business. Having already ceased acquiring new gas customers, following internal processes and a regulatory driven 60-day grace period, no renewal contracts will be offered after May 2023. It is anticipated that the portfolio will reduce by over 50% by the end of 2023 and be almost entirely gone by the end of 2024. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-704": { "value": "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\u2019s external auditor, Deloitte LLP, in respect of services they provided to the Group during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m The following expenditure has been charged in arriving at operating pro\ufb01t: Staff costs (note 6.1) 248.9 218.6 Repairs and maintenance expenditure on property, plant and equipment 110.3 10 9.1 Other operating and administrative expenses 183.6 142.2 Total operating and administrative expenses 542.8 469.9 Auditor\u2019s remuneration Year ended 31 December 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Audit fees: Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements 1375.0 1,250.0 Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts 40.0 40.0 Total audit fees 1,415.0 1,290.0 Other fees: Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements 115.0 110.0 Assurance services provided to non-material af\ufb01liates 18.0 16.4 Other services 46.2 42.3 Total audit and audit-related fees 1,594.2 1,458.7 Other assurance services 65.0 469.0 Total non-audit fees 65.0 469.0 Total auditor\u2019s remuneration 1,659.2 1,927.7 The fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements above relates to the audit of all of the Group\u2019s subsidiaries to a statutory materiality. In addition, certain head of\ufb01ce companies are not required for the Group audit opinion, the allocation of which is included in the fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. During 2022 there was a decrease in the level of non-audit services provided by Deloitte LLP in 2022. 2021 fees included agreed upon procedures and other assurance services provided in connection with the acquisition of Pinnacle Renewable Energy Inc. (Pinnacle). See note 5.1 for more information on the acquisition. See the Audit Committee report on page 116 for further details on other assurance services provided by Deloitte LLP. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-689": { "value": "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\u2019s external auditor, Deloitte LLP, in respect of services they provided to the Group during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m The following expenditure has been charged in arriving at operating pro\ufb01t: Staff costs (note 6.1) 248.9 218.6 Repairs and maintenance expenditure on property, plant and equipment 110.3 10 9.1 Other operating and administrative expenses 183.6 142.2 Total operating and administrative expenses 542.8 469.9 Auditor\u2019s remuneration Year ended 31 December 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Audit fees: Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements 1375.0 1,250.0 Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts 40.0 40.0 Total audit fees 1,415.0 1,290.0 Other fees: Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements 115.0 110.0 Assurance services provided to non-material af\ufb01liates 18.0 16.4 Other services 46.2 42.3 Total audit and audit-related fees 1,594.2 1,458.7 Other assurance services 65.0 469.0 Total non-audit fees 65.0 469.0 Total auditor\u2019s remuneration 1,659.2 1,927.7 The fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements above relates to the audit of all of the Group\u2019s subsidiaries to a statutory materiality. In addition, certain head of\ufb01ce companies are not required for the Group audit opinion, the allocation of which is included in the fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. During 2022 there was a decrease in the level of non-audit services provided by Deloitte LLP in 2022. 2021 fees included agreed upon procedures and other assurance services provided in connection with the acquisition of Pinnacle Renewable Energy Inc. (Pinnacle). See note 5.1 for more information on the acquisition. See the Audit Committee report on page 116 for further details on other assurance services provided by Deloitte LLP. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-638": { "value": "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\u2019s external auditor, Deloitte LLP, in respect of services they provided to the Group during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m The following expenditure has been charged in arriving at operating pro\ufb01t: Staff costs (note 6.1) 248.9 218.6 Repairs and maintenance expenditure on property, plant and equipment 110.3 10 9.1 Other operating and administrative expenses 183.6 142.2 Total operating and administrative expenses 542.8 469.9 ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-603": { "value": "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\u2019s external auditor, Deloitte LLP, in respect of services they provided to the Group during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m The following expenditure has been charged in arriving at operating pro\ufb01t: Staff costs (note 6.1) 248.9 218.6 Repairs and maintenance expenditure on property, plant and equipment 110.3 10 9.1 Other operating and administrative expenses 183.6 142.2 Total operating and administrative expenses 542.8 469.9 Auditor\u2019s remuneration Year ended 31 December 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Audit fees: Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements 1375.0 1,250.0 Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts 40.0 40.0 Total audit fees 1,415.0 1,290.0 Other fees: Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements 115.0 110.0 Assurance services provided to non-material af\ufb01liates 18.0 16.4 Other services 46.2 42.3 Total audit and audit-related fees 1,594.2 1,458.7 Other assurance services 65.0 469.0 Total non-audit fees 65.0 469.0 Total auditor\u2019s remuneration 1,659.2 1,927.7 The fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements above relates to the audit of all of the Group\u2019s subsidiaries to a statutory materiality. In addition, certain head of\ufb01ce companies are not required for the Group audit opinion, the allocation of which is included in the fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. During 2022 there was a decrease in the level of non-audit services provided by Deloitte LLP in 2022. 2021 fees included agreed upon procedures and other assurance services provided in connection with the acquisition of Pinnacle Renewable Energy Inc. (Pinnacle). See note 5.1 for more information on the acquisition. See the Audit Committee report on page 116 for further details on other assurance services provided by Deloitte LLP. ", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-639": { "value": "Auditor\u2019s remuneration Year ended 31 December 2022 \u00a3\u2019000 2021 \u00a3\u2019000 Audit fees: Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements 1375.0 1,250.0 Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts 40.0 40.0 Total audit fees 1,415.0 1,290.0 Other fees: Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements 115.0 110.0 Assurance services provided to non-material af\ufb01liates 18.0 16.4 Other services 46.2 42.3 Total audit and audit-related fees 1,594.2 1,458.7 Other assurance services 65.0 469.0 Total non-audit fees 65.0 469.0 Total auditor\u2019s remuneration 1,659.2 1,927.7 The fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements above relates to the audit of all of the Group\u2019s subsidiaries to a statutory materiality. In addition, certain head of\ufb01ce companies are not required for the Group audit opinion, the allocation of which is included in the fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. During 2022 there was a decrease in the level of non-audit services provided by Deloitte LLP in 2022. 2021 fees included agreed upon procedures and other assurance services provided in connection with the acquisition of Pinnacle Renewable Energy Inc. (Pinnacle). See note 5.1 for more information on the acquisition. See the Audit Committee report on page 116 for further details on other assurance services provided by Deloitte LLP. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-604": { "value": "2.4 Impairment review of \ufb01xed 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\u2019s cash-generating units (CGUs) or group of CGUs expected to bene\ufb01t from the synergies of the business combination. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGUs) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at least annually. 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 market participant (fair value less costs to sell). The initial assessment of the recoverable amount is normally based on value in use. The assessment of future cash flows is based on the approved long-term forecasts used to support the Board\u2019s strategic planning process. It includes all of the necessary costs expected to be incurred to generate the cash inflows from the CGU\u2019s 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\u2019s cash flow hedging activities and as a result the carrying amount of each CGU includes the mark-to-market value of those cash flow 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, electri\ufb01cation and the impact of relevant policies on longer-term supply and demand pro\ufb01les. As required by IAS 36, the additional value that could be obtained from enhancing the Group\u2019s assets and the potential bene\ufb01t of any future restructuring or reorganisation that the Group is not yet committed to, is not reflected in the value in use calculation. In determining value in use, the estimate of future cash flows is discounted to present value using a pre-tax nominal discount rate reflecting the speci\ufb01c risks attributable to the asset or CGU in question. The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell, based on its value in use and what a market participant would pay. If the recoverable amount is less than the current carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recorded 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. An impairment loss relating to a CGU is allocated \ufb01rst to reduce the carrying amount of any goodwill allocated 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 will be limited to reducing the assets, 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-\ufb01nancial 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 identi\ufb01ed, this is reversed immediately in the Consolidated income statement. CGUs Year ended 31 December 2022 Segment name CGUs contained within segment Goodwill \u00a3m Pellet Production Northern Operations and Southern Operations 176.0 Generation Drax Power Station (biomass) \u2013 Lanark 11.3 Galloway 4 0.1 Cruachan 26.9 OCGTs \u2013 Daldowie \u2013 Customers Drax Energy Solutions 10.7 Opus Energy 159.2 424.2 The Pellet Production business consists of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill recognised on the acquisition of Pinnacle was allocated to the Pellet Production segment due to the pellet operations as a whole being expected to bene\ufb01t from the synergies of the larger, combined pellet operations. In respect of the Generation business, 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. Drax Power Station is comprised of two separate CGUs, one for biomass generation assets and one for coal generation assets. The coal CGU was previously fully written down following the decision to cease commercial coal generation. At the request of the UK Government, the Group has entered into an agreement with National Grid to keep its two coal units available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and will only operate if, and when, instructed to do so by National Grid. Had no impairment loss been previously recognised on the coal assets, they would have already been fully depreciated at the time the contract with National Grid was agreed. As such, management have assessed the impact of this agreement on the coal CGU and determined no reversal of any prior impairment is required. In respect of the Customers business, the Group considers the smallest groups of assets that generate independent cash inflows to be equivalent to the operating entities within those businesses. The OCGT development projects are considered one CGU due to the intention to operate and contract the plants using a portfolio approach, resulting in forecast cash inflows that are interdependent. The Innovation, capital projects and other function does not have any external cash inflows and therefore does not meet the de\ufb01nition of a CGU and so is not included in the assessment below. Assessment of indicators of impairment CGU Goodwill? Impairment indicators identi\ufb01ed? Impairment review required? Northern Operations and Southern Operations Y N Y Drax Power Station (biomass) N N N Lanark Y N Y Galloway Y N Y Cruachan Y N Y OCGTs N Y Y Daldowie N Y Y Drax Energy Solutions Y N Y Opus Energy Y N Y A review of the Group\u2019s CGUs gave rise to an indicator of impairment for two CGUs: the Daldowie fuel plant, due to the increase in energy prices resulting in a signi\ufb01cant increase in input costs, and the OCGTs, due to a strategic review conducted during the year concluding that it was unlikely the Group\u2019s fourth OCGT project at Abergelli would be developed. In determining that no indicators of impairment existed in respect of the remaining 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 the impact of such changes on the Group\u2019s long-term planning models and future forecast cash flows. In particular, consideration was given to the impact of higher commodity prices and the changes in the economic environment, including market interest rates and inflation. Whilst higher commodity prices (e.g. power, gas and \ufb01bre) were an impairment indicator for Daldowie, they were not deemed an impairment indicator for other CGUs which are less exposed to the impact of these higher prices. This is due to the nature of the industries in which they operate and the corresponding impact on revenues. In the Generation and Customers businesses, higher energy costs are an input cost but these are offset by higher revenues. Additionally, in the Pellet Production segment, higher \ufb01bre costs and energy prices have been offset by increased revenues, reflecting strong demand for biomass pellets. In considering the economic environment, management concluded the Group\u2019s CGUs tend to be less sensitive to changes in the economy, as energy and pellet production are required to power and heat homes and businesses in the UK and abroad, which are generally considered essential spend. The Generation, Pellet Production and Drax Energy Solutions CGUs also contract with high quality, stable counterparties. For the Opus Energy CGU, customers are typically in the SME sector and therefore the impact of the economic environment, combined with higher market prices could potentially impact the recoverability of debt. However this impact is offset by the work done to improve the average credit quality of customers, along with achieved operational ef\ufb01ciencies and so was not deemed to be an impairment indicator. Higher interest rates were also considered, including their impact on discount rates. In the prior year, only the Galloway CGU was sensitive to changes in the discount rate. Therefore, whilst interest rates have increased, any impact on discount rates was not considered to be an impairment indicator. For the Galloway CGU, the impact of increases to power prices during 2022 would more than offset the impact of a higher discount rate and therefore this was not considered to be an impairment indicator. Consideration was also given to assumptions regarding biomass generation and biomass prices post-2027, when current subsidies for biomass generation at Drax Power Station are due to expire, and whether that was an indicator of impairment (See the Principal risks section starting on page 77 for further details on biomass acceptability). The Group aims to reduce biomass costs over time, as part of a strategy to secure a long-term future for biomass generation. Whilst management\u2019s forecasts extend beyond 2027, they indicate that a majority of the carrying amount of the Drax Power Station (biomass) CGU is supported by pre-2027 cash flows. Accordingly, the end of current subsidies in 2027 was not deemed to be an indicator of impairment. Drax Power Station is currently deemed to have a useful life until at least 2039 and an expectation of continuing to be in operation until that time. Impairment review For the purpose of impairment reviews the recoverable amounts of these CGUs, or groups of CGUs, were measured based on value in use calculations using the Group\u2019s established planning models. These calculations depend on a broad range of assumptions, the most signi\ufb01cant of which are outlined below for each CGU, or Group of CGUs, to which an impairment test has been performed in the current year. Management\u2019s bases for these estimates are also outlined below. CGUs Signi\ufb01cant assumptions for value in use calculation Management\u2019s bases for determining estimates used in value in use calculation Northern Operations and Southern Operations \u2022 Production costs \u2022 Production volumes \u2022 Sales prices \u2022 Discount rate \u2022 Future production costs are estimated based on current year actual production costs plus in\ufb02ation. \u2022 Production volumes are estimated based on the current capacity of the Group\u2019s pellet plants and the historical operational performance of the plants. \u2022 Sales prices are estimated based on contractual sales agreements. \u2022 See below for details of the basis used to estimate discount rates. Drax Energy Solutions and Opus Energy \u2022 Customer margins \u2022 Supply volumes \u2022 Collection rates \u2022 Power prices \u2022 Third party cost estimates \u2022 Discount rate \u2022 Customer margin estimates are based on previously achieved pro\ufb01tability. \u2022 The expectation of future organic volumes is based on past performance and management\u2019s expectations of market development. \u2022 Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are liquid), gas market prices as a proxy for power for another two years, then the Group\u2019s long-term power price forecast, which is prepared using externally provided gas price forecast and demand inputs. \u2022 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. \u2022 Collection rates are estimated based on historical data and adjusted for expected changes in future circumstances. \u2022 See below for details of the basis used to estimate discount rates. OCGTs, Lanark, Galloway and Cruachan \u2022 Power prices \u2022 Sources of stability income \u2022 Volume of generation (hydros only) \u2022 Construction cost (OCGTs only) \u2022 Discount rate \u2022 Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are liquid), gas market prices as a proxy for power for another two years, then the Group\u2019s long term power price forecast, which is prepared using externally provided gas price forecast and demand inputs. \u2022 Stability income assumptions are based on past performance and current agreed prices with National Grid. \u2022 Volume of generation for the hydro assets is derived from historical rainfall averages. \u2022 Construction costs are estimated based on agreed contracted prices and obtained quotes. \u2022 See below for details of the basis used to estimate discount rates. Daldowie \u2022 Gas prices \u2022 Estimated contract end date \u2022 Discount rate \u2022 Future wholesale gas price estimates are based on market traded prices for around \ufb01ve years (the period they are liquid). \u2022 The end date of the current contract is based on the contractual term and expectations about future extensions or changes to the contract term. \u2022 See below for details of the basis used to estimate discount rates. For each group of CGUs, management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the industries in which the Group operates. These longer-term structural changes are mainly linked to climate change and the transition to more renewable forms of energy and net zero. They are explained in more detail in each section below. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2% in all models. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The 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 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 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. As the Group does not believe that any reasonably possible change in the key assumptions would result in an impairment it is not considered a key source of estimation uncertainty and therefore any sensitivities provided below are for additional information only. Further details on the assessments for each group of CGUs are given below. Pellet Production The recoverable amount of the Pellet Production group of CGUs, consisting of the Northern Operations and Southern Operations CGUs, is measured at least annually due to the goodwill allocated to the group of CGUs. These CGUs are principally engaged in the production and sale of biomass pellets. Management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the pellet industry such as climate change and the expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the pellet industry. Group of CGUs Carrying amount (including allocated goodwill) \u00a3m Discount rate Pellet Production 1,024.7 10.5% The pre-tax nominal discount rate of 10.5% (2021: 8.5%) was calculated based on independent analysis commissioned by the Group. The value in use for the Pellet Production group of CGUs was signi\ufb01cantly in excess of its carrying amount. An increase in production costs of $20 per tonne in the calculation would reduce the headroom by \u00a3711.4 million and a 15% decrease in production volumes would reduce the headroom by \u00a3572.3 million. Neither scenario would result in an impairment. No reasonably possible change in the key assumptions would result in a recoverable amount that was lower than its carrying amount. Drax Energy Solutions and Opus Energy The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured annually due to the existence of goodwill allocated to these CGUs. These businesses are principally focused on renewable electricity sales and therefore consideration of climate and environmental impacts are already a key feature of the business models. Management has projected detailed cash flows based on a period of \ufb01ve years, consistent with the period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement. Cash flows beyond the \ufb01ve-year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the energy supply industry. The carrying amounts and discount rates applied to each CGU are set out in the table below: CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Drax Energy Solutions 25.7 10.3% Opus Energy 230.5 10.3% The expected future cash flows of the Drax Energy Solutions CGU were discounted using a pre-tax nominal discount rate of 10.3% (2021: 8.7%), calculated based on independent analysis commissioned by the Group, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s Customers business. The Group believes that this rate reflects the prospects for a well-established Customers business, reflecting the comparatively long trading record and customer bases the business holds. The value in use of the Drax Energy Solutions CGU was signi\ufb01cantly in excess of its carrying amount. An increase in the discount rate to 11.4% combined with factoring in 0% growth in the calculation would reduce the headroom by \u00a336.0 million, which would not result in an impairment. Reflecting the signi\ufb01cant headroom in the analysis, the Group does not believe that any reasonably possible change in the key assumptions would result in a recoverable amount for the Drax Energy Solutions CGU that was lower than its carrying amount. The expected future cash flows of the Opus Energy CGU were also discounted using a pre-tax nominal discount rate of 10.3% (2021: 8.7%). The forecast future cash flows of the CGU are adjusted to reflect the relative risk pro\ufb01le of its customer base compared to Drax Energy Solutions, for example by incorporating higher levels of expected credit losses. Opus Energy operates in the same industry, under the same macro-economic conditions and is impacted by the same commodity prices and impacts of climate change as Drax Energy Solutions. As such, it is considered appropriate to use the same discount rate for both CGUs, supported by independent analysis. The value in use of the Opus Energy CGU was signi\ufb01cantly in excess of its carrying amount. An increase in the discount rate to 11.4% combined with factoring in 0% growth in the calculation would reduce the headroom by \u00a357.9 million. This would not result in an impairment. Reflecting the signi\ufb01cant headroom in the analysis and sensitivities performed, the Group does not believe that any reasonably possible change in the key assumptions would result in a recoverable amount for the Opus Energy CGU that was lower than its carrying amount. Lanark, Galloway and Cruachan The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment annually due to the existence of goodwill allocated to these CGUs. These CGUs are engaged in hydro and pumped storage power generation. Management has projected detailed cash flows based on a period of 15 years, reflecting consideration of aspects of the plan which are realised over a long-term horizon. This is longer than the \ufb01ve-year period speci\ufb01ed by IAS 36, and the period the Group assesses viability over in the Viability statement, to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the generation industry in the models used, such as climate change, changing weather patterns, and the continued transition to renewable forms of energy and net zero. Cash flows beyond the 15 year period are inflated into perpetuity using a growth rate of 2%. This growth rate is based on prudent expectations of market share and pro\ufb01tability along with more general macro-economic factors which were obtained from the Group\u2019s established planning model along with external macro-economic forecasts. The growth rate does not exceed the relevant long-term average growth rate for the generation industry. CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Lanark 49.9 8.5% Galloway 169.8 8.5% Cruachan 250.6 8.5% The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 8.5% (2021: 7.3%) The discount rates were calculated based on independent analysis commissioned by the Group, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s hydro and pumped storage generation operations. The value in use for all three CGUs (Lanark, Galloway and Cruachan) was in excess of their carrying amounts. An increase in the discount rate to 15% in each of the calculations would reduce the headroom for Lanark, Galloway and Cruachan by \u00a326.0 million, \u00a387.2 million and \u00a3257.6 million respectively. A decrease in power prices of 25% in each of the calculations would reduce the headroom for Lanark, Galloway and Cruachan by \u00a328.9 million, \u00a3 101.1 million and \u00a3154.4 million respectively. None of these changes would result in an impairment. No reasonably possible change in the key assumptions would result in a recoverable amount that was lower than their carrying amount. Daldowie The Daldowie CGU does not have any goodwill allocated to it but in the current year had an indicator of impairment present. The impairment indicator was due to higher energy input costs resulting in a reduction in the forecast earnings. A full impairment review was carried out as a result of this impairment indicator. This CGU is engaged in processing wastewater sludge into biomass pellets. Management has projected detailed cash flows based on a period of three years, reflecting the expected contract end date. The carrying amount and discount rate applied to the CGU is set out in the table below: CGU Carrying amount (including allocated goodwill) \u00a3m Discount rate Daldowie 8.9 8.9% An independent analysis commissioned by the Group calculated a pre-tax nominal discount rate of 8.9% which was applied to the expected future cash flows to determine the value in use of the fuel plant. The carrying amount of \u00a316.9 million was higher than the value in use calculation and so an impairment charge was therefore recorded. As there is no goodwill associated with the Daldowie fuel plant, this charge of \u00a38.0 million was applied to its \ufb01xed assets on a pro rata basis as described in the accounting policy section of this note. An increase in estimated energy input costs of 25% in the value in use calculation would increase the impairment by \u00a34.2 million. OCGTs The OCGT CGU does not have any goodwill allocated to it but in the current year had an indicator of impairment present. Following a strategic review during the year, it was concluded that it was currently unlikely that the Group would develop its fourth OCGT project at Abergelli. The Abergelli OCGT development does not hold a Capacity Market contract. As a result of this strategic review, the Group has recognised an impairment charge of \u00a38.6 million, representing the previously capitalised development costs for the individual project. The impairment indicator was speci\ufb01c to the Abergelli assets with the CGU. No impairment indicators were identi\ufb01ed in relation to the other assets within the CGU, or the CGU as a whole, and therefore a full impairment assessment was not required. Impairment of non-current assets Due to a change in accounting policy in the current year an impairment charge has been recognised on intangible assets relating to SaaS costs previously capitalised (See Change in accounting policy section in the Basis of preparation on page 177 for further details). An impairment charge has also been recognised on a billing system where the Group has stopped development and is engaged in active discussion with the supplier reflecting the supplier\u2019s failure to perform under this contract. See note 5.2 for further details. The Group has incurred impairment losses in the year. It is the Group\u2019s policy that any impairments of assets that have not yet been brought into use and depreciated or amortised are reflected in the cost of the asset being impaired. For impairments of assets that have already been brought into use, the impairment is reflected as an accelerated charge in the accumulated depreciation or amortisation of the asset. Impairment Daldowie \u00a3m OCGTs \u00a3m Customers billing system \u00a3m SaaS assets \u00a3m Total \u00a3m Property, plant and equipment \u2013 cost \u2013 6.9 \u2013 \u2013 6.9 Property, plant and equipment \u2013 accumulated depreciation 8.0 \u2013 \u2013 \u2013 8.0 Intangible assets \u2013 cost \u2013 1.7 19.2 \u2013 20.9 Intangible assets \u2013 accumulated amortisation \u2013 \u2013 \u2013 5.7 5.7 Total impairment of non-current assets 8.0 8.6 19.2 5.7 41.5 The total impairments for the year of \u00a341.5 million are recognised in the impairment of non-current assets line in the Consolidated income statement. The impairment of SaaS intangible assets and the Customers billing system, totalling \u00a324.9 million, have been treated as exceptional items. See note 2.7 for further details. ", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-640": { "value": "Accounting policy Goodwill is tested for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group\u2019s cash-generating units (CGUs) or group of CGUs expected to bene\ufb01t from the synergies of the business combination. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGUs) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at least annually. 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 market participant (fair value less costs to sell). The initial assessment of the recoverable amount is normally based on value in use. The assessment of future cash flows is based on the approved long-term forecasts used to support the Board\u2019s strategic planning process. It includes all of the necessary costs expected to be incurred to generate the cash inflows from the CGU\u2019s 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\u2019s cash flow hedging activities and as a result the carrying amount of each CGU includes the mark-to-market value of those cash flow 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, electri\ufb01cation and the impact of relevant policies on longer-term supply and demand pro\ufb01les. As required by IAS 36, the additional value that could be obtained from enhancing the Group\u2019s assets and the potential bene\ufb01t of any future restructuring or reorganisation that the Group is not yet committed to, is not reflected in the value in use calculation. In determining value in use, the estimate of future cash flows is discounted to present value using a pre-tax nominal discount rate reflecting the speci\ufb01c risks attributable to the asset or CGU in question. The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell, based on its value in use and what a market participant would pay. If the recoverable amount is less than the current carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recorded 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. An impairment loss relating to a CGU is allocated \ufb01rst to reduce the carrying amount of any goodwill allocated 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 will be limited to reducing the assets, 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-\ufb01nancial 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 identi\ufb01ed, this is reversed immediately in the Consolidated income statement. An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is de\ufb01ned to be the higher of an asset\u2019s value in use and its fair value less costs to sell. The Group\u2019s policy is to recognise an impairment charge through accumulated depreciation if the asset will continue to be used by the Group or if the asset will be subsequently sold. However, if the asset is still under construction, as no depreciation has yet been charged, the impairment charge is recognised in cost. Assets that will no longer be used by the Group are disposed of by removing both the cost and any accumulated depreciation and impairment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-720": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-705": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-690": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-670": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-641": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-605": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the debt structure (such as interest payable on bonds) as well as foreign exchange gains and losses, the unwinding of discounts on provisions for reinstatement of the Group\u2019s sites at the end of their useful lives (see note 5.3), interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3) and 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. A reconciliation of net \ufb01nance costs is shown in the table below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Interest payable and similar charges: Interest payable on borrowings measured at amortised cost (68.6) (59.2) Interest on lease liabilities (6.8) (4.9) Unwinding of discount on provisions (1.1) (0.6) Amortisation of deferred \ufb01nance costs (6.1) (5.7) Other \ufb01nancing charges (0.5) (0.5) Total interest payable and similar charges included in Adjusted results (83.1) (70.9) Interest receivable: Interest income on bank deposits 3.3 0.1 Interest income on de\ufb01ned bene\ufb01t surplus (note 6.3) 1.0 0.3 Total interest receivable included in Adjusted results 4.3 0.4 Foreign exchange gains included in Adjusted results 14.8 0.9 Net \ufb01nance costs included in Adjusted results (64.0) (69.6) Certain remeasurements on \ufb01nancing derivatives (4.2) (5.4) Net \ufb01nance costs in Total results (68.2) (75.0) Foreign exchange gains and losses in net \ufb01nance costs arise on the retranslation of non-derivative balances denominated in foreign currencies to prevailing rates at the reporting date. Changes in the Group\u2019s \ufb01nancing structure during 2022 are described in note 4.2. The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-729": { "value": "The Group has a number of intercompany loans denominated in the functional currency of certain foreign subsidiaries, that are owed to a sterling functional currency entity, and sterling intercompany loans owed by foreign subsidiaries to a sterling functional currency entity. Due to the weakening of sterling during the year, this has resulted in a foreign exchange gain of \u00a329.0 million (2021: gain of \u00a34.2 million) on the retranslation of intercompany loans in the Consolidated income statement of the sterling functional currency entity. The foreign exchange loss (2021: loss) on translating the foreign subsidiaries\u2019 intercompany loans into the Group\u2019s sterling presentational currency is recognised within the translation reserve. As such, on consolidation, a foreign exchange gain (2021: gain) arises in the Consolidated income statement and is part of the foreign exchange gains included in Adjusted results in the table above. As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange losses (2021: gains) on borrowings disclosed in the above tables have been offset by \u00a362.0 million of foreign exchange gains (2021: 21.2 million of losses) on cross-currency interest rate swaps that have been recycled to pro\ufb01t and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group\u2019s cash flow hedging relationships on Net debt. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-671": { "value": "2.6 Current and deferred tax The tax credit or charge includes both current and deferred tax. It reflects the estimated tax on the pro\ufb01t before tax for the Group for the year ended 31 December 2022 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 pro\ufb01t or loss for the year in the relevant jurisdiction. Taxable pro\ufb01t or loss differs from pro\ufb01t 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\u2019s 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 independent tax advice. No uncertain tax provisions have been recognised in the current or prior year. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 . The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime, research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against total corporation tax payable. 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total tax credit/(charge) from continuing operations comprises: Current tax \u2013 Current year (66.0) (7.7) \u2013 Adjustments in respect of prior periods 1.9 (1.4) Deferred tax \u2013 Before impact of tax rate changes 61.9 (7.3) \u2013 Adjustments in respect of prior periods (0.1) (1.0) \u2013 Effect of changes in tax rate 6.7 (49.0) Total tax credit/(charge) 4.4 (66.4) Year ended 31 December 2022 \u00a3m 2021 \u00a3m Tax credited/(charged) on items recognised in other comprehensive income: Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme 6 .1 (7.2) Deferred tax on share-based payments \u2013 5.4 Deferred tax on cash \ufb02ow hedges (5.6) 41.2 Deferred tax on cost of hedging 2.2 (7.7) Total tax credit 2.7 31.7 Year ended 31 December 2022 \u00a3m 2021 \u00a3m Tax credited/(charged) on items released directly from equity: Deferred tax on cost of hedging 7.2 5.4 Deferred tax on cash \ufb02ow hedges 4.8 ( 7.5) Deferred tax on share-based payments 7.4 \u2013 Total tax credit/(charge) 19.4 (2.1) UK corporation tax is the main income tax for the Group and is calculated at 19% (2021: 19%) of the assessable pro\ufb01t or loss for the year. Due to the Group\u2019s overseas operations, the US income tax rate of 21% (2021: 21%) and the Canadian corporate income tax rate of 27% (2021: 27%) are also relevant to the Group\u2019s tax charge. The tax rate for the full year, before the impact of changes in tax rates, is lower than the standard corporation tax rate applicable in the UK, principally due to the tax bene\ufb01t arising from UK Patent Box claims and the UK super-deduction introduced in the Finance Act 2021, which allows for a 130% in-year deduction for tax purposes against the cost of qualifying capital expenditure on plant and machinery incurred between 1 April 2021 and 31 March 2023. 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% to pro\ufb01ts derived from utilisation of the patented technology. The Finance Act 2021 also contained legislation to increase the main rate of UK corporation tax from 19% to 25% with effect from 1 April 2023. The impact of this rate increase is a net \u00a36.7 million deferred tax credit through Total results in the Consolidated income statement (2021: \u00a349.0 million charge). The Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows: Year ended 31 December 2022 Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Pro\ufb01t/(loss) before tax from continuing operations 405.4 ( 327.3) 78.1 100.5 21.0 121.5 Pro\ufb01t/(loss) before tax multiplied by the rate of corporation tax in the UK of 19% (2021: 19%) 7 7. 0 (62.2) 14.8 19.2 4.0 23.2 Effects of: Adjustments in respect of prior periods (1.8) \u2013 (1.8) 2.4 \u2013 2.4 Expenses not deductible for tax purposes 4.5 \u2013 4.5 2.8 1.7 4.5 Impact of tax rate change 2.9 (9.6) (6.7) 0.4 48.6 49.0 Difference in overseas tax rates (1.3) \u2013 (1.3) (1.1) \u2013 (1.1) Patent Box bene\ufb01t (9.6) \u2013 (9.6) (8.0) \u2013 (8.0) Tax effect of RDEC credit (0.8) \u2013 (0.8) (0.9) \u2013 (0.9) UK super-deduction (3.5) \u2013 (3.5) (2.7) \u2013 (2.7) Total tax charge/(credit) 67.4 (71.8) (4.4) 12.1 54.3 66.4 The movements in deferred tax assets and liabilities during each year are shown below. Financial instruments \u00a3m Accelerated capital allowances \u00a3m Non-trade losses \u00a3m Intangible assets \u00a3m Trade losses \u00a3m Other liabilities \u00a3m Other assets \u00a3m Total \u00a3m At 1 January 2021 13.0 (183.0) 2.3 (15.7) 33.5 (23.3) 16.5 (156.7) (Charged)/credited to the income statement (5.6) (64.4) \u2013 (3.5) 11.7 5.4 (0.9) (57. 3) Charged to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.2) (7.2) Credited to other comprehensive income in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 5.4 Credited to other comprehensive income in respect of cash \ufb02ow hedges 41.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 41.2 Charged to other comprehensive income in respect of cost of hedging ( 7.7) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.7) Charged to equity in respect of cash flow hedges (7.5) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.5) Credited to equity in respect of cost of hedging 5.4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 Impact of acquisition \u2013 (44.7) \u2013 (0.6) 14.4 (0.8) 19.6 (12.1) Effect of changes in foreign exchange rates \u2013 (0.5) \u2013 (0.1) 0.4 \u2013 0.1 (0.1) At 1 January 2022 38.8 (292.6) 2.3 (19.9) 60.0 (18.7) 33.5 (196.6) Credited/(charged)to the income statement 77.3 (24.9) (1.8) 7.0 15.7 (20.7) 16.0 68.6 Credited to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 6 .1 \u2013 6.1 Charged to other comprehensive income in respect of cash \ufb02ow hedges ( 5.6) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (5.6) Credited to other comprehensive income in respect of cost of hedging 2.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 2.2 Credited to equity in respect of cash flow hedges 4.8 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4.8 Credited to equity in respect of cost of hedging 7. 2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7. 2 Credited to equity in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7.4 7.4 Impact of acquisition \u2013 (0.8) \u2013 \u2013 \u2013 \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates \u2013 (3.0) \u2013 \u2013 4.4 \u2013 1.0 2.4 At 31 December 2022 124.7 (321.3) 0.5 (12.9) 8 0 .1 (33.3) 57.9 (104.3) Deferred tax balances (after offset) for \ufb01nancial reporting purposes: Net Canadian deferred tax asset at 31 December 2022 \u2013 (49.6) \u2013 0.2 27.1 (1.0) 32.7 9.4 Net US deferred tax asset at 31 December 2022 \u2013 (30.6) \u2013 \u2013 53.0 \u2013 5.5 27.9 Net UK deferred tax liability at 31 December 2022 124.7 (241.1) 0.5 (13.1) \u2013 (32.3) 19.7 (141.6) Net Canadian deferred tax asset at 31 December 2021 \u2013 ( 3 8 .1) \u2013 (0.2) 17.5 (0.4) 26.6 5.4 Net US deferred tax asset at 31 December 2021 \u2013 (27.6) \u2013 \u2013 42.5 (0.3) 8.7 23.3 Net UK deferred tax liability at 31 December 2021 38.8 (226.9) 2.3 (19.7) \u2013 (18.0) (1.8) (225.3) Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so, otherwise they are shown separately in the Consolidated balance sheet. Within the above trade losses deferred tax asset of \u00a380.1 million (2021: \u00a360.0 million) there is \u00a353.0 million (2021: \u00a342.5 million) in relation to losses in the US Pellet Production business. The remaining \u00a327.1 million relates to losses of the Canadian Pellet Production business (2021: \u00a317.5 million). The future expected reversal of accelerated capital allowances and other timing differences, coupled with the pro\ufb01tability (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 suf\ufb01cient pro\ufb01ts in the short to medium term against which to utilise the deferred tax assets. The estimates used when assessing the future pro\ufb01tability of the US and Canadian businesses have been approved by the Board and are consistent with estimates used in the going concern assessment and in the Viability statement on page 75. As at 31 December 2022 the Group held \u00a379.2 million (2021: \u00a379.2 million) of 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. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-606": { "value": "2.6 Current and deferred tax The tax credit or charge includes both current and deferred tax. It reflects the estimated tax on the pro\ufb01t before tax for the Group for the year ended 31 December 2022 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 pro\ufb01t or loss for the year in the relevant jurisdiction. Taxable pro\ufb01t or loss differs from pro\ufb01t 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\u2019s 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 independent tax advice. No uncertain tax provisions have been recognised in the current or prior year. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 . The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime, research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against total corporation tax payable. 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total tax credit/(charge) from continuing operations comprises: Current tax \u2013 Current year (66.0) (7.7) \u2013 Adjustments in respect of prior periods 1.9 (1.4) Deferred tax \u2013 Before impact of tax rate changes 61.9 (7.3) \u2013 Adjustments in respect of prior periods (0.1) (1.0) \u2013 Effect of changes in tax rate 6.7 (49.0) Total tax credit/(charge) 4.4 (66.4) Year ended 31 December 2022 \u00a3m 2021 \u00a3m Tax credited/(charged) on items recognised in other comprehensive income: Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme 6 .1 (7.2) Deferred tax on share-based payments \u2013 5.4 Deferred tax on cash \ufb02ow hedges (5.6) 41.2 Deferred tax on cost of hedging 2.2 (7.7) Total tax credit 2.7 31.7 Year ended 31 December 2022 \u00a3m 2021 \u00a3m Tax credited/(charged) on items released directly from equity: Deferred tax on cost of hedging 7.2 5.4 Deferred tax on cash \ufb02ow hedges 4.8 ( 7.5) Deferred tax on share-based payments 7.4 \u2013 Total tax credit/(charge) 19.4 (2.1) UK corporation tax is the main income tax for the Group and is calculated at 19% (2021: 19%) of the assessable pro\ufb01t or loss for the year. Due to the Group\u2019s overseas operations, the US income tax rate of 21% (2021: 21%) and the Canadian corporate income tax rate of 27% (2021: 27%) are also relevant to the Group\u2019s tax charge. The tax rate for the full year, before the impact of changes in tax rates, is lower than the standard corporation tax rate applicable in the UK, principally due to the tax bene\ufb01t arising from UK Patent Box claims and the UK super-deduction introduced in the Finance Act 2021, which allows for a 130% in-year deduction for tax purposes against the cost of qualifying capital expenditure on plant and machinery incurred between 1 April 2021 and 31 March 2023. 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% to pro\ufb01ts derived from utilisation of the patented technology. The Finance Act 2021 also contained legislation to increase the main rate of UK corporation tax from 19% to 25% with effect from 1 April 2023. The impact of this rate increase is a net \u00a36.7 million deferred tax credit through Total results in the Consolidated income statement (2021: \u00a349.0 million charge). The Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows: Year ended 31 December 2022 Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Pro\ufb01t/(loss) before tax from continuing operations 405.4 ( 327.3) 78.1 100.5 21.0 121.5 Pro\ufb01t/(loss) before tax multiplied by the rate of corporation tax in the UK of 19% (2021: 19%) 7 7. 0 (62.2) 14.8 19.2 4.0 23.2 Effects of: Adjustments in respect of prior periods (1.8) \u2013 (1.8) 2.4 \u2013 2.4 Expenses not deductible for tax purposes 4.5 \u2013 4.5 2.8 1.7 4.5 Impact of tax rate change 2.9 (9.6) (6.7) 0.4 48.6 49.0 Difference in overseas tax rates (1.3) \u2013 (1.3) (1.1) \u2013 (1.1) Patent Box bene\ufb01t (9.6) \u2013 (9.6) (8.0) \u2013 (8.0) Tax effect of RDEC credit (0.8) \u2013 (0.8) (0.9) \u2013 (0.9) UK super-deduction (3.5) \u2013 (3.5) (2.7) \u2013 (2.7) Total tax charge/(credit) 67.4 (71.8) (4.4) 12.1 54.3 66.4 The movements in deferred tax assets and liabilities during each year are shown below. Financial instruments \u00a3m Accelerated capital allowances \u00a3m Non-trade losses \u00a3m Intangible assets \u00a3m Trade losses \u00a3m Other liabilities \u00a3m Other assets \u00a3m Total \u00a3m At 1 January 2021 13.0 (183.0) 2.3 (15.7) 33.5 (23.3) 16.5 (156.7) (Charged)/credited to the income statement (5.6) (64.4) \u2013 (3.5) 11.7 5.4 (0.9) (57. 3) Charged to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.2) (7.2) Credited to other comprehensive income in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 5.4 Credited to other comprehensive income in respect of cash \ufb02ow hedges 41.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 41.2 Charged to other comprehensive income in respect of cost of hedging ( 7.7) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.7) Charged to equity in respect of cash flow hedges (7.5) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (7.5) Credited to equity in respect of cost of hedging 5.4 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 5.4 Impact of acquisition \u2013 (44.7) \u2013 (0.6) 14.4 (0.8) 19.6 (12.1) Effect of changes in foreign exchange rates \u2013 (0.5) \u2013 (0.1) 0.4 \u2013 0.1 (0.1) At 1 January 2022 38.8 (292.6) 2.3 (19.9) 60.0 (18.7) 33.5 (196.6) Credited/(charged)to the income statement 77.3 (24.9) (1.8) 7.0 15.7 (20.7) 16.0 68.6 Credited to other comprehensive income in respect of actuarial gains \u2013 \u2013 \u2013 \u2013 \u2013 6 .1 \u2013 6.1 Charged to other comprehensive income in respect of cash \ufb02ow hedges ( 5.6) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (5.6) Credited to other comprehensive income in respect of cost of hedging 2.2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 2.2 Credited to equity in respect of cash flow hedges 4.8 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 4.8 Credited to equity in respect of cost of hedging 7. 2 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7. 2 Credited to equity in respect of share-based payments \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 7.4 7.4 Impact of acquisition \u2013 (0.8) \u2013 \u2013 \u2013 \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates \u2013 (3.0) \u2013 \u2013 4.4 \u2013 1.0 2.4 At 31 December 2022 124.7 (321.3) 0.5 (12.9) 8 0 .1 (33.3) 57.9 (104.3) Deferred tax balances (after offset) for \ufb01nancial reporting purposes: Net Canadian deferred tax asset at 31 December 2022 \u2013 (49.6) \u2013 0.2 27.1 (1.0) 32.7 9.4 Net US deferred tax asset at 31 December 2022 \u2013 (30.6) \u2013 \u2013 53.0 \u2013 5.5 27.9 Net UK deferred tax liability at 31 December 2022 124.7 (241.1) 0.5 (13.1) \u2013 (32.3) 19.7 (141.6) Net Canadian deferred tax asset at 31 December 2021 \u2013 ( 3 8 .1) \u2013 (0.2) 17.5 (0.4) 26.6 5.4 Net US deferred tax asset at 31 December 2021 \u2013 (27.6) \u2013 \u2013 42.5 (0.3) 8.7 23.3 Net UK deferred tax liability at 31 December 2021 38.8 (226.9) 2.3 (19.7) \u2013 (18.0) (1.8) (225.3) Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so, otherwise they are shown separately in the Consolidated balance sheet. Within the above trade losses deferred tax asset of \u00a380.1 million (2021: \u00a360.0 million) there is \u00a353.0 million (2021: \u00a342.5 million) in relation to losses in the US Pellet Production business. The remaining \u00a327.1 million relates to losses of the Canadian Pellet Production business (2021: \u00a317.5 million). The future expected reversal of accelerated capital allowances and other timing differences, coupled with the pro\ufb01tability (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 suf\ufb01cient pro\ufb01ts in the short to medium term against which to utilise the deferred tax assets. The estimates used when assessing the future pro\ufb01tability of the US and Canadian businesses have been approved by the Board and are consistent with estimates used in the going concern assessment and in the Viability statement on page 75. As at 31 December 2022 the Group held \u00a379.2 million (2021: \u00a379.2 million) of 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. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-642": { "value": "Accounting policy Current tax includes UK corporation tax, corporate income tax in Canada and US income tax. It is based on the taxable pro\ufb01t or loss for the year in the relevant jurisdiction. Taxable pro\ufb01t or loss differs from pro\ufb01t 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\u2019s 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 independent tax advice. No uncertain tax provisions have been recognised in the current or prior year. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 . The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime, research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against total corporation tax payable. 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-691": { "value": "Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-730": { "value": "Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the \ufb01nancial statements and the corresponding tax bases used in the computation of taxable pro\ufb01t. 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 pro\ufb01ts will be available against which deductible temporary differences can be utilised. Current and deferred taxes are credited or charged against pro\ufb01t or loss in the Consolidated income statement, except when they relate to items that are recognised in OCI 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 . The Group has utilised the relief available under the Research and Development expenditure credit regime (RDEC). Under this regime, research and development tax credits are accounted for as development grants in line with IAS 20 and are recorded in operating pro\ufb01t within the Consolidated income statement. The credit is subject to corporation tax with the corresponding receivable offset against total corporation tax payable. 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 advisers. These assumptions are consistent with other assumptions used in these \ufb01nancial 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 pro\ufb01tability of the Group\u2019s businesses. See table on page 202 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-731": { "value": "The Group presents Adjusted results in the Consolidated income statement. The Directors believe that this approach is useful as it provides a clear and consistent view of underlying trading performance. Certain remeasurements and exceptional items are excluded from Adjusted results and presented in a separate column. The Group believes that this presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way Executive management and the Board assess the performance of the business. The Group has a policy and framework for the determination of transactions to present as exceptional. All transactions presented as exceptional are approved by the Audit Committee. See the Audit Committee Report on page 116 for further details. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExceptionalItemsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-607": { "value": "2.8 Earnings per share Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to each ordinary share in issue. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the Parent Company (pro\ufb01t or loss after tax in accordance with IFRS excluding amounts attributable to NCI) by the weighted average number of ordinary shares that were in issue 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 contingency period (such as those to be issued under employee share schemes \u2013 see note 6.2), were exercised and treated as ordinary shares as at the reporting date. Repurchased shares of 13.8 million (2021: 13.8 million) held in the Treasury shares reserve (see note 4.4) are not included in the weighted average calculation of shares. 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 2022 2021 Earnings attributable to equity holders of the Parent Company for the purposes of basic and diluted earnings per share (\u00a3m), made up of: 85.1 79.7 Net result from continuing operations 85.1 55.6 Net result from discontinued operations \u2013 24 .1 Number of shares (millions): Weighted average number of ordinary shares for the purposes of basic earnings per share 400.4 398.4 Effect of dilutive potential ordinary shares under share plans 14.0 14.2 Weighted average number of ordinary shares for the purposes of diluted earnings per share 414.4 412.6 Year ended 31 December 2022 2021 Earnings per share attributable to the owners of the Parent Company Adjusted results Total results Adjusted results Total results Earnings \u2013 pro\ufb01t after tax (\u00a3m) 340.6 85.1 105.6 79.7 Earnings per share \u2013 basic (pence) 85.1 21.3 26.5 20.0 Earnings per share \u2013 diluted (pence) 82.2 20.5 25.6 19.3 Year ended 31 December 2022 2021 Earnings per share from continuing operations attributable to the owners of the Parent Company Adjusted results Total results Adjusted results Total results Earnings \u2013 pro\ufb01t after tax (\u00a3m) 340.6 85.1 88.9 55.6 Earnings per share \u2013 basic (pence) 85.1 21.3 22.3 13.9 Earnings per share \u2013 diluted (pence) 82.2 20.5 21.5 13.5 There were no discontinued operations in the year. The Total pro\ufb01t after tax from discontinued operations in 2021 of \u00a324.1 million, resulted in Total basic EPS of 6.1 pence and Total diluted EPS of 5.8 pence. Application of the same calculation to Adjusted pro\ufb01t after tax from discontinued operations in 2021 of \u00a316.7 million, resulted in Adjusted basic EPS of 4.2 pence and Adjusted diluted EPS of 4.1 pence. Earnings per share Pence Pence For net pro\ufb01t for the period from discontinued operations attributable to owners of the Parent Company \u2013 Basic 4.2 6 .1 \u2013 Diluted 4.1 5.8 ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-706": { "value": "Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to each ordinary share in issue. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the Parent Company (pro\ufb01t or loss after tax in accordance with IFRS excluding amounts attributable to NCI) by the weighted average number of ordinary shares that were in issue 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 contingency period (such as those to be issued under employee share schemes \u2013 see note 6.2), were exercised and treated as ordinary shares as at the reporting date. Repurchased shares of 13.8 million (2021: 13.8 million) held in the Treasury shares reserve (see note 4.4) are not included in the weighted average calculation of shares. For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-721": { "value": "Repurchased shares of 13.8 million (2021: 13.8 million) held in the Treasury shares reserve (see note 4.4) are not included in the weighted average calculation of shares. For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact. Other equity reserves reflect the impact of certain historical transactions, which are described under the table below: Capital redemption reserve \u00a3m Translation reserve \u00a3m Merger reserve \u00a3m Treasury shares \u00a3m Total other reserves \u00a3m At 1 January 2021 1.5 35.4 710.8 (50.4) 697.3 Exchange differences on translation of foreign operations \u2013 8.7 \u2013 \u2013 8.7 At 1 January 2022 1.5 4 4 .1 710.8 (50.4) 706.0 Exchange differences on translation of foreign operations \u2013 42.4 \u2013 \u2013 42.4 Exchange differences on acquisition of interest in Alabama Pellets LLC \u2013 (0.7) \u2013 \u2013 (0.7) At 31 December 2022 1.5 85.8 710.8 (50.4) 747.7 The capital redemption and treasury share reserves arose when the Group completed previous share buyback programmes. The 13.8 million shares held in the treasury share reserve have no voting rights attached to them. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-608": { "value": "2.9 Dividends Year ended 31 December 2022 \u00a3m 2021 \u00a3m Amounts recognised as distributions to equity holders in the year (based on the number of shares in issue at the record date): Interim dividend for the year ended 31 December 2022 of 8.4 pence per share paid on 7 October 2022 (2021: 7.5 pence per share paid on 8 October 2021) 33.7 29.9 Final dividend for the year ended 31 December 2021 of 11.3 pence per share paid on 13 May 2022 (2020: 10.3 pence per share paid on 14 May 2021) 45.2 41.0 Total distributions 78.9 70.9 At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a resolution is passed to approve payment of a \ufb01nal dividend for the year ended 31 December 2022 of 1 2.6 pence per share (equivalent to approximately \u00a350 million) payable on or before 19 May 2023. The \ufb01nal dividend has not been included as a liability as at 31 December 2022. This would bring total dividends payable in respect of the 2022 \ufb01nancial year to approximately \u00a384 million. The Group has a long-standing capital allocation policy. This policy is based on a commitment to robust \ufb01nancial metrics that underpin the Group\u2019s strong credit rating: investment in the core business; paying a sustainable and growing dividend; and returning surplus capital to shareholders. The Board is con\ufb01dent that the dividend is sustainable and expects it to grow as the implementation of the Group\u2019s 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\u2019s commodity-linked revenue streams. In future years, if there is a build-up of capital in excess of the Group\u2019s investment needs, the Board will consider the most appropriate mechanism to return this to shareholders. Consideration of sustainability, including a link to the Group\u2019s dividend, can be found in the Market context section on pages 4 and 5. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-708": { "value": "0.126", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "fact-707": { "value": "50000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-609": { "value": "2.10 Retained pro\ufb01ts Retained pro\ufb01ts are a component of equity reserves. The overall balance reflects the total pro\ufb01ts the Group has generated over its lifetime that are attributable to the equity holders of the Parent Company, reduced by the amount of that pro\ufb01t distributed to shareholders. The table below sets out the movements in retained pro\ufb01ts during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 198.3 153.4 Pro\ufb01t for the year 85.1 79.7 Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3) (24.4) 30.7 Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6) 6 .1 (7.2) Deferred tax on share-based payments (note 2.6) 7.4 5.4 Equity dividends paid (note 2.9) (78.9) (70.9) Movements in equity associated with share-based payments (note 6.2) 9.5 7.4 Acquisition of NCI without a change in control (note 4.5) (9.3) (0.2) At 31 December 193.8 198.3 Distributable reserves The capacity of the Group to make dividend payments is primarily determined by the availability of retained distributable pro\ufb01ts and cash resources. The Parent Company\u2019s \ufb01nancial statements are set out on pages 277 to 283 of this Annual report, disclose the Parent Company\u2019s distributable reserves of \u00a3306.3 million. Suf\ufb01cient reserves are available across the Group as a whole to make future distributions in accordance with the Group\u2019s dividend policy for the foreseeable future. The majority of the Group\u2019s 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 that the Parent Company has access to these reserves. The immediate cash resources of the Group of \u00a3238.0 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\u2019s \ufb01nancing facilities (see note 4.2) place customary conditions on the amount of dividend payments to 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 the Viability statement on page 75 and note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. 4.4 Equity and reserves The Group\u2019s 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 classi\ufb01ed 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 2022 \u00a3m 2021 \u00a3m Issued and fully paid: 2022: 414,872,491 ordinary shares of 11 16 \u2044 29 pence each (2021: 413,068,027) 47.9 47.7 The movement in allotted and fully paid share capital of the Company during the year was as follows: Year ended 31 December 2022 (number) 2021 (number) At 1 January 413,068,027 410,848,934 Issued under employee share schemes 1,804,464 2,219,093 At 31 December 414,872,491 413,068,027 The Company has only one class of shares, which are ordinary shares of 11 16 \u204429 pence each, carrying no right to \ufb01xed 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\u2019s employee share schemes (see note 6.2). 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 reflect amounts received on the issue of shares under employee share schemes. Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 432.2 430.0 Issue of share capital 1.1 2.2 At 31 December 433.3 432.2 Other reserves Other equity reserves reflect the impact of certain historical transactions, which are described under the table below: Capital redemption reserve \u00a3m Translation reserve \u00a3m Merger reserve \u00a3m Treasury shares \u00a3m Total other reserves \u00a3m At 1 January 2021 1.5 35.4 710.8 (50.4) 697.3 Exchange differences on translation of foreign operations \u2013 8.7 \u2013 \u2013 8.7 At 1 January 2022 1.5 4 4 .1 710.8 (50.4) 706.0 Exchange differences on translation of foreign operations \u2013 42.4 \u2013 \u2013 42.4 Exchange differences on acquisition of interest in Alabama Pellets LLC \u2013 (0.7) \u2013 \u2013 (0.7) At 31 December 2022 1.5 85.8 710.8 (50.4) 747.7 The capital redemption and treasury share reserves arose when the Group completed previous share buyback programmes. The 13.8 million shares held in the treasury share reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\u2019s US and Canadian subsidiaries from their functional currencies (USD and CAD) into sterling for presentation in these Consolidated \ufb01nancial statements are recognised in the translation reserve. Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \ufb01nancial instruments designated into hedge accounting relationships in accordance with IFRS 9, are set out in notes 7.3 and 7.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-722": { "value": "2.10 Retained pro\ufb01ts Retained pro\ufb01ts are a component of equity reserves. The overall balance reflects the total pro\ufb01ts the Group has generated over its lifetime that are attributable to the equity holders of the Parent Company, reduced by the amount of that pro\ufb01t distributed to shareholders. The table below sets out the movements in retained pro\ufb01ts during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 198.3 153.4 Pro\ufb01t for the year 85.1 79.7 Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3) (24.4) 30.7 Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6) 6 .1 (7.2) Deferred tax on share-based payments (note 2.6) 7.4 5.4 Equity dividends paid (note 2.9) (78.9) (70.9) Movements in equity associated with share-based payments (note 6.2) 9.5 7.4 Acquisition of NCI without a change in control (note 4.5) (9.3) (0.2) At 31 December 193.8 198.3 Distributable reserves The capacity of the Group to make dividend payments is primarily determined by the availability of retained distributable pro\ufb01ts and cash resources. The Parent Company\u2019s \ufb01nancial statements are set out on pages 277 to 283 of this Annual report, disclose the Parent Company\u2019s distributable reserves of \u00a3306.3 million. Suf\ufb01cient reserves are available across the Group as a whole to make future distributions in accordance with the Group\u2019s dividend policy for the foreseeable future. The majority of the Group\u2019s 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 that the Parent Company has access to these reserves. The immediate cash resources of the Group of \u00a3238.0 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\u2019s \ufb01nancing facilities (see note 4.2) place customary conditions on the amount of dividend payments to 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 the Viability statement on page 75 and note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfRetainedProfits", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-643": { "value": "2.10 Retained pro\ufb01ts Retained pro\ufb01ts are a component of equity reserves. The overall balance reflects the total pro\ufb01ts the Group has generated over its lifetime that are attributable to the equity holders of the Parent Company, reduced by the amount of that pro\ufb01t distributed to shareholders. The table below sets out the movements in retained pro\ufb01ts during the year: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 198.3 153.4 Pro\ufb01t for the year 85.1 79.7 Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3) (24.4) 30.7 Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6) 6 .1 (7.2) Deferred tax on share-based payments (note 2.6) 7.4 5.4 Equity dividends paid (note 2.9) (78.9) (70.9) Movements in equity associated with share-based payments (note 6.2) 9.5 7.4 Acquisition of NCI without a change in control (note 4.5) (9.3) (0.2) At 31 December 193.8 198.3 Distributable reserves The capacity of the Group to make dividend payments is primarily determined by the availability of retained distributable pro\ufb01ts and cash resources. The Parent Company\u2019s \ufb01nancial statements are set out on pages 277 to 283 of this Annual report, disclose the Parent Company\u2019s distributable reserves of \u00a3306.3 million. Suf\ufb01cient reserves are available across the Group as a whole to make future distributions in accordance with the Group\u2019s dividend policy for the foreseeable future. The majority of the Group\u2019s 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 that the Parent Company has access to these reserves. The immediate cash resources of the Group of \u00a3238.0 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\u2019s \ufb01nancing facilities (see note 4.2) place customary conditions on the amount of dividend payments to 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 the Viability statement on page 75 and note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. Other reserves Other equity reserves reflect the impact of certain historical transactions, which are described under the table below: Capital redemption reserve \u00a3m Translation reserve \u00a3m Merger reserve \u00a3m Treasury shares \u00a3m Total other reserves \u00a3m At 1 January 2021 1.5 35.4 710.8 (50.4) 697.3 Exchange differences on translation of foreign operations \u2013 8.7 \u2013 \u2013 8.7 At 1 January 2022 1.5 4 4 .1 710.8 (50.4) 706.0 Exchange differences on translation of foreign operations \u2013 42.4 \u2013 \u2013 42.4 Exchange differences on acquisition of interest in Alabama Pellets LLC \u2013 (0.7) \u2013 \u2013 (0.7) At 31 December 2022 1.5 85.8 710.8 (50.4) 747.7 The capital redemption and treasury share reserves arose when the Group completed previous share buyback programmes. The 13.8 million shares held in the treasury share reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\u2019s US and Canadian subsidiaries from their functional currencies (USD and CAD) into sterling for presentation in these Consolidated \ufb01nancial statements are recognised in the translation reserve. Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \ufb01nancial instruments designated into hedge accounting relationships in accordance with IFRS 9, are set out in notes 7.3 and 7.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-589": { "value": "This section gives further information on the operating assets the Group uses to generate revenue and the short-term liquid assets and liabilities, managed during day-to-day operations, that comprise the Group\u2019s working capital balances. 3.1 Property, plant and equipment This note shows the cost, depreciation 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 less impairment, 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 the 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 brought into use and over its UEL. Where relevant, this is limited to the expected 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 way 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 2022 (years) Freehold buildings 20 Plant and equipment Electricity generation assets: Drax Power Station common plant 14 Drax Power Station biomass-speci\ufb01c assets 16 Hydro-electric plants (including pumped storage) 39 Pellet production plant 10 Other plant, machinery and equipment 14 Reinstatement asset 17 Plant spare parts 17 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 2022 is \u00a337.5 million (2021: \u00a326.9 million). An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is de\ufb01ned to be the higher of an asset\u2019s value in use and its fair value less costs to sell. The Group\u2019s policy is to recognise an impairment charge through accumulated depreciation if the asset will continue to be used by the Group or if the asset will be subsequently sold. However, if the asset is still under construction, as no depreciation has yet been charged, the impairment charge is recognised in cost. Assets that will no longer be used by the Group are disposed of by removing both the cost and any accumulated depreciation and impairment. Electricity generation assets are grouped according to the fuel type of the relevant plant. Certain assets at Drax Power Station are common to the whole plant. Pellet Production plant includes the US and Canadian based assets of the Group\u2019s 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. Occasionally, plant spare parts are required to be used within 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 on 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 or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed as incurred. Estimated UELs and residual values are reviewed annually, taking into account regulatory changes 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\u2019s accounting policy in respect of impairment, along with details of the impairment review conducted during 2022 and disclosures relating to the impairment of Daldowie and Abergelli assets, are set out in note 2.4. During the year, the Group has capitalised \u00a319.1 million (2021: \u00a35.4 million) of costs relating to the UK BECCS project at Drax Power Station. The Group has also commenced construction of the Group\u2019s three OCGT projects that have obtained Capacity Market contracts. The costs capitalised in the year on the OCGT projects total \u00a390.2 million (2021: \u00a3 7. 8 million). The Group\u2019s total commitment for future capital expenditure is disclosed in note 7.7. Signi\ufb01cant estimation uncertainty Assets\u2019 UELs are reviewed annually at each reporting date, taking into consideration the impact of climate and environmental change. See note 3.8 for further details. As disclosed on page 178, 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\u2019s net zero strategy becomes clearer, particularly in relation to UK BECCS, the Group will continue to assess any potential impact of these developments and whether the UEL of Drax Power Station is impacted. The continued rate of change in these areas increases the risk that UELs 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\u2019s biomass assets has been disclosed as a key source of estimation uncertainty. If UK BECCS is 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 currently limited to end of station life of 2039 were to increase by a further 10 years, the annual depreciation charge for the year would decrease by approximately \u00a314.2 million. Freehold land and buildings \u00a3m Plant and equipment \u00a3m Plant spare parts \u00a3m Assets under the course of construction \u00a3m Total \u00a3m Cost: At 1 January 2021 389.3 2,836.3 69.6 188.8 3,484.0 Additions at cost 13.9 0.9 5.3 195.4 215.5 Acquired in business combinations 43.8 185.0 \u2013 61.1 289.9 Disposals (1) (1.4) (24.1) \u2013 \u2013 (25.5 ) Movement in reinstatement asset (1) \u2013 (2.7) \u2013 \u2013 (2.7) Issues to maintenance projects \u2013 \u2013 (5.5) \u2013 (5.5) Transfers from inventories \u2013 \u2013 3.7 \u2013 3.7 Transfers from right-of-use assets 0.3 0.7 \u2013 \u2013 1.0 Transfers from intangibles (2) \u2013 \u2013 \u2013 18 .1 18 .1 Transfers between PPE categories 5.7 156.4 (0.8) (161.3) \u2013 Effect of changes in foreign exchange rates 2.2 8.0 \u2013 2.2 12.4 At 1 January 2022 453.8 3,160 . 5 72.3 304.3 3,990.9 Additions at cost 8.2 2.2 3.8 231.8 246.0 Acquired in business combinations 3.3 4.6 \u2013 \u2013 7.9 Impairment (0.2) \u2013 \u2013 (6.7) (6.9) Disposals (1.3) (23.7) \u2013 (0.9) (25.9) Movement in reinstatement asset \u2013 (22.4) \u2013 \u2013 (22.4) Issues to maintenance projects \u2013 \u2013 (3.3) \u2013 (3.3) Transfers from inventories \u2013 \u2013 0.5 \u2013 0.5 Transfers from/(to) intangibles \u2013 0.3 \u2013 (0.3) \u2013 Transfers between PPE categories 22.3 202.6 7.7 (232.6) \u2013 Effect of changes in foreign exchange rates 17.2 52.6 \u2013 13.3 83.1 At 31 December 2022 503.3 3,376.7 81.0 308.9 4,269.9 Accumulated depreciation: At 1 January 2021 102.4 1,415.6 24.9 \u2013 1,542.9 Depreciation charge for the year 15.8 130.2 3.8 \u2013 149.8 Disposals (0 .1) (16.2) \u2013 \u2013 (16.3) Issues to maintenance projects \u2013 \u2013 (0.8) \u2013 (0.8) Transfers from right-of-use assets 0.1 0.7 \u2013 \u2013 0.8 Transfers between PPE categories (0.4) 0.4 \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 0.4 3.4 \u2013 \u2013 3.8 At 1 January 2022 118.2 1, 53 4 .1 27.9 \u2013 1,680.2 Depreciation charge for the year 21.5 171.6 2.5 \u2013 195.6 Impairment 0.5 7.5 \u2013 \u2013 8.0 Disposals (1.7) (19.7) \u2013 \u2013 (21.4) Issues to maintenance projects \u2013 \u2013 (0.4) \u2013 (0.4) Transfers between PPE categories (0.3) (3.2) 3.5 \u2013 \u2013 Effect of changes in foreign exchange rates 4.1 15.8 \u2013 \u2013 19.9 At 31 December 2022 142.3 1,70 6 .1 33.5 \u2013 1,881.9 Net book value: At 31 December 2021 335.6 1,626.4 44.4 304.3 2,310.7 At 31 December 2022 361.0 1,670.6 47.5 308.9 2,388.0 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. Included in the amount for assets under the course of construction are capitalised borrowing costs of \u00a35.2 million (2021: \u00a3nil) related to the construction of the three OCGT projects that have obtained a Capacity Market contract. In the table above, impairments within cost of \u00a36.9 million relate to the write down of the Group\u2019s fourth OCGT project that has not obtained a Capacity Market contract. Impairments within accumulated depreciation of \u00a38.0 million relate to the write down of assets at the Daldowie fuel plant. See note 2.4 for further details of the Group\u2019s accounting policy for impairments of \ufb01xed assets. 3.1 Property, plant and equipment continued Plant and equipment shown above includes the following categories of assets: Biomass and coal plant \u00a3m Hydro-electric plant \u00a3m Pellet production plants \u00a3m Other \u00a3m Total plant and equipment \u00a3m Cost: At 1 January 2021 2,072.9 471.0 276.4 16.0 2,836.3 Additions at cost \u2013 \u2013 0.8 0 .1 0.9 Acquired in business combinations \u2013 \u2013 185.0 \u2013 185.0 Disposals (1) (17.5) \u2013 (5.6) (1.0) (24 .1) Movement in reinstatement asset (1) (2.7) \u2013 \u2013 \u2013 (2.7) Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7 Transfers between PPE categories 65.1 5.0 82.0 4.3 156.4 Effect of changes in foreign exchange rates \u2013 \u2013 8.0 \u2013 8.0 At 1 January 2022 (2) 2,117. 8 476.0 5 47.3 19.4 3,16 0 . 5 Additions at cost 1.0 \u2013 0.9 0.3 2.2 Acquired in business combinations \u2013 \u2013 4.6 \u2013 4.6 Disposals (0.1) \u2013 (21.1) (2.5) (23.7) Movement in reinstatement asset (22.4) \u2013 \u2013 \u2013 (22.4) Transfers from intangibles \u2013 \u2013 0.3 \u2013 0.3 Transfers between PPE categories 45.0 3.4 154.2 \u2013 202.6 Effect of changes in foreign exchange rates \u2013 \u2013 52.6 \u2013 52.6 At 31 December 2022 2,141. 3 479.4 738.8 17.2 3,376.7 Accumulated depreciation: At 1 January 2021 1,298.4 2 8 .1 7 7.3 11.8 1,415.6 Depreciation charge for the year 70.3 12 .1 45.0 2.8 130.2 Disposals (11.2) \u2013 (4.2) (0.8) (16.2) Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7 Transfers between PPE categories (1.0) 1.0 0.4 \u2013 0.4 Effect of changes in foreign exchange rates \u2013 \u2013 3.4 \u2013 3.4 At 1 January 2022 1,356.5 41.2 122.6 13.8 1,53 4 .1 Depreciation charge for the year 64.3 12 .1 92.9 2.3 171.6 Impairment \u2013 \u2013 7.5 \u2013 7.5 Disposals \u2013 \u2013 (17.3) (2.4) (19.7) Transfers between PPE categories (3.5) \u2013 0.3 \u2013 (3.2) Effect of changes in foreign exchange rates \u2013 \u2013 15.8 \u2013 15.8 At 31 December 2022 1,417.3 53.3 221.8 13.7 1,70 6 .1 Net book value: At 31 December 2021 761.3 434.8 424.7 5.6 1,626.4 At 31 December 2022 724.0 426 .1 517.0 3.5 1,670.6 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. The depreciation expense in the Consolidated income statement of \u00a3208.0 million comprises of \u00a3195.6 million of depreciation charged on property, plant and equipment, \u00a320.3 million charged on right-of-use assets (see note 3.2) offset by \u00a37.9 million of depreciation included in closing inventories. The increase in depreciation of pellet production plants during the year includes the impact of planned higher levels of capital expenditure in relation to plant upgrades and capacity expansions, and includes some accelerated depreciation for existing equipment that has been, or will be, replaced following capital investments. The UELs of impacted assets were reviewed and updated at the start of 2022 to re\ufb02ect these plans, and the impact of these updates on the depreciation charge for 2022 was around an additional \u00a322.0 million charge. 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 identi\ufb01ed asset is controlled by the Group for a period of time. If the Group is deemed to have control of an identi\ufb01ed 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 speci\ufb01c 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 speci\ufb01c proxies for risk-free rates, such as UK Gilt curves, and an adjustment for credit risk based on the Group\u2019s credit rating. The liability is subsequently adjusted for interest, repayments and other modi\ufb01cations. 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 modi\ufb01cations 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 modi\ufb01cation 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 scope of the lease. All other modi\ufb01cations 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 probable that the option will be exercised. Leases with a term shorter than 12 months, or where the identi\ufb01ed asset has a value below \u00a33,500, are expensed to the Consolidated income statement on a straight-line basis over the term of the agreement. Right-of-use assets Land and buildings \u00a3m Plant and equipment \u00a3m Railcars \u00a3m Vessels \u00a3m Total \u00a3m Cost: At 1 January 2021 23.7 9.1 8.7 \u2013 41.5 Additions at cost 0.2 7. 0 4 .1 33.3 44.6 Other movements (0.5) (4.2) (0.3) \u2013 (5.0) Transfers to PPE (0.3) (0.7) \u2013 \u2013 (1.0) Acquired in business combinations 4.7 4 .1 17.0 34.6 60.4 Effect of changes in foreign exchange rates 0 .1 (0.1) 0.7 0.6 1.3 At 1 January 2022 27.9 15.2 30.2 68.5 141.8 Additions at cost 5.1 4.7 2.2 19.8 31.8 Other movements (3.1) 4.0 (0.8) \u2013 0 .1 Effect of changes in foreign exchange rates 0.5 0.9 2.1 2.5 6.0 At 31 December 2022 30.4 24.8 33.7 90.8 179.7 Accumulated depreciation and impairment: At 1 January 2021 6 .1 4.2 2.2 \u2013 12.5 Depreciation charge for the year 4.3 4.6 3.2 3.1 15.2 Other movements (1.9) (3.3) (0.3) \u2013 (5.5) Transfers to PPE (0.1) (0.7) \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates 0 .1 \u2013 0.5 \u2013 0.6 At 1 January 2022 8.5 4.8 5.6 3.1 22.0 Depreciation charge for the year 3.9 6.0 4.6 5.8 20.3 Other movements (1.1) (0.4) \u2013 \u2013 (1.5) Effect of changes in foreign exchange rates 0.2 0.2 0.4 (0.2) 0.6 At 31 December 2022 11.5 10.6 10.6 8.7 41.4 Net book value: At 31 December 2021 19.4 10.4 24.6 65.4 119.8 At 31 December 2022 18.9 14.2 23.1 82 .1 138.3 Lease liabilities Year ended 31 December Carrying amount: 2022 \u00a3m 2021 \u00a3m At 1 January 125.9 30.2 Additions 30.2 44.7 Acquired in business combinations \u2013 61.1 Interest charge for the year 6.8 4.9 Payments (24.8) (17.9) Other movements 3.4 0.2 Effect of changes in foreign exchange rates 11.6 2.7 At 31 December 153.1 125.9 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 \u00a30.1 million during the year (2021: \u00a30.8 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 2022 \u00a3m 2021 \u00a3m Within one year 30.3 21.2 Within one to two years 26.7 18.9 Within two to \ufb01ve years 64.3 46.4 After \ufb01ve years 72.0 78.4 Total gross lease liabilities 193.3 164.9 Effect of discounting (40.2) (39.0) Lease liabilities recognised in the Consolidated balance sheet 153.1 125.9 Current portion 22.7 15.1 Non-current portion 130.4 110.8 The Group recognised the following charges from continuing operations relating to leases in the Consolidated income statement: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Expense relating to short-term leases 0 .1 0.8 Interest charge for the year 6.8 4.9 Depreciation charge for the year 20.3 15.2 3.3 Renewable certi\ufb01cate assets The Group earns renewable certi\ufb01cate assets including ROCs and REGOs which are accredited by the Of\ufb01ce for Gas and Electricity Markets (Ofgem), as a result of burning biomass pellets to generate electricity at Drax Power Station and generating renewable energy at a number of the Group\u2019s hydro-electric plants. The Group\u2019s ROC and REGO certi\ufb01cates are sold bilaterally to counterparties, including external suppliers, and also internally for utilisation by the Customers business. This note sets out the value of these certi\ufb01cate assets that the Group held at the reporting date. Accounting policy Renewable certi\ufb01cates, principally ROCs and REGOs, are \ufb01rst recognised as current assets in the period they are generated. The Group uses their fair value at initial recognition, based on anticipated sales prices, as deemed cost. The value of renewable certi\ufb01cates earned is recognised in the Consolidated income statement as a reduction to cost of sales in the same period they are earned. Where the Customers business incurs an obligation to deliver renewable certi\ufb01cates, that obligation is provided for in the period incurred within cost of sales. ROCs and REGOs valuation 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 to cover the renewable certi\ufb01cates generated in a period, then they are recognised at the contracted price. Any renewable certi\ufb01cates generated above this, or to be utilised by the Customers 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. ROC valuations are comprised of two parts: the expected value to be obtained in a sales transaction with a third-party supplier relating to the buy-out price; and an estimate of the future bene\ufb01t that may be obtained from the ROC recycle fund at the end of the CP, which runs from April to March each year. The recycle fund provides a bene\ufb01t where supplier buy-out charges (incurred by suppliers who do not procure suf\ufb01cient 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 and also the demand for ROCs over the CP, and is thus subject to some uncertainty. The Group utilises external sources of information 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. At each reporting date, the Group reviews the carrying value of renewable certi\ufb01cate 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, the likely utilisation of renewable certi\ufb01cates generated to settle the Group\u2019s own obligations, and any relevant information about the levels of wider renewable generation. Any impairment loss is recognised in the Consolidated income statement in the period incurred. Year ended 31 December Carrying amount: 2022 \u00a3m 2021 \u00a3m At 1 January 301.4 139.6 Earned from generation 652.5 658.2 Purchased from third-parties 486.3 361.3 Utilised by the Customers business (39 4.1) (320.7) Sold to third-parties (858.3) (537. 0) At 31 December 187. 8 301.4 Recognition of revenue from the sale of renewable certi\ufb01cates is described in further detail in note 2.2. 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 and waste pellets. This note shows the cost of biomass, coal, other fuels and plant consumables held at the reporting date. Accounting policy The Group\u2019s raw materials and fuel inventory are valued at the lower of the weighted average cost to purchase and net realisable value. The cost of purchased fuel inventories includes all direct costs and overheads incurred in bringing the fuel to its 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 when they arise. Both biomass and coal inventories are weighed when entering, moving within or exiting the Group\u2019s sites using technology regularly calibrated to industry standards. Fuel burn in the electricity generation process is calculated using a combination of weights and thermal ef\ufb01ciency calculations to provide closing inventory volumes. Both calibrated weighers and ef\ufb01ciency calculations are subject to a range of tolerable error. All fuel inventories are subject to regular surveys to ensure these measurements are suf\ufb01ciently 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 \ufb01re prevention purposes and thus cannot be surveyed using traditional methods. Biomass inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy of the weights and ef\ufb01ciency methods outlined above. The cost of manufactured fuel inventories includes all direct costs incurred in production and conversion including raw materials, labour, direct overheads and other costs incurred in bringing the inventories to their existing condition and location. It also includes an allocation of overheads, including depreciation and other indirect costs. 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. The valuation of \ufb01bre inventory involves estimations of the conversion rates to determine the volume of residual \ufb01bre 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 2022 \u00a3m 2021 \u00a3m Biomass \u2013 \ufb01nished goods 294.5 144.6 Biomass \u2013 \ufb01bre and other raw materials 16.5 12.8 Coal \u2013 8.4 Other fuels and consumables 37.1 33.3 Total inventories 3 4 8 .1 19 9.1 The net realisable value of coal in the prior year in the table above was stated after provisions of \u00a30.9 million. No inventory provisions have been recognised in the current year. The increase in the value of biomass \ufb01nished goods held at the reporting date results from the planned build-up of inventories due to the repro\ufb01ling of generation into winter from summer when it was originally planned, along with higher biomass prices. At the request of the UK Government, the Group entered into an agreement with National Grid to keep the two coal units at Drax Power Station available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and only operate if and when instructed to do so by National Grid. Under the terms of this contract, the Group no longer has control of any coal inventory. The cost of inventories recognised as an expense in the year ended 31 December 2022 was \u00a31,587.9 million (2021: \u00a31,352.0 million). This includes the value of write downs of inventory in the year. 3.5 Trade and other receivables and contract assets Trade receivables represent amounts owed by customers for goods or services provided that have been invoiced for but have not yet been paid. Accrued income represents income earned in the period but not yet invoiced, largely in respect of power delivered to customers that will be invoiced the following month. Accounting policy Trade and other receivables are initially measured at the transaction price and subsequently measured at amortised cost. The Group has access to a receivables monetisation facility under which amounts receivable can be sold to a third-party on a non- recourse basis. Receivables sold under such facilities 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 \ufb01nancial assets. These receivables are derecognised at the point of sale which is shortly after the initial recognition of the receivable balance. As a result, no fair value gains or losses have been recognised. Fees are recognised in the Consolidated income statement as incurred within interest payable and similar charges. At 31 December 2022, the receivables sold under this facility were \u00a3400.0 million (2021: \u00a3200.0 million), reflecting the increase in the size of the facility during the year. Refer to note 4.3 for further information about the facility. Contingent consideration receivable is a \ufb01nancial asset. As the cash flows are not solely payments of principal and interest, it does not meet the criteria for recognition at either amortised cost or FVOCI, and is therefore recognised at fair value through pro\ufb01t and loss (FVTPL). The UK Government introduced the Energy Bill Relief Scheme (EBRS) from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period has a discount applied under the EBRS. The Group claims this discount back from the Government. The amount the Group is entitled to claim from the Government is either recognised in other receivables, if it has been claimed but has not yet been received from the Government, or accrued income if not yet claimed at the reporting date. See note 2.2 for details of energy supplied under the EBRS within the Consolidated income statement. As at 31 December 2022 \u00a3m 2021 \u00a3m Amounts falling due within one year: Trade receivables 276.6 187.5 Accrued income 522.5 270.3 Prepayments 127.7 97.4 Other receivables 272.8 59.0 Contingent consideration 27. 4 27.7 Total trade and other receivables and contract assets 1,227.0 641.9 At 31 December 2022, the Group had no amounts receivable from signi\ufb01cant counterparties which represented 10% or more of total trade receivables and accrued income (2021: one signi\ufb01cant counterparty). Of total trade receivables and accrued income at 31 December 2022, \u00a3587.0 million (2021: \u00a3314.0 million) relates to the Customers business, \u00a3168.0 million relates to the Generation business (2021: \u00a3125.9 million), and \u00a344.1 million (2021: \u00a317.9 million) relates to the Pellet Production business. The contingent consideration relates to the Group\u2019s 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, \u00a329.0 million of contingent consideration would become payable to the Group from the acquirer. The estimated fair value of this contingent consideration is \u00a327.4 million (2021: \u00a327.7 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. See note 7.1 for further details on the contingent consideration. 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 payment is not yet due. Any amount previously recognised as a contract asset is reclassi\ufb01ed to trade receivables at the point at which it is invoiced to the customer, usually in the following \ufb01nancial period. Contract assets at 31 December 2022 were \u00a320.0 million (2021: \u00a36.0 million). Impairment of \ufb01nancial assets Accounting policy The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group\u2019s \ufb01nancial assets including trade receivables, accrued income, contract assets and other \ufb01nancial 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 \ufb01nancial assets, the Group recognises a lifetime expected credit loss provision when there has been a signi\ufb01cant increase in credit risk since initial recognition. If the credit risk of the \ufb01nancial instrument has not increased signi\ufb01cantly since initial recognition, the Group recognises a 12-month expected credit loss provision. The greatest concentration of credit risk exists in the Customers business. For the larger consumers within the Customers business (and also customers within the Generation and Pellet Production businesses) a provision matrix method is adopted. For the SME consumers within the Customers business, the risk is higher due to the wide range of customer characteristics within the portfolio. The loss provisioning for these customers is complex and requires a provisioning tool that is more dynamic than the provision matrix method and so a combined probability method is applied. Both of these approaches are described in more detail below. Under the Group\u2019s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally for recovery of the balance. The Group writes off a \ufb01nancial 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. Combined probability method The Group uses a machine learning algorithm to calculate expected credit losses for its SME customer base. The algorithm predicts the future performance of debt on an individual account basis using a broad range of indicators that are speci\ufb01c to the customer. The algorithm forms predictions, based on historical experience, of the debt on each account reaching greater than 365 days past due. A timeframe of 13 months is the normal period of historic data to which the algorithm is trained. The customer\u2019s behaviours and performance in this period inform the current provisioning for the existing debt portfolio. As required by IFRS 9, the calculation of expected credit losses incorporates both historical and forward-looking information. Management considers the 13 month period on which the algorithm is trained and determines whether any additional provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2022, these factors included, but were not limited to, expectations around future inflation and interest rates, customer pricing and the impact of Government support for customers. In the current period, management concluded that no additional provision was required (2021: no additional provision was required). Provision matrix method Larger consumers within the Customers business and customers within the Generation and Pellet Production businesses 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: 2022 2021 Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m At 1 January 44.4 2.2 46.6 51.4 5.0 56.4 Amounts written off (39.7) (2.6) (42.3) (41.5) (2.0) (43.5) Net additional amounts provided against 50.2 6.4 56.6 34.5 (0.8) 33.7 At 31 December 54.9 6.0 60.9 44.4 2.2 46.6 Gross trade receivables 189.1 148.4 337.5 14 4.1 90.0 23 4 .1 Average Expected Credit Loss % 29% 4% 18% 31% 2% 20% The provision above relates to trade receivables in the Customers business. If the calculated provision rates were 10% higher than the provision rates calculated at the reporting date, the impact to the provision would be an increase of \u00a34.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both Generation and Pellet Production businesses. The risk of default within the Pellet Production and Generation businesses is considered to be remote. This is supported by strong historic collection rates and timely receipts. The Pellet Production business has a remote risk of default because the external customer base are high-quality counterparties with long-term supply contracts. Furthermore, invoices are usually settled within seven days with negligible levels of aged debt. The current economic environment and pressure on energy markets resulted in signi\ufb01cantly higher commodity prices during 2022, and in turn higher bills raised to some of the Group\u2019s customers. This has resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected loss provision, particularly for SME customers. Prices for the deemed customer portfolio have seen the most signi\ufb01cant increases. Deemed supply is where electricity or gas is supplied to a site or customer that is yet to enter into a contract and, as a result, they are charged on a standard variable tariff based on merchant power and gas prices. Given the increases in these standard variable prices during the year, the recoverability of these balances has become more challenging. The expected credit loss provision has been updated to reflect this change. The coverage levels of the provision are in line with the outturn performance experienced during Covid-19, a period which was also signi\ufb01cantly impacted by challenging macro- economic conditions. In October 2022, in response to the signi\ufb01cant increase in energy prices, the Government introduced support for non-domestic customers through the EBRS. This has provided \ufb01nancial support to customers during this period as described in more detail in note 2.2. The Group received no incremental revenue over that to which it was contractually entitled, due to this scheme. The net charge to the Consolidated income statement in 2022 for impairment losses on \ufb01nancial assets was \u00a348.0 million (2021: \u00a316.3 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a356.6 million (2021: \u00a333.7 million) less an \u00a38.6 million (2021: \u00a317.4 million) bene\ufb01t in the period in respect of resolution of legacy credit balances. The value of provisions calculated using the combined probability model is set out below. This shows the trade receivables balances for SME consumers within the Customers business grouped by the combined probability assigned by the model. The following table shows the comparative risk pro\ufb01le of amounts due based on the combined probability model at 31 December: 2022 2021 Probability of default range % Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m 80\u2013100 50.0 40.4 43.3 35.3 50\u201379 16.8 8.9 10.7 5.7 26\u201349 18.2 5.5 11.1 3.3 0\u201325 10 4 .1 0.1 79.0 0 .1 Total 189.1 54.9 14 4 .1 44.4 The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the risk pro\ufb01le in 30-day increments of the trade receivables within the Generation and Pellet Production businesses, the trade receivables of the Group\u2019s larger consumers within the Customers business, and accrued income (including contract assets) of the Group at each reporting date. As at 31 December 2022 As at 31 December 2021 Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate \u00a3m \u00a3m % \u00a3m \u00a3m % Accrued income balances not yet due 7.6 530.1 1% 8.6 278.9 3% Trade receivables days past due: Balances not yet due 1.8 115.0 2% 0.4 70.8 1% Between 0-30 days 0.8 22.1 4% 0 .1 14.0 1% Between 31-60 days 0.7 3.3 21% 0.2 1.2 17% Between 61-90 days 0.6 1.5 42% 0 .1 0.8 13% Over 90 days 2 .1 6.5 33% 1.4 3.2 44% Trade receivables total 6.0 148.4 4% 2.2 90.0 2% Total 13.6 678.5 2% 10.8 368.9 3% The expected credit loss provision of \u00a313.6 million (2021: \u00a310.8 million) in the table above wholly relates to the Customers business. The expected credit loss rates above are expressed as a percentage of the gross carrying amount of all of the Group\u2019s trade receivables and accrued income balances that are subject to the provision matrix method. The expected credit loss provision calculated for other \ufb01nancial 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 Customers 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 2022 \u00a3m 2021 \u00a3m At 1 January 23.7 4 0 .1 Additions 30.7 14.0 Amortisation (24.6) (30.4) At 31 December 29.8 23.7 3.7 Trade and other payables and contract liabilities Trade and other payables represent amounts the Group owes to its suppliers for trade purchases and ongoing costs, taxes and social security amounts due in relation to the Group\u2019s 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\u2019s activities in the current period (e.g. fuel received but for which the Group has not yet been invoiced). Contract liabilities represent the Group\u2019s 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 measured at amortised cost. The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring under which certain suppliers can obtain early access to payments. There are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease. The amount due is recognised in trade payables. The Group also has access to payment facilities, utilised to leverage scale and ef\ufb01ciencies in transaction processing. Under these facilities the Group bene\ufb01ts from an extension to payment terms of less than 12 months for a small fee. The original liability is derecognised and 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, in the period incurred. The Group does not include trade and other payables in its calculation of Net debt (see note 2.7). As at 31 December 2022 \u00a3m 2021 \u00a3m Trade payables 152.9 147.8 Fuel accruals 107.7 50.3 Energy supply accruals 511.4 36 2.1 Other accruals 370.9 269.8 Other payables 351.0 366.5 Contract liabilities 34.0 14.6 Total Trade and other payables and contract liabilities 1,527.9 1,211.1 Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying amounts of trade and other payables are the same as their fair values, due to their short-term nature. Trade payables includes \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. Other payables includes \u00a3214.5 million (2021: \u00a362.2 million) due under other payment facilities which includes amounts due under deferred letters of credit in respect of the construction of the Group\u2019s three OCGT assets that obtained a Capacity Market contract. Energy supply accruals includes \u00a3315.0 million (2021: \u00a3264.3 million) in relation to the Group\u2019s obligation to deliver ROCs arising from activities in the Customers business. The remaining balance principally comprises third-party grid charge accruals of \u00a3108.5 million (2021: \u00a348.2 million) and Feed-in-Tariff accruals of \u00a346.8 million (2021: \u00a319.8 million). Energy supply accruals have increased as a result of both higher supply volumes and higher prices. Other accruals includes \u00a311.1 million (2021: \u00a339.3 million) in respect of the Group\u2019s estimated obligation to deliver carbon emissions allowances under the UK Emission Trading Scheme (UK ETS). Allowances are purchased in the market and are recorded at cost. Other accruals also includes accruals for capital and operating expenditure where the invoices have not yet been received. Contract liabilities primarily relate to the advance consideration received from customers for \ufb01xed 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. Additions in the year include \u00a314.4 million in the Generation business in relation to the winter coal contract with the National Grid to provide a \u2018winter contingency\u2019 service to the UK power system. The reconciliation of opening to closing contract liabilities is as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 14.6 11.1 Revenue recognised in the year that was included in the contract liability at the start of the period (6.6) (5.4) Additions as a result of cash received from customers in the period not yet recognised in revenue 26.0 8.9 At 31 December 34.0 14.6 3.8 Climate change Climate change, and tackling it, is pervasive to the Group\u2019s purpose, as set out in the Strategic report on pages 2 to 91. The Sustainable development report, starting on page 36 sets out how the Group\u2019s ambition is to be climate positive and the TCFD disclosures, starting on page 52, set out the Group\u2019s approach to managing climate risks, including scenario analysis. Climate change is factored into short, medium and long-term forecasts and estimates used by the Group. Several areas of the Consolidated \ufb01nancial statements have climate considerations in relation to them, namely: Area Description Page reference Judgements in relation to key sources of estimation uncertainty Impairment of assets, UELs of property, plant and equipment and capitalisation of development project costs are all sensitive to climate change. Please see further details below. 178 Impairment of assets The Group\u2019s expectations around the impacts of climate change, and in particular the requirements of the UK Government\u2019s commitment to reach net zero by 2050, are integral to the forecasts used to underpin the Group\u2019s impairment analyses. 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. Governmental and societal responses to climate change are still developing, and therefore \ufb01nancial statements cannot capture all potential future scenarios as these are not yet known. This presents uncertainty around future cash\ufb02ows from an IAS 36 perspective. Sensitivities modelled, including around biomass acceptability, seek to capture some of these potential scenarios. Also, operational outages, whether caused by climate related events or other factors, are some of the sensitivities modelled in the impairment testing. 194 Going concern and viability As above, forecast power prices and operational outages are also incorporated into the going concern and viability assessments. 176 for going concern and 75 for viability Fixed asset UELs Climate impacts are one of the factors assessed in determining how long the Group anticipate both additions and existing assets to operate for. For example, the OCGT assets under development will be given a UEL commensurate with the Group\u2019s expectations around the UK\u2019s transition to a net zero position by 2050. Although, as outlined in the Key sources of estimation uncertainty, the likelihood is that UELs at Drax Power Station will be extended, were UELs to be shortened by 10 years, whether as a result of climate change or otherwise, depreciation would increase by approximately \u00a365 million per year. 210 ", "dimensions": { "concept": "draxgroupplc:DisclosureOfOperatingAssetsAndWorkingCapital", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-583": { "value": "3.1 Property, plant and equipment This note shows the cost, depreciation 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 less impairment, 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 the 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 brought into use and over its UEL. Where relevant, this is limited to the expected 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 way 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 2022 (years) Freehold buildings 20 Plant and equipment Electricity generation assets: Drax Power Station common plant 14 Drax Power Station biomass-speci\ufb01c assets 16 Hydro-electric plants (including pumped storage) 39 Pellet production plant 10 Other plant, machinery and equipment 14 Reinstatement asset 17 Plant spare parts 17 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 2022 is \u00a337.5 million (2021: \u00a326.9 million). An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is de\ufb01ned to be the higher of an asset\u2019s value in use and its fair value less costs to sell. The Group\u2019s policy is to recognise an impairment charge through accumulated depreciation if the asset will continue to be used by the Group or if the asset will be subsequently sold. However, if the asset is still under construction, as no depreciation has yet been charged, the impairment charge is recognised in cost. Assets that will no longer be used by the Group are disposed of by removing both the cost and any accumulated depreciation and impairment. Electricity generation assets are grouped according to the fuel type of the relevant plant. Certain assets at Drax Power Station are common to the whole plant. Pellet Production plant includes the US and Canadian based assets of the Group\u2019s 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. Occasionally, plant spare parts are required to be used within 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 on 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 or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed as incurred. Estimated UELs and residual values are reviewed annually, taking into account regulatory changes 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\u2019s accounting policy in respect of impairment, along with details of the impairment review conducted during 2022 and disclosures relating to the impairment of Daldowie and Abergelli assets, are set out in note 2.4. During the year, the Group has capitalised \u00a319.1 million (2021: \u00a35.4 million) of costs relating to the UK BECCS project at Drax Power Station. The Group has also commenced construction of the Group\u2019s three OCGT projects that have obtained Capacity Market contracts. The costs capitalised in the year on the OCGT projects total \u00a390.2 million (2021: \u00a3 7. 8 million). The Group\u2019s total commitment for future capital expenditure is disclosed in note 7.7. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-610": { "value": "3.1 Property, plant and equipment This note shows the cost, depreciation 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 less impairment, 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 the 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 brought into use and over its UEL. Where relevant, this is limited to the expected 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 way 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 2022 (years) Freehold buildings 20 Plant and equipment Electricity generation assets: Drax Power Station common plant 14 Drax Power Station biomass-speci\ufb01c assets 16 Hydro-electric plants (including pumped storage) 39 Pellet production plant 10 Other plant, machinery and equipment 14 Reinstatement asset 17 Plant spare parts 17 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 2022 is \u00a337.5 million (2021: \u00a326.9 million). An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is de\ufb01ned to be the higher of an asset\u2019s value in use and its fair value less costs to sell. The Group\u2019s policy is to recognise an impairment charge through accumulated depreciation if the asset will continue to be used by the Group or if the asset will be subsequently sold. However, if the asset is still under construction, as no depreciation has yet been charged, the impairment charge is recognised in cost. Assets that will no longer be used by the Group are disposed of by removing both the cost and any accumulated depreciation and impairment. Electricity generation assets are grouped according to the fuel type of the relevant plant. Certain assets at Drax Power Station are common to the whole plant. Pellet Production plant includes the US and Canadian based assets of the Group\u2019s 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. Occasionally, plant spare parts are required to be used within 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 on 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 or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed as incurred. Estimated UELs and residual values are reviewed annually, taking into account regulatory changes 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\u2019s accounting policy in respect of impairment, along with details of the impairment review conducted during 2022 and disclosures relating to the impairment of Daldowie and Abergelli assets, are set out in note 2.4. During the year, the Group has capitalised \u00a319.1 million (2021: \u00a35.4 million) of costs relating to the UK BECCS project at Drax Power Station. The Group has also commenced construction of the Group\u2019s three OCGT projects that have obtained Capacity Market contracts. The costs capitalised in the year on the OCGT projects total \u00a390.2 million (2021: \u00a3 7. 8 million). The Group\u2019s total commitment for future capital expenditure is disclosed in note 7.7. Signi\ufb01cant estimation uncertainty Assets\u2019 UELs are reviewed annually at each reporting date, taking into consideration the impact of climate and environmental change. See note 3.8 for further details. As disclosed on page 178, 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\u2019s net zero strategy becomes clearer, particularly in relation to UK BECCS, the Group will continue to assess any potential impact of these developments and whether the UEL of Drax Power Station is impacted. The continued rate of change in these areas increases the risk that UELs 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\u2019s biomass assets has been disclosed as a key source of estimation uncertainty. If UK BECCS is 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 currently limited to end of station life of 2039 were to increase by a further 10 years, the annual depreciation charge for the year would decrease by approximately \u00a314.2 million. Freehold land and buildings \u00a3m Plant and equipment \u00a3m Plant spare parts \u00a3m Assets under the course of construction \u00a3m Total \u00a3m Cost: At 1 January 2021 389.3 2,836.3 69.6 188.8 3,484.0 Additions at cost 13.9 0.9 5.3 195.4 215.5 Acquired in business combinations 43.8 185.0 \u2013 61.1 289.9 Disposals (1) (1.4) (24.1) \u2013 \u2013 (25.5 ) Movement in reinstatement asset (1) \u2013 (2.7) \u2013 \u2013 (2.7) Issues to maintenance projects \u2013 \u2013 (5.5) \u2013 (5.5) Transfers from inventories \u2013 \u2013 3.7 \u2013 3.7 Transfers from right-of-use assets 0.3 0.7 \u2013 \u2013 1.0 Transfers from intangibles (2) \u2013 \u2013 \u2013 18 .1 18 .1 Transfers between PPE categories 5.7 156.4 (0.8) (161.3) \u2013 Effect of changes in foreign exchange rates 2.2 8.0 \u2013 2.2 12.4 At 1 January 2022 453.8 3,160 . 5 72.3 304.3 3,990.9 Additions at cost 8.2 2.2 3.8 231.8 246.0 Acquired in business combinations 3.3 4.6 \u2013 \u2013 7.9 Impairment (0.2) \u2013 \u2013 (6.7) (6.9) Disposals (1.3) (23.7) \u2013 (0.9) (25.9) Movement in reinstatement asset \u2013 (22.4) \u2013 \u2013 (22.4) Issues to maintenance projects \u2013 \u2013 (3.3) \u2013 (3.3) Transfers from inventories \u2013 \u2013 0.5 \u2013 0.5 Transfers from/(to) intangibles \u2013 0.3 \u2013 (0.3) \u2013 Transfers between PPE categories 22.3 202.6 7.7 (232.6) \u2013 Effect of changes in foreign exchange rates 17.2 52.6 \u2013 13.3 83.1 At 31 December 2022 503.3 3,376.7 81.0 308.9 4,269.9 Accumulated depreciation: At 1 January 2021 102.4 1,415.6 24.9 \u2013 1,542.9 Depreciation charge for the year 15.8 130.2 3.8 \u2013 149.8 Disposals (0 .1) (16.2) \u2013 \u2013 (16.3) Issues to maintenance projects \u2013 \u2013 (0.8) \u2013 (0.8) Transfers from right-of-use assets 0.1 0.7 \u2013 \u2013 0.8 Transfers between PPE categories (0.4) 0.4 \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 0.4 3.4 \u2013 \u2013 3.8 At 1 January 2022 118.2 1, 53 4 .1 27.9 \u2013 1,680.2 Depreciation charge for the year 21.5 171.6 2.5 \u2013 195.6 Impairment 0.5 7.5 \u2013 \u2013 8.0 Disposals (1.7) (19.7) \u2013 \u2013 (21.4) Issues to maintenance projects \u2013 \u2013 (0.4) \u2013 (0.4) Transfers between PPE categories (0.3) (3.2) 3.5 \u2013 \u2013 Effect of changes in foreign exchange rates 4.1 15.8 \u2013 \u2013 19.9 At 31 December 2022 142.3 1,70 6 .1 33.5 \u2013 1,881.9 Net book value: At 31 December 2021 335.6 1,626.4 44.4 304.3 2,310.7 At 31 December 2022 361.0 1,670.6 47.5 308.9 2,388.0 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. Included in the amount for assets under the course of construction are capitalised borrowing costs of \u00a35.2 million (2021: \u00a3nil) related to the construction of the three OCGT projects that have obtained a Capacity Market contract. In the table above, impairments within cost of \u00a36.9 million relate to the write down of the Group\u2019s fourth OCGT project that has not obtained a Capacity Market contract. Impairments within accumulated depreciation of \u00a38.0 million relate to the write down of assets at the Daldowie fuel plant. See note 2.4 for further details of the Group\u2019s accounting policy for impairments of \ufb01xed assets. 3.1 Property, plant and equipment continued Plant and equipment shown above includes the following categories of assets: Biomass and coal plant \u00a3m Hydro-electric plant \u00a3m Pellet production plants \u00a3m Other \u00a3m Total plant and equipment \u00a3m Cost: At 1 January 2021 2,072.9 471.0 276.4 16.0 2,836.3 Additions at cost \u2013 \u2013 0.8 0 .1 0.9 Acquired in business combinations \u2013 \u2013 185.0 \u2013 185.0 Disposals (1) (17.5) \u2013 (5.6) (1.0) (24 .1) Movement in reinstatement asset (1) (2.7) \u2013 \u2013 \u2013 (2.7) Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7 Transfers between PPE categories 65.1 5.0 82.0 4.3 156.4 Effect of changes in foreign exchange rates \u2013 \u2013 8.0 \u2013 8.0 At 1 January 2022 (2) 2,117. 8 476.0 5 47.3 19.4 3,16 0 . 5 Additions at cost 1.0 \u2013 0.9 0.3 2.2 Acquired in business combinations \u2013 \u2013 4.6 \u2013 4.6 Disposals (0.1) \u2013 (21.1) (2.5) (23.7) Movement in reinstatement asset (22.4) \u2013 \u2013 \u2013 (22.4) Transfers from intangibles \u2013 \u2013 0.3 \u2013 0.3 Transfers between PPE categories 45.0 3.4 154.2 \u2013 202.6 Effect of changes in foreign exchange rates \u2013 \u2013 52.6 \u2013 52.6 At 31 December 2022 2,141. 3 479.4 738.8 17.2 3,376.7 Accumulated depreciation: At 1 January 2021 1,298.4 2 8 .1 7 7.3 11.8 1,415.6 Depreciation charge for the year 70.3 12 .1 45.0 2.8 130.2 Disposals (11.2) \u2013 (4.2) (0.8) (16.2) Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7 Transfers between PPE categories (1.0) 1.0 0.4 \u2013 0.4 Effect of changes in foreign exchange rates \u2013 \u2013 3.4 \u2013 3.4 At 1 January 2022 1,356.5 41.2 122.6 13.8 1,53 4 .1 Depreciation charge for the year 64.3 12 .1 92.9 2.3 171.6 Impairment \u2013 \u2013 7.5 \u2013 7.5 Disposals \u2013 \u2013 (17.3) (2.4) (19.7) Transfers between PPE categories (3.5) \u2013 0.3 \u2013 (3.2) Effect of changes in foreign exchange rates \u2013 \u2013 15.8 \u2013 15.8 At 31 December 2022 1,417.3 53.3 221.8 13.7 1,70 6 .1 Net book value: At 31 December 2021 761.3 434.8 424.7 5.6 1,626.4 At 31 December 2022 724.0 426 .1 517.0 3.5 1,670.6 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. The depreciation expense in the Consolidated income statement of \u00a3208.0 million comprises of \u00a3195.6 million of depreciation charged on property, plant and equipment, \u00a320.3 million charged on right-of-use assets (see note 3.2) offset by \u00a37.9 million of depreciation included in closing inventories. The increase in depreciation of pellet production plants during the year includes the impact of planned higher levels of capital expenditure in relation to plant upgrades and capacity expansions, and includes some accelerated depreciation for existing equipment that has been, or will be, replaced following capital investments. The UELs of impacted assets were reviewed and updated at the start of 2022 to re\ufb02ect these plans, and the impact of these updates on the depreciation charge for 2022 was around an additional \u00a322.0 million charge. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-673": { "value": "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 brought into use and over its UEL. Where relevant, this is limited to the expected decommissioning date of the site where the asset is located. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-672": { "value": "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 way intended by management. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForConstructionInProgressExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-644": { "value": "Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying amounts or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed as incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepairsAndMaintenanceExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-723": { "value": "Freehold land and buildings \u00a3m Plant and equipment \u00a3m Plant spare parts \u00a3m Assets under the course of construction \u00a3m Total \u00a3m Cost: At 1 January 2021 389.3 2,836.3 69.6 188.8 3,484.0 Additions at cost 13.9 0.9 5.3 195.4 215.5 Acquired in business combinations 43.8 185.0 \u2013 61.1 289.9 Disposals (1) (1.4) (24.1) \u2013 \u2013 (25.5 ) Movement in reinstatement asset (1) \u2013 (2.7) \u2013 \u2013 (2.7) Issues to maintenance projects \u2013 \u2013 (5.5) \u2013 (5.5) Transfers from inventories \u2013 \u2013 3.7 \u2013 3.7 Transfers from right-of-use assets 0.3 0.7 \u2013 \u2013 1.0 Transfers from intangibles (2) \u2013 \u2013 \u2013 18 .1 18 .1 Transfers between PPE categories 5.7 156.4 (0.8) (161.3) \u2013 Effect of changes in foreign exchange rates 2.2 8.0 \u2013 2.2 12.4 At 1 January 2022 453.8 3,160 . 5 72.3 304.3 3,990.9 Additions at cost 8.2 2.2 3.8 231.8 246.0 Acquired in business combinations 3.3 4.6 \u2013 \u2013 7.9 Impairment (0.2) \u2013 \u2013 (6.7) (6.9) Disposals (1.3) (23.7) \u2013 (0.9) (25.9) Movement in reinstatement asset \u2013 (22.4) \u2013 \u2013 (22.4) Issues to maintenance projects \u2013 \u2013 (3.3) \u2013 (3.3) Transfers from inventories \u2013 \u2013 0.5 \u2013 0.5 Transfers from/(to) intangibles \u2013 0.3 \u2013 (0.3) \u2013 Transfers between PPE categories 22.3 202.6 7.7 (232.6) \u2013 Effect of changes in foreign exchange rates 17.2 52.6 \u2013 13.3 83.1 At 31 December 2022 503.3 3,376.7 81.0 308.9 4,269.9 Accumulated depreciation: At 1 January 2021 102.4 1,415.6 24.9 \u2013 1,542.9 Depreciation charge for the year 15.8 130.2 3.8 \u2013 149.8 Disposals (0 .1) (16.2) \u2013 \u2013 (16.3) Issues to maintenance projects \u2013 \u2013 (0.8) \u2013 (0.8) Transfers from right-of-use assets 0.1 0.7 \u2013 \u2013 0.8 Transfers between PPE categories (0.4) 0.4 \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 0.4 3.4 \u2013 \u2013 3.8 At 1 January 2022 118.2 1, 53 4 .1 27.9 \u2013 1,680.2 Depreciation charge for the year 21.5 171.6 2.5 \u2013 195.6 Impairment 0.5 7.5 \u2013 \u2013 8.0 Disposals (1.7) (19.7) \u2013 \u2013 (21.4) Issues to maintenance projects \u2013 \u2013 (0.4) \u2013 (0.4) Transfers between PPE categories (0.3) (3.2) 3.5 \u2013 \u2013 Effect of changes in foreign exchange rates 4.1 15.8 \u2013 \u2013 19.9 At 31 December 2022 142.3 1,70 6 .1 33.5 \u2013 1,881.9 Net book value: At 31 December 2021 335.6 1,626.4 44.4 304.3 2,310.7 At 31 December 2022 361.0 1,670.6 47.5 308.9 2,388.0 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. Plant and equipment shown above includes the following categories of assets: Biomass and coal plant \u00a3m Hydro-electric plant \u00a3m Pellet production plants \u00a3m Other \u00a3m Total plant and equipment \u00a3m Cost: At 1 January 2021 2,072.9 471.0 276.4 16.0 2,836.3 Additions at cost \u2013 \u2013 0.8 0 .1 0.9 Acquired in business combinations \u2013 \u2013 185.0 \u2013 185.0 Disposals (1) (17.5) \u2013 (5.6) (1.0) (24 .1) Movement in reinstatement asset (1) (2.7) \u2013 \u2013 \u2013 (2.7) Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7 Transfers between PPE categories 65.1 5.0 82.0 4.3 156.4 Effect of changes in foreign exchange rates \u2013 \u2013 8.0 \u2013 8.0 At 1 January 2022 (2) 2,117. 8 476.0 5 47.3 19.4 3,16 0 . 5 Additions at cost 1.0 \u2013 0.9 0.3 2.2 Acquired in business combinations \u2013 \u2013 4.6 \u2013 4.6 Disposals (0.1) \u2013 (21.1) (2.5) (23.7) Movement in reinstatement asset (22.4) \u2013 \u2013 \u2013 (22.4) Transfers from intangibles \u2013 \u2013 0.3 \u2013 0.3 Transfers between PPE categories 45.0 3.4 154.2 \u2013 202.6 Effect of changes in foreign exchange rates \u2013 \u2013 52.6 \u2013 52.6 At 31 December 2022 2,141. 3 479.4 738.8 17.2 3,376.7 Accumulated depreciation: At 1 January 2021 1,298.4 2 8 .1 7 7.3 11.8 1,415.6 Depreciation charge for the year 70.3 12 .1 45.0 2.8 130.2 Disposals (11.2) \u2013 (4.2) (0.8) (16.2) Transfers from right-of-use assets \u2013 \u2013 0.7 \u2013 0.7 Transfers between PPE categories (1.0) 1.0 0.4 \u2013 0.4 Effect of changes in foreign exchange rates \u2013 \u2013 3.4 \u2013 3.4 At 1 January 2022 1,356.5 41.2 122.6 13.8 1,53 4 .1 Depreciation charge for the year 64.3 12 .1 92.9 2.3 171.6 Impairment \u2013 \u2013 7.5 \u2013 7.5 Disposals \u2013 \u2013 (17.3) (2.4) (19.7) Transfers between PPE categories (3.5) \u2013 0.3 \u2013 (3.2) Effect of changes in foreign exchange rates \u2013 \u2013 15.8 \u2013 15.8 At 31 December 2022 1,417.3 53.3 221.8 13.7 1,70 6 .1 Net book value: At 31 December 2021 761.3 434.8 424.7 5.6 1,626.4 At 31 December 2022 724.0 426 .1 517.0 3.5 1,670.6 (1) The comparative amounts have been re-presented to split out the movement in the reinstatement asset. The reduction in the reinstatement asset of \u00a32.7 million in the year ended 31 December 2021 was previously reported within the disposals line. (2) The comparative amounts have been re-presented to present the OCGT development costs in assets under the course of construction. Customer- related assets \u00a3m Brand \u00a3m Computer software and licences \u00a3m Development assets \u00a3m Other intangibles \u00a3m Goodwill \u00a3m Total \u00a3m Cost and carrying amount: At 1 January 2021 211.0 11.3 131.5 21.0 \u2013 248.2 623.0 Additions at cost (acquired separately) 8.2 \u2013 \u2013 \u2013 \u2013 \u2013 8.2 Additions at cost (internally generated) \u2013 \u2013 14.1 \u2013 \u2013 \u2013 14.1 Transfers from/(to) tangible fixed assets \u2013 \u2013 1.2 (19.3) \u2013 \u2013 (18 .1) Acquired in business combinations 35.9 \u2013 0.4 \u2013 0.2 165.9 202.4 Effect of changes in foreign exchange rates 0.4 \u2013 \u2013 \u2013 0 .1 2.2 2.7 At 1 January 2022 255.5 11.3 147.2 1.7 0.3 416.3 832.3 Additions at cost (internally generated) \u2013 \u2013 9.4 \u2013 \u2013 \u2013 9.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 (19.2) (1.7) \u2013 \u2013 (20.9) Transfers between categories \u2013 \u2013 (0.5) 0.5 \u2013 \u2013 \u2013 Transfers to property, plant and equipment \u2013 \u2013 0.5 (0.5) \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 2.1 \u2013 0.3 \u2013 \u2013 7.9 10.3 At 31 December 2022 257.6 11.3 129.5 \u2013 0.3 424.2 822.9 Accumulated amortisation: At 1 January 2021 126.6 4.5 61.9 \u2013 \u2013 \u2013 193.0 Charge for the year 22.8 1.1 10.5 \u2013 \u2013 \u2013 34.4 Acquired in business combinations 0 .1 \u2013 \u2013 \u2013 0 .1 \u2013 0.2 Effect of changes in foreign exchange rates (0.1) \u2013 \u2013 \u2013 (0.1) \u2013 (0.2) At 1 January 2022 149.4 5.6 72.4 \u2013 \u2013 \u2013 227.4 Charge for the year 21.2 1.2 9.0 \u2013 \u2013 \u2013 31.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 5.7 \u2013 \u2013 \u2013 5.7 Effect of changes in foreign exchange rates \u2013 \u2013 0.1 \u2013 \u2013 \u2013 0 .1 At 31 December 2022 170.6 6.8 79.0 \u2013 \u2013 \u2013 256.4 Net book value: At 31 December 2021 10 6 .1 5.7 74.8 1.7 0.3 416.3 604.9 At 31 December 2022 87.0 4.5 50.5 \u2013 0.3 424.2 566.5 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-692": { "value": "Included in the amount for assets under the course of construction are capitalised borrowing costs of \u00a35.2 million (2021: \u00a3nil) related to the construction of the three OCGT projects that have obtained a Capacity Market contract. Reconciliation of borrowings The table below shows the movement in borrowings during the current and previous year: Year ended 31 December 2022 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,376.2 (15.2) 1,361.0 Cash movements: Repayment of Index-linked loan (41.4) \u2013 (41.4) Draw down of facilities 188.5 \u2013 188.5 Repayment of facilities (145.0) \u2013 (145.0) Non-cash movements: Indexation of linked loan 0.8 \u2013 0.8 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 6 .1 6 .1 Amortisation of USD loan note premium (0.4) \u2013 (0.4) Effect of changes in foreign exchange rates 71.1 0.2 71.3 Borrowings at 31 December 1,449.8 (8.9) 1,440.9 Year ended 31 December 2021 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,085.3 (19.6) 1,065.7 Cash movements: Drawdown of 2020 Infrastructure private placement facilities 130.8 (0.5) 130.3 Repayment of debt acquired from Pinnacle (25 3.1) \u2013 (25 3.1) Drawdown of C$300m term facility 17 3.1 (0.8) 172.3 Other cash movements (3.2) \u2013 (3.2) Non-cash movements: Borrowings acquired on acquisition of Pinnacle (note 5.1) 256.3 \u2013 256.3 Indexation of linked loan 2.2 \u2013 2.2 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 5.7 5.7 Amortisation of USD loan note premium (0.3) \u2013 (0.3) Effect of changes in foreign exchange rates (14.9) \u2013 (14.9) Borrowings at 31 December 1,376.2 (15.2) 1,361.0 As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange losses (2021: gains) on borrowings disclosed in the above tables have been offset by \u00a362.0 million of foreign exchange gains (2021: 21.2 million of losses) on cross-currency interest rate swaps that have been recycled to pro\ufb01t and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group\u2019s cash flow hedging relationships on Net debt. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingCostsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-611": { "value": "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 identi\ufb01ed asset is controlled by the Group for a period of time. If the Group is deemed to have control of an identi\ufb01ed 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 speci\ufb01c 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 speci\ufb01c proxies for risk-free rates, such as UK Gilt curves, and an adjustment for credit risk based on the Group\u2019s credit rating. The liability is subsequently adjusted for interest, repayments and other modi\ufb01cations. 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 modi\ufb01cations 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 modi\ufb01cation 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 scope of the lease. All other modi\ufb01cations 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 probable that the option will be exercised. Leases with a term shorter than 12 months, or where the identi\ufb01ed asset has a value below \u00a33,500, are expensed to the Consolidated income statement on a straight-line basis over the term of the agreement. Right-of-use assets Land and buildings \u00a3m Plant and equipment \u00a3m Railcars \u00a3m Vessels \u00a3m Total \u00a3m Cost: At 1 January 2021 23.7 9.1 8.7 \u2013 41.5 Additions at cost 0.2 7. 0 4 .1 33.3 44.6 Other movements (0.5) (4.2) (0.3) \u2013 (5.0) Transfers to PPE (0.3) (0.7) \u2013 \u2013 (1.0) Acquired in business combinations 4.7 4 .1 17.0 34.6 60.4 Effect of changes in foreign exchange rates 0 .1 (0.1) 0.7 0.6 1.3 At 1 January 2022 27.9 15.2 30.2 68.5 141.8 Additions at cost 5.1 4.7 2.2 19.8 31.8 Other movements (3.1) 4.0 (0.8) \u2013 0 .1 Effect of changes in foreign exchange rates 0.5 0.9 2.1 2.5 6.0 At 31 December 2022 30.4 24.8 33.7 90.8 179.7 Accumulated depreciation and impairment: At 1 January 2021 6 .1 4.2 2.2 \u2013 12.5 Depreciation charge for the year 4.3 4.6 3.2 3.1 15.2 Other movements (1.9) (3.3) (0.3) \u2013 (5.5) Transfers to PPE (0.1) (0.7) \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates 0 .1 \u2013 0.5 \u2013 0.6 At 1 January 2022 8.5 4.8 5.6 3.1 22.0 Depreciation charge for the year 3.9 6.0 4.6 5.8 20.3 Other movements (1.1) (0.4) \u2013 \u2013 (1.5) Effect of changes in foreign exchange rates 0.2 0.2 0.4 (0.2) 0.6 At 31 December 2022 11.5 10.6 10.6 8.7 41.4 Net book value: At 31 December 2021 19.4 10.4 24.6 65.4 119.8 At 31 December 2022 18.9 14.2 23.1 82 .1 138.3 Lease liabilities Year ended 31 December Carrying amount: 2022 \u00a3m 2021 \u00a3m At 1 January 125.9 30.2 Additions 30.2 44.7 Acquired in business combinations \u2013 61.1 Interest charge for the year 6.8 4.9 Payments (24.8) (17.9) Other movements 3.4 0.2 Effect of changes in foreign exchange rates 11.6 2.7 At 31 December 153.1 125.9 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 \u00a30.1 million during the year (2021: \u00a30.8 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 2022 \u00a3m 2021 \u00a3m Within one year 30.3 21.2 Within one to two years 26.7 18.9 Within two to \ufb01ve years 64.3 46.4 After \ufb01ve years 72.0 78.4 Total gross lease liabilities 193.3 164.9 Effect of discounting (40.2) (39.0) Lease liabilities recognised in the Consolidated balance sheet 153.1 125.9 Current portion 22.7 15.1 Non-current portion 130.4 110.8 The Group recognised the following charges from continuing operations relating to leases in the Consolidated income statement: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Expense relating to short-term leases 0 .1 0.8 Interest charge for the year 6.8 4.9 Depreciation charge for the year 20.3 15.2 ", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-645": { "value": "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 identi\ufb01ed asset is controlled by the Group for a period of time. If the Group is deemed to have control of an identi\ufb01ed 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 speci\ufb01c 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 speci\ufb01c proxies for risk-free rates, such as UK Gilt curves, and an adjustment for credit risk based on the Group\u2019s credit rating. The liability is subsequently adjusted for interest, repayments and other modi\ufb01cations. 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 modi\ufb01cations 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 modi\ufb01cation 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 scope of the lease. All other modi\ufb01cations 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 probable that the option will be exercised. Leases with a term shorter than 12 months, or where the identi\ufb01ed asset has a value below \u00a33,500, are expensed to the Consolidated income statement on a straight-line basis over the term of the agreement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-646": { "value": "Right-of-use assets Land and buildings \u00a3m Plant and equipment \u00a3m Railcars \u00a3m Vessels \u00a3m Total \u00a3m Cost: At 1 January 2021 23.7 9.1 8.7 \u2013 41.5 Additions at cost 0.2 7. 0 4 .1 33.3 44.6 Other movements (0.5) (4.2) (0.3) \u2013 (5.0) Transfers to PPE (0.3) (0.7) \u2013 \u2013 (1.0) Acquired in business combinations 4.7 4 .1 17.0 34.6 60.4 Effect of changes in foreign exchange rates 0 .1 (0.1) 0.7 0.6 1.3 At 1 January 2022 27.9 15.2 30.2 68.5 141.8 Additions at cost 5.1 4.7 2.2 19.8 31.8 Other movements (3.1) 4.0 (0.8) \u2013 0 .1 Effect of changes in foreign exchange rates 0.5 0.9 2.1 2.5 6.0 At 31 December 2022 30.4 24.8 33.7 90.8 179.7 Accumulated depreciation and impairment: At 1 January 2021 6 .1 4.2 2.2 \u2013 12.5 Depreciation charge for the year 4.3 4.6 3.2 3.1 15.2 Other movements (1.9) (3.3) (0.3) \u2013 (5.5) Transfers to PPE (0.1) (0.7) \u2013 \u2013 (0.8) Effect of changes in foreign exchange rates 0 .1 \u2013 0.5 \u2013 0.6 At 1 January 2022 8.5 4.8 5.6 3.1 22.0 Depreciation charge for the year 3.9 6.0 4.6 5.8 20.3 Other movements (1.1) (0.4) \u2013 \u2013 (1.5) Effect of changes in foreign exchange rates 0.2 0.2 0.4 (0.2) 0.6 At 31 December 2022 11.5 10.6 10.6 8.7 41.4 Net book value: At 31 December 2021 19.4 10.4 24.6 65.4 119.8 At 31 December 2022 18.9 14.2 23.1 82 .1 138.3 ", "dimensions": { "concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-612": { "value": "3.3 Renewable certi\ufb01cate assets The Group earns renewable certi\ufb01cate assets including ROCs and REGOs which are accredited by the Of\ufb01ce for Gas and Electricity Markets (Ofgem), as a result of burning biomass pellets to generate electricity at Drax Power Station and generating renewable energy at a number of the Group\u2019s hydro-electric plants. The Group\u2019s ROC and REGO certi\ufb01cates are sold bilaterally to counterparties, including external suppliers, and also internally for utilisation by the Customers business. This note sets out the value of these certi\ufb01cate assets that the Group held at the reporting date. Accounting policy Renewable certi\ufb01cates, principally ROCs and REGOs, are \ufb01rst recognised as current assets in the period they are generated. The Group uses their fair value at initial recognition, based on anticipated sales prices, as deemed cost. The value of renewable certi\ufb01cates earned is recognised in the Consolidated income statement as a reduction to cost of sales in the same period they are earned. Where the Customers business incurs an obligation to deliver renewable certi\ufb01cates, that obligation is provided for in the period incurred within cost of sales. ROCs and REGOs valuation 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 to cover the renewable certi\ufb01cates generated in a period, then they are recognised at the contracted price. Any renewable certi\ufb01cates generated above this, or to be utilised by the Customers 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. ROC valuations are comprised of two parts: the expected value to be obtained in a sales transaction with a third-party supplier relating to the buy-out price; and an estimate of the future bene\ufb01t that may be obtained from the ROC recycle fund at the end of the CP, which runs from April to March each year. The recycle fund provides a bene\ufb01t where supplier buy-out charges (incurred by suppliers who do not procure suf\ufb01cient 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 and also the demand for ROCs over the CP, and is thus subject to some uncertainty. The Group utilises external sources of information 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. At each reporting date, the Group reviews the carrying value of renewable certi\ufb01cate 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, the likely utilisation of renewable certi\ufb01cates generated to settle the Group\u2019s own obligations, and any relevant information about the levels of wider renewable generation. Any impairment loss is recognised in the Consolidated income statement in the period incurred. Year ended 31 December Carrying amount: 2022 \u00a3m 2021 \u00a3m At 1 January 301.4 139.6 Earned from generation 652.5 658.2 Purchased from third-parties 486.3 361.3 Utilised by the Customers business (39 4.1) (320.7) Sold to third-parties (858.3) (537. 0) At 31 December 187. 8 301.4 Recognition of revenue from the sale of renewable certi\ufb01cates is described in further detail in note 2.2. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfRenewableCertificateAssets", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-584": { "value": "Accounting policy Renewable certi\ufb01cates, principally ROCs and REGOs, are \ufb01rst recognised as current assets in the period they are generated. The Group uses their fair value at initial recognition, based on anticipated sales prices, as deemed cost. The value of renewable certi\ufb01cates earned is recognised in the Consolidated income statement as a reduction to cost of sales in the same period they are earned. Where the Customers business incurs an obligation to deliver renewable certi\ufb01cates, that obligation is provided for in the period incurred within cost of sales. ROCs and REGOs valuation 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 to cover the renewable certi\ufb01cates generated in a period, then they are recognised at the contracted price. Any renewable certi\ufb01cates generated above this, or to be utilised by the Customers 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. ROC valuations are comprised of two parts: the expected value to be obtained in a sales transaction with a third-party supplier relating to the buy-out price; and an estimate of the future bene\ufb01t that may be obtained from the ROC recycle fund at the end of the CP, which runs from April to March each year. The recycle fund provides a bene\ufb01t where supplier buy-out charges (incurred by suppliers who do not procure suf\ufb01cient 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 and also the demand for ROCs over the CP, and is thus subject to some uncertainty. The Group utilises external sources of information 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. At each reporting date, the Group reviews the carrying value of renewable certi\ufb01cate 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, the likely utilisation of renewable certi\ufb01cates generated to settle the Group\u2019s own obligations, and any relevant information about the levels of wider renewable generation. Any impairment loss is recognised in the Consolidated income statement in the period incurred. ", "dimensions": { "concept": "ifrs-full:DescriptionOfOtherAccountingPoliciesRelevantToUnderstandingOfFinancialStatements", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-613": { "value": "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 and waste pellets. This note shows the cost of biomass, coal, other fuels and plant consumables held at the reporting date. Accounting policy The Group\u2019s raw materials and fuel inventory are valued at the lower of the weighted average cost to purchase and net realisable value. The cost of purchased fuel inventories includes all direct costs and overheads incurred in bringing the fuel to its 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 when they arise. Both biomass and coal inventories are weighed when entering, moving within or exiting the Group\u2019s sites using technology regularly calibrated to industry standards. Fuel burn in the electricity generation process is calculated using a combination of weights and thermal ef\ufb01ciency calculations to provide closing inventory volumes. Both calibrated weighers and ef\ufb01ciency calculations are subject to a range of tolerable error. All fuel inventories are subject to regular surveys to ensure these measurements are suf\ufb01ciently 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 \ufb01re prevention purposes and thus cannot be surveyed using traditional methods. Biomass inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy of the weights and ef\ufb01ciency methods outlined above. The cost of manufactured fuel inventories includes all direct costs incurred in production and conversion including raw materials, labour, direct overheads and other costs incurred in bringing the inventories to their existing condition and location. It also includes an allocation of overheads, including depreciation and other indirect costs. 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. The valuation of \ufb01bre inventory involves estimations of the conversion rates to determine the volume of residual \ufb01bre 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 2022 \u00a3m 2021 \u00a3m Biomass \u2013 \ufb01nished goods 294.5 144.6 Biomass \u2013 \ufb01bre and other raw materials 16.5 12.8 Coal \u2013 8.4 Other fuels and consumables 37.1 33.3 Total inventories 3 4 8 .1 19 9.1 The net realisable value of coal in the prior year in the table above was stated after provisions of \u00a30.9 million. No inventory provisions have been recognised in the current year. The increase in the value of biomass \ufb01nished goods held at the reporting date results from the planned build-up of inventories due to the repro\ufb01ling of generation into winter from summer when it was originally planned, along with higher biomass prices. At the request of the UK Government, the Group entered into an agreement with National Grid to keep the two coal units at Drax Power Station available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and only operate if and when instructed to do so by National Grid. Under the terms of this contract, the Group no longer has control of any coal inventory. The cost of inventories recognised as an expense in the year ended 31 December 2022 was \u00a31,587.9 million (2021: \u00a31,352.0 million). This includes the value of write downs of inventory in the year. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-647": { "value": "Accounting policy The Group\u2019s raw materials and fuel inventory are valued at the lower of the weighted average cost to purchase and net realisable value. The cost of purchased fuel inventories includes all direct costs and overheads incurred in bringing the fuel to its 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 when they arise. Both biomass and coal inventories are weighed when entering, moving within or exiting the Group\u2019s sites using technology regularly calibrated to industry standards. Fuel burn in the electricity generation process is calculated using a combination of weights and thermal ef\ufb01ciency calculations to provide closing inventory volumes. Both calibrated weighers and ef\ufb01ciency calculations are subject to a range of tolerable error. All fuel inventories are subject to regular surveys to ensure these measurements are suf\ufb01ciently 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 \ufb01re prevention purposes and thus cannot be surveyed using traditional methods. Biomass inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy of the weights and ef\ufb01ciency methods outlined above. The cost of manufactured fuel inventories includes all direct costs incurred in production and conversion including raw materials, labour, direct overheads and other costs incurred in bringing the inventories to their existing condition and location. It also includes an allocation of overheads, including depreciation and other indirect costs. 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. The valuation of \ufb01bre inventory involves estimations of the conversion rates to determine the volume of residual \ufb01bre 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-614": { "value": "3.5 Trade and other receivables and contract assets Trade receivables represent amounts owed by customers for goods or services provided that have been invoiced for but have not yet been paid. Accrued income represents income earned in the period but not yet invoiced, largely in respect of power delivered to customers that will be invoiced the following month. Accounting policy Trade and other receivables are initially measured at the transaction price and subsequently measured at amortised cost. The Group has access to a receivables monetisation facility under which amounts receivable can be sold to a third-party on a non- recourse basis. Receivables sold under such facilities 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 \ufb01nancial assets. These receivables are derecognised at the point of sale which is shortly after the initial recognition of the receivable balance. As a result, no fair value gains or losses have been recognised. Fees are recognised in the Consolidated income statement as incurred within interest payable and similar charges. At 31 December 2022, the receivables sold under this facility were \u00a3400.0 million (2021: \u00a3200.0 million), reflecting the increase in the size of the facility during the year. Refer to note 4.3 for further information about the facility. Contingent consideration receivable is a \ufb01nancial asset. As the cash flows are not solely payments of principal and interest, it does not meet the criteria for recognition at either amortised cost or FVOCI, and is therefore recognised at fair value through pro\ufb01t and loss (FVTPL). The UK Government introduced the Energy Bill Relief Scheme (EBRS) from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period has a discount applied under the EBRS. The Group claims this discount back from the Government. The amount the Group is entitled to claim from the Government is either recognised in other receivables, if it has been claimed but has not yet been received from the Government, or accrued income if not yet claimed at the reporting date. See note 2.2 for details of energy supplied under the EBRS within the Consolidated income statement. As at 31 December 2022 \u00a3m 2021 \u00a3m Amounts falling due within one year: Trade receivables 276.6 187.5 Accrued income 522.5 270.3 Prepayments 127.7 97.4 Other receivables 272.8 59.0 Contingent consideration 27. 4 27.7 Total trade and other receivables and contract assets 1,227.0 641.9 At 31 December 2022, the Group had no amounts receivable from signi\ufb01cant counterparties which represented 10% or more of total trade receivables and accrued income (2021: one signi\ufb01cant counterparty). Of total trade receivables and accrued income at 31 December 2022, \u00a3587.0 million (2021: \u00a3314.0 million) relates to the Customers business, \u00a3168.0 million relates to the Generation business (2021: \u00a3125.9 million), and \u00a344.1 million (2021: \u00a317.9 million) relates to the Pellet Production business. The contingent consideration relates to the Group\u2019s 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, \u00a329.0 million of contingent consideration would become payable to the Group from the acquirer. The estimated fair value of this contingent consideration is \u00a327.4 million (2021: \u00a327.7 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. See note 7.1 for further details on the contingent consideration. 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 payment is not yet due. Any amount previously recognised as a contract asset is reclassi\ufb01ed to trade receivables at the point at which it is invoiced to the customer, usually in the following \ufb01nancial period. Contract assets at 31 December 2022 were \u00a320.0 million (2021: \u00a36.0 million). Impairment of \ufb01nancial assets Accounting policy The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group\u2019s \ufb01nancial assets including trade receivables, accrued income, contract assets and other \ufb01nancial 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 \ufb01nancial assets, the Group recognises a lifetime expected credit loss provision when there has been a signi\ufb01cant increase in credit risk since initial recognition. If the credit risk of the \ufb01nancial instrument has not increased signi\ufb01cantly since initial recognition, the Group recognises a 12-month expected credit loss provision. The greatest concentration of credit risk exists in the Customers business. For the larger consumers within the Customers business (and also customers within the Generation and Pellet Production businesses) a provision matrix method is adopted. For the SME consumers within the Customers business, the risk is higher due to the wide range of customer characteristics within the portfolio. The loss provisioning for these customers is complex and requires a provisioning tool that is more dynamic than the provision matrix method and so a combined probability method is applied. Both of these approaches are described in more detail below. Under the Group\u2019s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally for recovery of the balance. The Group writes off a \ufb01nancial 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. Combined probability method The Group uses a machine learning algorithm to calculate expected credit losses for its SME customer base. The algorithm predicts the future performance of debt on an individual account basis using a broad range of indicators that are speci\ufb01c to the customer. The algorithm forms predictions, based on historical experience, of the debt on each account reaching greater than 365 days past due. A timeframe of 13 months is the normal period of historic data to which the algorithm is trained. The customer\u2019s behaviours and performance in this period inform the current provisioning for the existing debt portfolio. As required by IFRS 9, the calculation of expected credit losses incorporates both historical and forward-looking information. Management considers the 13 month period on which the algorithm is trained and determines whether any additional provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2022, these factors included, but were not limited to, expectations around future inflation and interest rates, customer pricing and the impact of Government support for customers. In the current period, management concluded that no additional provision was required (2021: no additional provision was required). Provision matrix method Larger consumers within the Customers business and customers within the Generation and Pellet Production businesses 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: 2022 2021 Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m At 1 January 44.4 2.2 46.6 51.4 5.0 56.4 Amounts written off (39.7) (2.6) (42.3) (41.5) (2.0) (43.5) Net additional amounts provided against 50.2 6.4 56.6 34.5 (0.8) 33.7 At 31 December 54.9 6.0 60.9 44.4 2.2 46.6 Gross trade receivables 189.1 148.4 337.5 14 4.1 90.0 23 4 .1 Average Expected Credit Loss % 29% 4% 18% 31% 2% 20% The provision above relates to trade receivables in the Customers business. If the calculated provision rates were 10% higher than the provision rates calculated at the reporting date, the impact to the provision would be an increase of \u00a34.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both Generation and Pellet Production businesses. The risk of default within the Pellet Production and Generation businesses is considered to be remote. This is supported by strong historic collection rates and timely receipts. The Pellet Production business has a remote risk of default because the external customer base are high-quality counterparties with long-term supply contracts. Furthermore, invoices are usually settled within seven days with negligible levels of aged debt. The current economic environment and pressure on energy markets resulted in signi\ufb01cantly higher commodity prices during 2022, and in turn higher bills raised to some of the Group\u2019s customers. This has resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected loss provision, particularly for SME customers. Prices for the deemed customer portfolio have seen the most signi\ufb01cant increases. Deemed supply is where electricity or gas is supplied to a site or customer that is yet to enter into a contract and, as a result, they are charged on a standard variable tariff based on merchant power and gas prices. Given the increases in these standard variable prices during the year, the recoverability of these balances has become more challenging. The expected credit loss provision has been updated to reflect this change. The coverage levels of the provision are in line with the outturn performance experienced during Covid-19, a period which was also signi\ufb01cantly impacted by challenging macro- economic conditions. In October 2022, in response to the signi\ufb01cant increase in energy prices, the Government introduced support for non-domestic customers through the EBRS. This has provided \ufb01nancial support to customers during this period as described in more detail in note 2.2. The Group received no incremental revenue over that to which it was contractually entitled, due to this scheme. The net charge to the Consolidated income statement in 2022 for impairment losses on \ufb01nancial assets was \u00a348.0 million (2021: \u00a316.3 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a356.6 million (2021: \u00a333.7 million) less an \u00a38.6 million (2021: \u00a317.4 million) bene\ufb01t in the period in respect of resolution of legacy credit balances. The value of provisions calculated using the combined probability model is set out below. This shows the trade receivables balances for SME consumers within the Customers business grouped by the combined probability assigned by the model. The following table shows the comparative risk pro\ufb01le of amounts due based on the combined probability model at 31 December: 2022 2021 Probability of default range % Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m 80\u2013100 50.0 40.4 43.3 35.3 50\u201379 16.8 8.9 10.7 5.7 26\u201349 18.2 5.5 11.1 3.3 0\u201325 10 4 .1 0.1 79.0 0 .1 Total 189.1 54.9 14 4 .1 44.4 The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the risk pro\ufb01le in 30-day increments of the trade receivables within the Generation and Pellet Production businesses, the trade receivables of the Group\u2019s larger consumers within the Customers business, and accrued income (including contract assets) of the Group at each reporting date. As at 31 December 2022 As at 31 December 2021 Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate \u00a3m \u00a3m % \u00a3m \u00a3m % Accrued income balances not yet due 7.6 530.1 1% 8.6 278.9 3% Trade receivables days past due: Balances not yet due 1.8 115.0 2% 0.4 70.8 1% Between 0-30 days 0.8 22.1 4% 0 .1 14.0 1% Between 31-60 days 0.7 3.3 21% 0.2 1.2 17% Between 61-90 days 0.6 1.5 42% 0 .1 0.8 13% Over 90 days 2 .1 6.5 33% 1.4 3.2 44% Trade receivables total 6.0 148.4 4% 2.2 90.0 2% Total 13.6 678.5 2% 10.8 368.9 3% The expected credit loss provision of \u00a313.6 million (2021: \u00a310.8 million) in the table above wholly relates to the Customers business. The expected credit loss rates above are expressed as a percentage of the gross carrying amount of all of the Group\u2019s trade receivables and accrued income balances that are subject to the provision matrix method. The expected credit loss provision calculated for other \ufb01nancial assets of the Group was negligible. Credit and counterparty risk are disclosed in further detail in note 7.2. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-648": { "value": "Accounting policy Trade and other receivables are initially measured at the transaction price and subsequently measured at amortised cost. The Group has access to a receivables monetisation facility under which amounts receivable can be sold to a third-party on a non- recourse basis. Receivables sold under such facilities 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 \ufb01nancial assets. These receivables are derecognised at the point of sale which is shortly after the initial recognition of the receivable balance. As a result, no fair value gains or losses have been recognised. Fees are recognised in the Consolidated income statement as incurred within interest payable and similar charges. At 31 December 2022, the receivables sold under this facility were \u00a3400.0 million (2021: \u00a3200.0 million), reflecting the increase in the size of the facility during the year. Refer to note 4.3 for further information about the facility. Contingent consideration receivable is a \ufb01nancial asset. As the cash flows are not solely payments of principal and interest, it does not meet the criteria for recognition at either amortised cost or FVOCI, and is therefore recognised at fair value through pro\ufb01t and loss (FVTPL). The UK Government introduced the Energy Bill Relief Scheme (EBRS) from 1 October 2022 to 31 March 2023. Energy supplied to non-domestic customers in this period has a discount applied under the EBRS. The Group claims this discount back from the Government. The amount the Group is entitled to claim from the Government is either recognised in other receivables, if it has been claimed but has not yet been received from the Government, or accrued income if not yet claimed at the reporting date. See note 2.2 for details of energy supplied under the EBRS within the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-649": { "value": "As at 31 December 2022 \u00a3m 2021 \u00a3m Amounts falling due within one year: Trade receivables 276.6 187.5 Accrued income 522.5 270.3 Prepayments 127.7 97.4 Other receivables 272.8 59.0 Contingent consideration 27. 4 27.7 Total trade and other receivables and contract assets 1,227.0 641.9 ", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-674": { "value": "Impairment of \ufb01nancial assets Accounting policy The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group\u2019s \ufb01nancial assets including trade receivables, accrued income, contract assets and other \ufb01nancial 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 \ufb01nancial assets, the Group recognises a lifetime expected credit loss provision when there has been a signi\ufb01cant increase in credit risk since initial recognition. If the credit risk of the \ufb01nancial instrument has not increased signi\ufb01cantly since initial recognition, the Group recognises a 12-month expected credit loss provision. The greatest concentration of credit risk exists in the Customers business. For the larger consumers within the Customers business (and also customers within the Generation and Pellet Production businesses) a provision matrix method is adopted. For the SME consumers within the Customers business, the risk is higher due to the wide range of customer characteristics within the portfolio. The loss provisioning for these customers is complex and requires a provisioning tool that is more dynamic than the provision matrix method and so a combined probability method is applied. Both of these approaches are described in more detail below. Under the Group\u2019s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally for recovery of the balance. The Group writes off a \ufb01nancial 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. Combined probability method The Group uses a machine learning algorithm to calculate expected credit losses for its SME customer base. The algorithm predicts the future performance of debt on an individual account basis using a broad range of indicators that are speci\ufb01c to the customer. The algorithm forms predictions, based on historical experience, of the debt on each account reaching greater than 365 days past due. A timeframe of 13 months is the normal period of historic data to which the algorithm is trained. The customer\u2019s behaviours and performance in this period inform the current provisioning for the existing debt portfolio. As required by IFRS 9, the calculation of expected credit losses incorporates both historical and forward-looking information. Management considers the 13 month period on which the algorithm is trained and determines whether any additional provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2022, these factors included, but were not limited to, expectations around future inflation and interest rates, customer pricing and the impact of Government support for customers. In the current period, management concluded that no additional provision was required (2021: no additional provision was required). Provision matrix method Larger consumers within the Customers business and customers within the Generation and Pellet Production businesses 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: 2022 2021 Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m At 1 January 44.4 2.2 46.6 51.4 5.0 56.4 Amounts written off (39.7) (2.6) (42.3) (41.5) (2.0) (43.5) Net additional amounts provided against 50.2 6.4 56.6 34.5 (0.8) 33.7 At 31 December 54.9 6.0 60.9 44.4 2.2 46.6 Gross trade receivables 189.1 148.4 337.5 14 4.1 90.0 23 4 .1 Average Expected Credit Loss % 29% 4% 18% 31% 2% 20% The provision above relates to trade receivables in the Customers business. If the calculated provision rates were 10% higher than the provision rates calculated at the reporting date, the impact to the provision would be an increase of \u00a34.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both Generation and Pellet Production businesses. The risk of default within the Pellet Production and Generation businesses is considered to be remote. This is supported by strong historic collection rates and timely receipts. The Pellet Production business has a remote risk of default because the external customer base are high-quality counterparties with long-term supply contracts. Furthermore, invoices are usually settled within seven days with negligible levels of aged debt. The current economic environment and pressure on energy markets resulted in signi\ufb01cantly higher commodity prices during 2022, and in turn higher bills raised to some of the Group\u2019s customers. This has resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected loss provision, particularly for SME customers. Prices for the deemed customer portfolio have seen the most signi\ufb01cant increases. Deemed supply is where electricity or gas is supplied to a site or customer that is yet to enter into a contract and, as a result, they are charged on a standard variable tariff based on merchant power and gas prices. Given the increases in these standard variable prices during the year, the recoverability of these balances has become more challenging. The expected credit loss provision has been updated to reflect this change. The coverage levels of the provision are in line with the outturn performance experienced during Covid-19, a period which was also signi\ufb01cantly impacted by challenging macro- economic conditions. In October 2022, in response to the signi\ufb01cant increase in energy prices, the Government introduced support for non-domestic customers through the EBRS. This has provided \ufb01nancial support to customers during this period as described in more detail in note 2.2. The Group received no incremental revenue over that to which it was contractually entitled, due to this scheme. The net charge to the Consolidated income statement in 2022 for impairment losses on \ufb01nancial assets was \u00a348.0 million (2021: \u00a316.3 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a356.6 million (2021: \u00a333.7 million) less an \u00a38.6 million (2021: \u00a317.4 million) bene\ufb01t in the period in respect of resolution of legacy credit balances. The value of provisions calculated using the combined probability model is set out below. This shows the trade receivables balances for SME consumers within the Customers business grouped by the combined probability assigned by the model. The following table shows the comparative risk pro\ufb01le of amounts due based on the combined probability model at 31 December: 2022 2021 Probability of default range % Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m 80\u2013100 50.0 40.4 43.3 35.3 50\u201379 16.8 8.9 10.7 5.7 26\u201349 18.2 5.5 11.1 3.3 0\u201325 10 4 .1 0.1 79.0 0 .1 Total 189.1 54.9 14 4 .1 44.4 The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the risk pro\ufb01le in 30-day increments of the trade receivables within the Generation and Pellet Production businesses, the trade receivables of the Group\u2019s larger consumers within the Customers business, and accrued income (including contract assets) of the Group at each reporting date. As at 31 December 2022 As at 31 December 2021 Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate \u00a3m \u00a3m % \u00a3m \u00a3m % Accrued income balances not yet due 7.6 530.1 1% 8.6 278.9 3% Trade receivables days past due: Balances not yet due 1.8 115.0 2% 0.4 70.8 1% Between 0-30 days 0.8 22.1 4% 0 .1 14.0 1% Between 31-60 days 0.7 3.3 21% 0.2 1.2 17% Between 61-90 days 0.6 1.5 42% 0 .1 0.8 13% Over 90 days 2 .1 6.5 33% 1.4 3.2 44% Trade receivables total 6.0 148.4 4% 2.2 90.0 2% Total 13.6 678.5 2% 10.8 368.9 3% The expected credit loss provision of \u00a313.6 million (2021: \u00a310.8 million) in the table above wholly relates to the Customers business. The expected credit loss rates above are expressed as a percentage of the gross carrying amount of all of the Group\u2019s trade receivables and accrued income balances that are subject to the provision matrix method. The expected credit loss provision calculated for other \ufb01nancial assets of the Group was negligible. Credit and counterparty risk are disclosed in further detail in note 7.2. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-650": { "value": "Accounting policy The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the Group\u2019s \ufb01nancial assets including trade receivables, accrued income, contract assets and other \ufb01nancial 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 \ufb01nancial assets, the Group recognises a lifetime expected credit loss provision when there has been a signi\ufb01cant increase in credit risk since initial recognition. If the credit risk of the \ufb01nancial instrument has not increased signi\ufb01cantly since initial recognition, the Group recognises a 12-month expected credit loss provision. The greatest concentration of credit risk exists in the Customers business. For the larger consumers within the Customers business (and also customers within the Generation and Pellet Production businesses) a provision matrix method is adopted. For the SME consumers within the Customers business, the risk is higher due to the wide range of customer characteristics within the portfolio. The loss provisioning for these customers is complex and requires a provisioning tool that is more dynamic than the provision matrix method and so a combined probability method is applied. Both of these approaches are described in more detail below. Under the Group\u2019s debt recovery strategy, a breach in terms could lead to the customer being disconnected or pursued legally for recovery of the balance. The Group writes off a \ufb01nancial 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-585": { "value": "Provision matrix method Larger consumers within the Customers business and customers within the Generation and Pellet Production businesses 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: 2022 2021 Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m Combined probability method \u00a3m Provision matrix method \u00a3m Total \u00a3m At 1 January 44.4 2.2 46.6 51.4 5.0 56.4 Amounts written off (39.7) (2.6) (42.3) (41.5) (2.0) (43.5) Net additional amounts provided against 50.2 6.4 56.6 34.5 (0.8) 33.7 At 31 December 54.9 6.0 60.9 44.4 2.2 46.6 Gross trade receivables 189.1 148.4 337.5 14 4.1 90.0 23 4 .1 Average Expected Credit Loss % 29% 4% 18% 31% 2% 20% The provision above relates to trade receivables in the Customers business. If the calculated provision rates were 10% higher than the provision rates calculated at the reporting date, the impact to the provision would be an increase of \u00a34.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both Generation and Pellet Production businesses. The risk of default within the Pellet Production and Generation businesses is considered to be remote. This is supported by strong historic collection rates and timely receipts. The Pellet Production business has a remote risk of default because the external customer base are high-quality counterparties with long-term supply contracts. Furthermore, invoices are usually settled within seven days with negligible levels of aged debt. The current economic environment and pressure on energy markets resulted in signi\ufb01cantly higher commodity prices during 2022, and in turn higher bills raised to some of the Group\u2019s customers. This has resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected loss provision, particularly for SME customers. Prices for the deemed customer portfolio have seen the most signi\ufb01cant increases. Deemed supply is where electricity or gas is supplied to a site or customer that is yet to enter into a contract and, as a result, they are charged on a standard variable tariff based on merchant power and gas prices. Given the increases in these standard variable prices during the year, the recoverability of these balances has become more challenging. The expected credit loss provision has been updated to reflect this change. The coverage levels of the provision are in line with the outturn performance experienced during Covid-19, a period which was also signi\ufb01cantly impacted by challenging macro- economic conditions. In October 2022, in response to the signi\ufb01cant increase in energy prices, the Government introduced support for non-domestic customers through the EBRS. This has provided \ufb01nancial support to customers during this period as described in more detail in note 2.2. The Group received no incremental revenue over that to which it was contractually entitled, due to this scheme. The net charge to the Consolidated income statement in 2022 for impairment losses on \ufb01nancial assets was \u00a348.0 million (2021: \u00a316.3 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a356.6 million (2021: \u00a333.7 million) less an \u00a38.6 million (2021: \u00a317.4 million) bene\ufb01t in the period in respect of resolution of legacy credit balances. The value of provisions calculated using the combined probability model is set out below. This shows the trade receivables balances for SME consumers within the Customers business grouped by the combined probability assigned by the model. The following table shows the comparative risk pro\ufb01le of amounts due based on the combined probability model at 31 December: 2022 2021 Probability of default range % Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m Estimated gross carrying amount at default \u00a3m Lifetime expected credit losses \u00a3m 80\u2013100 50.0 40.4 43.3 35.3 50\u201379 16.8 8.9 10.7 5.7 26\u201349 18.2 5.5 11.1 3.3 0\u201325 10 4 .1 0.1 79.0 0 .1 Total 189.1 54.9 14 4 .1 44.4 The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the risk pro\ufb01le in 30-day increments of the trade receivables within the Generation and Pellet Production businesses, the trade receivables of the Group\u2019s larger consumers within the Customers business, and accrued income (including contract assets) of the Group at each reporting date. As at 31 December 2022 As at 31 December 2021 Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate Lifetime expected credit losses Estimated total gross carrying amount at default Expected credit loss rate \u00a3m \u00a3m % \u00a3m \u00a3m % Accrued income balances not yet due 7.6 530.1 1% 8.6 278.9 3% Trade receivables days past due: Balances not yet due 1.8 115.0 2% 0.4 70.8 1% Between 0-30 days 0.8 22.1 4% 0 .1 14.0 1% Between 31-60 days 0.7 3.3 21% 0.2 1.2 17% Between 61-90 days 0.6 1.5 42% 0 .1 0.8 13% Over 90 days 2 .1 6.5 33% 1.4 3.2 44% Trade receivables total 6.0 148.4 4% 2.2 90.0 2% Total 13.6 678.5 2% 10.8 368.9 3% The expected credit loss provision of \u00a313.6 million (2021: \u00a310.8 million) in the table above wholly relates to the Customers business. The expected credit loss rates above are expressed as a percentage of the gross carrying amount of all of the Group\u2019s trade receivables and accrued income balances that are subject to the provision matrix method. The expected credit loss provision calculated for other \ufb01nancial assets of the Group was negligible. Credit and counterparty risk are disclosed in further detail in note 7.2. 5.3 Provisions The Group makes provisions for reinstatement to cover the estimated costs of decommissioning and demolishing or remediating the sites of its generation assets at the end of their useful economic lives (UELs). The Group has recognised a restructuring provision in respect of coal closure. Other provisions primarily relate to dilapidation provisions for leased assets. Accounting policy Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount required to settle the obligation. Speci\ufb01cally, a provision is made for the estimated decommissioning costs at the end of the UEL of the Group\u2019s generating assets, when a legal or constructive obligation arises, on a discounted basis. The amount provided is calculated on a site-by-site basis and represents the present value of the expected future costs. An amount equivalent to the discounted provision is capitalised within property, plant and equipment and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges. The Group recognises a restructuring provision when it has developed a detailed formal plan for the restructuring and has raised a valid expectation that it will carry out the restructuring either by starting to implement the plan or announcing its main features to those affected by it. The restructuring provision includes only the direct expenditures arising from the restructuring programme. These are costs that would have been avoided if the restructuring programme did not go ahead. Any costs to be incurred relating to the ongoing activities of the Group are excluded from the provision. A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination bene\ufb01t and when the Group recognises any related restructuring costs. Decommissioning provision \u00a3m Restructuring provision \u00a3m Other provisions \u00a3m Total \u00a3m Carrying amount: At 1 January 2022 69.5 16.7 0.2 86.4 Additions \u2013 0.4 0.1 0.5 Utilised (2.7) (4.4) \u2013 ( 7.1) Reclass between provision categories (1.5) \u2013 1.5 \u2013 Unwinding of discount and changes in the discount rate (1) (21.3) \u2013 \u2013 (21.3) Effect of changes in foreign exchange rates \u2013 \u2013 0.1 0.1 At 31 December 2022 44.0 12.7 1.9 58.6 (1) The unwinding of discount and changes in the discount rate is comprised of a \u00a31.1m increase to the provision relating to unwinding of the discount (see note 2.5) and a \u00a322.4m decrease in the provision relating to changes in the discount rate (see note 3.1). Decommissioning provisions are made in respect of Drax Power Station. The decommissioning provision is based on the assumption that the decommissioning and reinstatement will take place at the end of the expected UEL of Drax Power Station, currently estimated to be 2039. This has been estimated using existing technology at current prices based on independent third-party advice, updated on a triennial basis as a minimum, but more regularly where deemed appropriate due to changes in plans for decommissioning the site that would impact the expected costs. The most recent update took place in December 2020. This cost of decommissioning was estimated to be \u00a356.0 million. An inflation curve was then applied to estimate the decommissioning costs in 2039. This value was then discounted to calculate the present value of the provision to be recognised. The discount rate used is a nominal risk-free rate that reflects the duration of the liability. The discount rate is estimated using forward UK Gilt curves as a proxy for risk-free rates. The use of a risk-free rate reflects the fact that the estimated future cash flows have built-in risks speci\ufb01c to the liability. The discount rate used for the Group\u2019s decommissioning provision is 4.05% (2021: 1.16%). The decommissioning provision is not considered a key source of estimation uncertainty to which there is a signi\ufb01cant risk of a material adjustment to the carrying amount within the next \ufb01nancial year. Decommissioning provisions are based on costs suf\ufb01ciently far in the future that, given the length of time, it is not anticipated that any new, more reliable, or accurate information will be available within the next \ufb01nancial year to update this estimate that would result in a material adjustment. The cost of decommissioning a site the size of Drax Power Station will be impacted by things such as the exact composition and volumes of materials used in the structures to be decommissioned, and the presence of contaminants. Full site surveys and investigations will need to be performed once the site ceases operation to ascertain further information necessary to decommission the site which could impact the potential costs. Notwithstanding this, due to the high degree of estimation and uncertainty regarding the potential costs and timing of decommissioning Drax Power Station, there remains a risk of a material adjustment to the carrying amount in the longer-term. The present value recognised for the decommissioning provision is dependent on the inflation rate and discount rate used. Inflation rates are estimated using forward inflation curves. An increase of 10% to the cost estimates would increase the decommissioning provision by \u00a34.7 million (2021: \u00a36.8 million). An increase of 100 basis points in the inflation and discount rates used would result in a \u00a39.5 million (2021: \u00a313.8 million) increase and a \u00a37.0 million (20 21: \u00a311.1 million) decrease respectively in the amount recognised. The relationship between the change in basis points and change in amount recognised is relatively linear therefore the impact of similar sensitivities may be interpolated and extrapolated from these amounts. The restructuring provision consists of redundancy costs relating to the formal closure of the coal units at Drax Power Station which was initially planned for September 2022. It also includes costs for engineering works required to make the coal units and related assets safe when they cease operating. At the request of the UK Government, the Group has entered into an agreement with National Grid to keep the two coal units available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and will only operate if and when instructed to do so by National Grid. This has delayed the formal closure of the coal units and has resulted in the utilisation of certain amounts of the restructuring provision also being delayed. This has not materially impacted the expected costs. The amount of the restructuring provision utilised in the year predominantly relates to engineering and redundancy costs. Of the balance remaining at 31 December 2022, \u00a311.6 million relates to engineering works, of which \u00a33.2 million is expected to be utilised in 2023 with the remaining amounts expected to be utilised in the period 2024 to 2026. A further \u00a30.6 million relates to redundancy costs, which are expected to be utilised in 2023, and the remaining \u00a30.5 million relates to other costs, which are expected to be utilised in the period 2024 to 2026. The full provision has been presented within non-current liabilities in the Consolidated balance sheet. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-615": { "value": "3.6 Contract costs The Group incurs costs of obtaining contracts in the Customers 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 2022 \u00a3m 2021 \u00a3m At 1 January 23.7 4 0 .1 Additions 30.7 14.0 Amortisation (24.6) (30.4) At 31 December 29.8 23.7 ", "dimensions": { "concept": "draxgroupplc:DisclosureOfContractCosts", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-651": { "value": "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: ", "dimensions": { "concept": "draxgroupplc:DescriptionOfAccountingPolicyForContractCosts", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-616": { "value": "3.7 Trade and other payables and contract liabilities Trade and other payables represent amounts the Group owes to its suppliers for trade purchases and ongoing costs, taxes and social security amounts due in relation to the Group\u2019s 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\u2019s activities in the current period (e.g. fuel received but for which the Group has not yet been invoiced). Contract liabilities represent the Group\u2019s 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 measured at amortised cost. The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring under which certain suppliers can obtain early access to payments. There are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease. The amount due is recognised in trade payables. The Group also has access to payment facilities, utilised to leverage scale and ef\ufb01ciencies in transaction processing. Under these facilities the Group bene\ufb01ts from an extension to payment terms of less than 12 months for a small fee. The original liability is derecognised and 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, in the period incurred. The Group does not include trade and other payables in its calculation of Net debt (see note 2.7). As at 31 December 2022 \u00a3m 2021 \u00a3m Trade payables 152.9 147.8 Fuel accruals 107.7 50.3 Energy supply accruals 511.4 36 2.1 Other accruals 370.9 269.8 Other payables 351.0 366.5 Contract liabilities 34.0 14.6 Total Trade and other payables and contract liabilities 1,527.9 1,211.1 Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying amounts of trade and other payables are the same as their fair values, due to their short-term nature. Trade payables includes \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. Other payables includes \u00a3214.5 million (2021: \u00a362.2 million) due under other payment facilities which includes amounts due under deferred letters of credit in respect of the construction of the Group\u2019s three OCGT assets that obtained a Capacity Market contract. Energy supply accruals includes \u00a3315.0 million (2021: \u00a3264.3 million) in relation to the Group\u2019s obligation to deliver ROCs arising from activities in the Customers business. The remaining balance principally comprises third-party grid charge accruals of \u00a3108.5 million (2021: \u00a348.2 million) and Feed-in-Tariff accruals of \u00a346.8 million (2021: \u00a319.8 million). Energy supply accruals have increased as a result of both higher supply volumes and higher prices. Other accruals includes \u00a311.1 million (2021: \u00a339.3 million) in respect of the Group\u2019s estimated obligation to deliver carbon emissions allowances under the UK Emission Trading Scheme (UK ETS). Allowances are purchased in the market and are recorded at cost. Other accruals also includes accruals for capital and operating expenditure where the invoices have not yet been received. Contract liabilities primarily relate to the advance consideration received from customers for \ufb01xed 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. Additions in the year include \u00a314.4 million in the Generation business in relation to the winter coal contract with the National Grid to provide a \u2018winter contingency\u2019 service to the UK power system. The reconciliation of opening to closing contract liabilities is as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 14.6 11.1 Revenue recognised in the year that was included in the contract liability at the start of the period (6.6) (5.4) Additions as a result of cash received from customers in the period not yet recognised in revenue 26.0 8.9 At 31 December 34.0 14.6 ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-652": { "value": "Accounting policy Trade and other payables are measured at amortised cost. The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring under which certain suppliers can obtain early access to payments. There are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease. The amount due is recognised in trade payables. The Group also has access to payment facilities, utilised to leverage scale and ef\ufb01ciencies in transaction processing. Under these facilities the Group bene\ufb01ts from an extension to payment terms of less than 12 months for a small fee. The original liability is derecognised and 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, in the period incurred. The Group does not include trade and other payables in its calculation of Net debt (see note 2.7). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-675": { "value": "As at 31 December 2022 \u00a3m 2021 \u00a3m Trade payables 152.9 147.8 Fuel accruals 107.7 50.3 Energy supply accruals 511.4 36 2.1 Other accruals 370.9 269.8 Other payables 351.0 366.5 Contract liabilities 34.0 14.6 Total Trade and other payables and contract liabilities 1,527.9 1,211.1 Energy supply accruals includes \u00a3315.0 million (2021: \u00a3264.3 million) in relation to the Group\u2019s obligation to deliver ROCs arising from activities in the Customers business. The remaining balance principally comprises third-party grid charge accruals of \u00a3108.5 million (2021: \u00a348.2 million) and Feed-in-Tariff accruals of \u00a346.8 million (2021: \u00a319.8 million). Energy supply accruals have increased as a result of both higher supply volumes and higher prices. Other accruals includes \u00a311.1 million (2021: \u00a339.3 million) in respect of the Group\u2019s estimated obligation to deliver carbon emissions allowances under the UK Emission Trading Scheme (UK ETS). Allowances are purchased in the market and are recorded at cost. Other accruals also includes accruals for capital and operating expenditure where the invoices have not yet been received. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-676": { "value": "Contract liabilities primarily relate to the advance consideration received from customers for \ufb01xed 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. Additions in the year include \u00a314.4 million in the Generation business in relation to the winter coal contract with the National Grid to provide a \u2018winter contingency\u2019 service to the UK power system. The reconciliation of opening to closing contract liabilities is as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 14.6 11.1 Revenue recognised in the year that was included in the contract liability at the start of the period (6.6) (5.4) Additions as a result of cash received from customers in the period not yet recognised in revenue 26.0 8.9 At 31 December 34.0 14.6 ", "dimensions": { "concept": "draxgroupplc:DisclosureOfContractLiabilities", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-617": { "value": "3.8 Climate change Climate change, and tackling it, is pervasive to the Group\u2019s purpose, as set out in the Strategic report on pages 2 to 91. The Sustainable development report, starting on page 36 sets out how the Group\u2019s ambition is to be climate positive and the TCFD disclosures, starting on page 52, set out the Group\u2019s approach to managing climate risks, including scenario analysis. Climate change is factored into short, medium and long-term forecasts and estimates used by the Group. Several areas of the Consolidated \ufb01nancial statements have climate considerations in relation to them, namely: Area Description Page reference Judgements in relation to key sources of estimation uncertainty Impairment of assets, UELs of property, plant and equipment and capitalisation of development project costs are all sensitive to climate change. Please see further details below. 178 Impairment of assets The Group\u2019s expectations around the impacts of climate change, and in particular the requirements of the UK Government\u2019s commitment to reach net zero by 2050, are integral to the forecasts used to underpin the Group\u2019s impairment analyses. 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. Governmental and societal responses to climate change are still developing, and therefore \ufb01nancial statements cannot capture all potential future scenarios as these are not yet known. This presents uncertainty around future cash\ufb02ows from an IAS 36 perspective. Sensitivities modelled, including around biomass acceptability, seek to capture some of these potential scenarios. Also, operational outages, whether caused by climate related events or other factors, are some of the sensitivities modelled in the impairment testing. 194 Going concern and viability As above, forecast power prices and operational outages are also incorporated into the going concern and viability assessments. 176 for going concern and 75 for viability Fixed asset UELs Climate impacts are one of the factors assessed in determining how long the Group anticipate both additions and existing assets to operate for. For example, the OCGT assets under development will be given a UEL commensurate with the Group\u2019s expectations around the UK\u2019s transition to a net zero position by 2050. Although, as outlined in the Key sources of estimation uncertainty, the likelihood is that UELs at Drax Power Station will be extended, were UELs to be shortened by 10 years, whether as a result of climate change or otherwise, depreciation would increase by approximately \u00a365 million per year. 210 ", "dimensions": { "concept": "draxgroupplc:DisclosureOfClimateChange", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-590": { "value": "Section 4: Financing and capital structure This section provides further information about the Group\u2019s capital structure (equity and debt \ufb01nancing) and cash generated from operations during the year. 4.1 Cash and cash equivalents Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity of three months or less, and money market funds. The carrying amount of these assets is approximately equal to their fair value. It is the Group\u2019s policy to invest available cash on hand in short-term, low-risk bank accounts or deposit accounts. As at 31 December 2022 \u00a3m 2021 \u00a3m Cash at bank 102.1 35.9 Short-term deposits 19.5 23.7 Money market funds 116.4 2 57. 8 Total cash and cash equivalents 238.0 317.4 Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. At 31 December 2022, net postings of \u00a3234.0 million had been made to counterparties (2021: \u00a3172.8 million of net receipts from counterparties) to support energy hedging activity. Cash collateral payments of \u00a3234.0 million (2021: \u00a332.8 million) were recognised in other receivables and \u00a3nil (2021: \u00a3205.6 million) of cash collateral receipts were recognised in other payables. The increase in cash collateral payments is predominantly due to the signi\ufb01cant price increases seen in the power, gas and carbon markets as well as an increase in the use of collateralised exchange based trading. See note 7.6 and 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. 4.2 Borrowings Accounting policy The Group measures all debt instruments (whether \ufb01nancial assets or \ufb01nancial liabilities) initially at fair value, which equates to the principal value of the consideration paid or received. 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 \ufb01nancial 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 payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, with a \ufb01xed repayment date regardless of when the loan is drawn down, are recognised on a systematic basis over the period the Group is able to draw down if draw down is probable. Loan commitment fees payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, where the loan has the same \ufb01xed term regardless of when the loan is drawn down, are deferred until draw down and are recognised over the life of the instrument as part of the effective interest rate if draw down is probable. 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 draw down can vary at the Group\u2019s discretion, such as 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 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 \ufb01x 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 statement of comprehensive income within either foreign exchange gains/(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. The Group\u2019s net borrowings at each reporting date were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Secured borrowings at amortised cost: 2.625% loan notes \u20ac250m (1) 219.8 207. 2 6.625% loan notes $500m (2) 412.8 367.0 Index-linked loan \u00a335m (3) \u2013 40.6 UK infrastructure private placement facilities (2019) (4) 372.5 370.0 UK infrastructure private placement facilities (2020) (5) 207.9 201.2 CAD term facility C$300m (6) 183.6 175.0 Unsecured borrowings at amortised cost: Uncommitted short-term loan facility \u20ac50m (7) 44.3 \u2013 Total borrowings 1,440.9 1,361.0 Split between: Current liabilities 44.3 40.6 Non-current liabilities 1,396.6 1,320.4 (1) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.6%. (2) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.9%. (3) The index-linked loan facility matured in March 2022. On maturity the principal amount of \u00a335 million plus \u00a36.4 million of indexation was repaid wholly from cash reserves. (4) These comprise committed facilities totalling \u00a3375 million with a range of maturities extending out to between 2024 and 2029. Interest rate swaps have been used to \ufb01x floating rates. This equates to an effective sterling interest rate of 3.3%. (5) These comprise committed facilities totalling \u00a398 million and \u20ac126.5 million with a range of maturities extending out to between 2024 and 2030. Interest rate swaps have been used to \ufb01x sterling floating rates on sterling facilities. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments on euro facilities. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 2.5%. (6) This facility matures in 2024 with the option to extend by two years and has a customary margin grid reference over the Canadian Dollar Offered Rate (CDOR). No interest rate or cross-currency interest rate swaps are in place to hedge the facility, so the Group is exposed to movements in both floating interest rates and movements in the Canadian dollar. (7) This is an uncommitted short-term facility with a maturity term of one month, however this term may be extended at the option of the lender. The average \ufb01xed interest rate for this facility is 2.4%. The Group has a committed \u00a3300 million RCF and C$10 million RCF. These had no cash drawings as at 31 December 2022 or 31 December 2021. The Group has never had cash drawings under this facility since its inception, three years ago. The Group also has access to certain non-recourse trade receivable monetisation facilities and payment facilities, as described in note 4.3, which are utilised to accelerate working capital cash inflows and defer cash outflows. In December 2022, the Group secured a new \u00a3200 million committed liquidity facility with banks within its lending group. This facility provides an additional source of liquidity to the Group\u2019s existing undrawn RCFs, over the 12 months following the reporting date. This facility was temporarily drawn during December, to support optimisation of generation and associated cash collateral postings, but was undrawn at 31 December 2022. The Group has a \u20ac50 million uncommitted facility that was drawn during the second half of 2022 and at 31 December 2022 \u20ac50 million remained drawn (2021: \u00a3nil). This facility was also drawn to support optimisation of generation and associated cash collateral postings. See note 2.7 for further details on the Group\u2019s cash and committed facilities. The Group\u2019s secured borrowings are secured against the assets of a number of the Group\u2019s subsidiaries, with the exception of property owned by the US subsidiaries. The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%). Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated net income and the consolidated net income to debt ratio. The consolidated net income to debt ratio broadly equates to an EBITDA to Net debt calculation and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group is required to test its \ufb01nancial covenants every six months at \ufb01nancial full-year and half-year reporting periods, and has complied with all \ufb01nancial covenants during the current and prior year. The Group has signi\ufb01cant headroom and expects to continue to comply with these \ufb01nancial covenants in future periods under all reasonably possible downside scenarios. See the Viability statement on page 75 for further details on the scenarios considered. The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. (1) The net debt calculation for \ufb01nancial covenants is based on Net debt including cash and borrowings attributable to non-controlling interests, but excludes the impact of hedging. Reconciliation of borrowings The table below shows the movement in borrowings during the current and previous year: Year ended 31 December 2022 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,376.2 (15.2) 1,361.0 Cash movements: Repayment of Index-linked loan (41.4) \u2013 (41.4) Draw down of facilities 188.5 \u2013 188.5 Repayment of facilities (145.0) \u2013 (145.0) Non-cash movements: Indexation of linked loan 0.8 \u2013 0.8 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 6 .1 6 .1 Amortisation of USD loan note premium (0.4) \u2013 (0.4) Effect of changes in foreign exchange rates 71.1 0.2 71.3 Borrowings at 31 December 1,449.8 (8.9) 1,440.9 Year ended 31 December 2021 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,085.3 (19.6) 1,065.7 Cash movements: Drawdown of 2020 Infrastructure private placement facilities 130.8 (0.5) 130.3 Repayment of debt acquired from Pinnacle (25 3.1) \u2013 (25 3.1) Drawdown of C$300m term facility 17 3.1 (0.8) 172.3 Other cash movements (3.2) \u2013 (3.2) Non-cash movements: Borrowings acquired on acquisition of Pinnacle (note 5.1) 256.3 \u2013 256.3 Indexation of linked loan 2.2 \u2013 2.2 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 5.7 5.7 Amortisation of USD loan note premium (0.3) \u2013 (0.3) Effect of changes in foreign exchange rates (14.9) \u2013 (14.9) Borrowings at 31 December 1,376.2 (15.2) 1,361.0 As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange losses (2021: gains) on borrowings disclosed in the above tables have been offset by \u00a362.0 million of foreign exchange gains (2021: 21.2 million of losses) on cross-currency interest rate swaps that have been recycled to pro\ufb01t and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group\u2019s cash flow hedging relationships on Net debt. 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 \ufb01nancing 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 \ufb01nancing activities. Cash generated from operations Cash generated from operations is the starting point of the Group\u2019s Consolidated cash flow statement on page 185. The table below makes adjustments for any non-cash accounting items to reconcile the Group\u2019s net pro\ufb01t for the year to the amount of cash generated from the Group\u2019s operations. Year ended 31 December 2022 \u00a3m 2021 \u00a3m Pro\ufb01t for the year \u2013 continuing 82.5 55.1 Pro\ufb01t for the year \u2013 discontinued \u2013 24 .1 Adjustments for: Interest payable and similar charges 83.1 70.9 Interest receivable (4.3) (0.3) Tax (credit)/charge (4.4) 6 8 .1 Research and development tax credits (5.5) (7.5) Income from associates (0.5) (0.3) Depreciation of property, plant and equipment 187.7 149.8 Amortisation of intangible assets 31.4 34.4 Depreciation of right-of-use assets 20.3 15.2 Impairment of non-current assets 41.5 \u2013 Losses on disposal of \ufb01xed assets 5.5 9.4 Gain on disposal of subsidiaries \u2013 (16.2) Other losses 0.3 \u2013 Certain remeasurements of derivative contracts (1) 288.7 (74.6) Non-cash charge for share-based payments 9.6 7.4 Effect of changes in foreign exchange rates (2.2) 1.3 Operating cash \ufb02ows before movement in working capital 733.7 336.8 Changes in working capital: (Increase)/decrease in inventories (133.4) 3 7.4 Increase in receivables (379.0) (27.4) Increase in payables 431.8 15.0 Net movement in collateral (2) (406.8) 168.3 Decrease in provisions (29.1) (4.2) Decrease/(increase) in renewable certi\ufb01cate assets 113.7 (161.8) Total cash (absorbed by)/released from working capital (402.8) 27.3 Net movement in de\ufb01ned bene\ufb01t pension obligations (3) (10.6) (9.6) Cash generated from operations 320.3 354.5 (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. (2) The \u00a3168.3 million increase in collateral received in the prior year has been re-presented. Previously this was included in the movement in receivables as a \u00a330.6 million increase and movement in payables as a \u00a3198.9 million increase. (3) The comparative \ufb01gure has been re-presented to combine the de\ufb01ned bene\ufb01t scheme current and past service costs and contributions into a net de\ufb01ned bene\ufb01t pension obligation. The Group has generated cash from operations of \u00a3320.3 million during the year (2021: \u00a3354.5 million). This resulted from a cash inflow from operating activities before working capital of \u00a3733.7 million (2021: \u00a3336.8 million). This was offset by a \u00a310.6 million (2021: \u00a39.6 million) cash outflow in respect of pension obligations and a net working capital outflow of \u00a3402.8 million (2021: \u00a327.3 million inflow), principally due to collateral payments. The most signi\ufb01cant factors making up these cash movements are explained in further detail below. The \u00a3288.7 million adjustment for certain remeasurements of derivative contracts (2021: \u00a3(74.6) million adjustment) in the current year predominantly relates to net unrealised losses recognised within the Consolidated income statement, where cash has not yet been paid or received by the Group. These net unrealised losses were offset by a net cash outflow due to realised losses on maturing trades. From time to time, where market conditions change, the Group can rebase foreign currency contracts including cross-currency interest rate swaps. Rebasing trades accelerates certain cash flows at the point of rebasing that would have been received on maturity or at contractual payment dates per the original terms of the trade. There is an equal and opposite reduction in cash flows (less rebasing fees) on the original maturity or contractual payment dates. At 31 December 2022 the Group had accelerated \u00a343.1 million of cash flows through the use of rebasing (2021: \u00a348.1 million). The reduction in accelerated cash flows reflects the unwinding of the cash bene\ufb01t as the original maturity or contractual payment dates pass. The accelerated cash flows related wholly to rebased cross-currency interest rate swaps in the current and prior year. The impact of rebasing is reflected within the Certain remeasurements of derivative contracts line in the table above. 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 certi\ufb01cate 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 explained further below. High levels of volatility in power and commodity markets have continued during 2022. Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. The Group actively manages the liquidity requirements, including collateral, associated with the hedging of power and other commodities. At 31 December 2022 the Group had a net posting of collateral. However, the design of the Group\u2019s trading agreements and methods of posting collateral, such as being able to utilise letters of credit and surety bonds to meet collateral requirements, aims to minimise cash outflows resulting from collateral requirements where possible. The Group has had a net cash outflow of \u00a3406.8 million during the year due to collateral (2021: \u00a3168.3 million inflow). At 31 December 2022 the Group held \u00a3nil in cash collateral receipts (2021: \u00a3205.6 million) recognised in payables and had posted \u00a3234.0 million (2021: \u00a332.8 million) of cash collateral payments recognised in receivables. The Group also had \u00a354.5 million (2021: \u00a342.5 million) of letters of credit and \u00a3165.0 million (2021: \u00a3107.1 million) of surety bonds utilised covering 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 reduced the amount by which receivables has increased. See notes 4.1 and 7.6 for further details on cash collateral receipts and non-cash collateral postings respectively. The \u00a3379.0 million (2021: \u00a327.4 million) cash outflow due to an increase in receivables in 2022 is predominantly related to the Customers business as a result of higher power and gas prices during the year, resulting in higher amounts receivable from customers. The Customers business has access to a facility which enables it to accelerate cash flows associated with amounts receivable from energy supply customers on a non-recourse basis. The Group has re\ufb01nanced this facility during the year, extending the maturity to January 2027 and increasing the size of the facility to \u00a3300.0 million from \u00a3200.0 million. The Group also agreed a further increase to the \u00a3300.0 million limit, to \u00a3400.0 million, for the period November 2022 to January 2024. Utilisation of the facility was \u00a3400.0 million at 31 December 2022 (2021: \u00a3200.0 million). The additional utilisation of this facility has resulted in a \u00a3200.0 million cash inflow which has offset the increase in receivables described above to lead to the net \u00a3379.0 million cash outflow. The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales, as described in note 3.3. The \u00a3113.7 million cash inflow is predominantly due to the Group\u2019s use of standard renewable certi\ufb01cate sale and renewable certi\ufb01cate purchase arrangements. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however, through these arrangements, the Group is able to accelerate cash flows over a proportion of these assets. At 31 December 2022 the Group had accelerated \u00a3331.2 million of cash flows using these standard renewable certi\ufb01cate sales (2021: \u00a3199.8 million). This cash inflow was offset by a net cash outflow as a result of renewable certi\ufb01cates generated and still held by the Group. The Group had a \u00a3431.8 million (2021: \u00a315.0 million) cash inflow due to an increase in payables during the year. This increase is predominantly due to increased levels of power repurchases within the Generation business in the current year, as well as higher accruals as a result of both increased volumes and higher prices in the Customers business. The Group has sought to normalise payments across its supplier base resulting in certain suppliers extending payment terms and some reducing terms. The Group\u2019s suppliers are able to access a supply chain \ufb01nance facility provided by a bank, for which funds can be accelerated in advance of the normal payment terms. At 31 December 2022, the Group had trade payables of \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. The facility does not directly impact the Group\u2019s 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 a number of payment facilities to leverage scale and ef\ufb01ciencies in transaction processing, whilst providing a working capital bene\ufb01t for the Group due to a short extension of payment terms of less than 12 months. The amount outstanding under these facilities at 31 December 2022 was \u00a3214.5 million (2021: \u00a362.2 million) resulting in a cash inflow of \u00a3152.3 million. Utilisation of these payment facilities has reduced the cash outflow in the purchases of property, plant and equipment line in the Consolidated cash flow statement by \u00a364.6 million and has also impacted the movement in payables line in the table above by \u00a387.7 million. The cash outflow of \u00a3133.4 million as a result of the increase in inventories results in part from the planned build-up of inventories due to the repro\ufb01ling of generation from summer into winter. Changes in liabilities arising from \ufb01nancing cash flows A reconciliation of the movements in liabilities arising from \ufb01nancing activities for both cash and non-cash movements is provided below: As at 31 December 2022 Borrowings \u00a3m Lease liabilities \u00a3m Total \u00a3m Balance at 1 January 1,361.0 125.9 1,486.9 Cash \ufb02ows from \ufb01nancing activities 2.1 (18.0) (15.9) Effect of changes in foreign exchange rates 71.3 11.5 82.8 Other movements 6.5 33.7 40.2 Balance at 31 December 1,440.9 153.1 1,594.0 As at 31 December 2021 Borrowings \u00a3m Lease liabilities \u00a3m Total \u00a3m Balance at 1 January 1,065.7 30.2 1,095.9 Cash \ufb02ows from \ufb01nancing activities 46.3 (13.2) 33.1 Effect of changes in foreign exchange rates (14.9) 2.7 (12.2) Other movements 7.6 45 .1 52.7 Acquisition of subsidiary 256.3 61.1 317.4 Balance at 31 December 1,361.0 125.9 1,486.9 Other movements principally relate to the amortisation of deferred \ufb01nance costs, discounting of lease liabilities and lease additions in the year. 4.4 Equity and reserves The Group\u2019s 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 classi\ufb01ed 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 2022 \u00a3m 2021 \u00a3m Issued and fully paid: 2022: 414,872,491 ordinary shares of 11 16 \u2044 29 pence each (2021: 413,068,027) 47.9 47.7 The movement in allotted and fully paid share capital of the Company during the year was as follows: Year ended 31 December 2022 (number) 2021 (number) At 1 January 413,068,027 410,848,934 Issued under employee share schemes 1,804,464 2,219,093 At 31 December 414,872,491 413,068,027 The Company has only one class of shares, which are ordinary shares of 11 16 \u204429 pence each, carrying no right to \ufb01xed 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\u2019s employee share schemes (see note 6.2). 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 reflect amounts received on the issue of shares under employee share schemes. Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 432.2 430.0 Issue of share capital 1.1 2.2 At 31 December 433.3 432.2 Other reserves Other equity reserves reflect the impact of certain historical transactions, which are described under the table below: Capital redemption reserve \u00a3m Translation reserve \u00a3m Merger reserve \u00a3m Treasury shares \u00a3m Total other reserves \u00a3m At 1 January 2021 1.5 35.4 710.8 (50.4) 697.3 Exchange differences on translation of foreign operations \u2013 8.7 \u2013 \u2013 8.7 At 1 January 2022 1.5 4 4 .1 710.8 (50.4) 706.0 Exchange differences on translation of foreign operations \u2013 42.4 \u2013 \u2013 42.4 Exchange differences on acquisition of interest in Alabama Pellets LLC \u2013 (0.7) \u2013 \u2013 (0.7) At 31 December 2022 1.5 85.8 710.8 (50.4) 747.7 The capital redemption and treasury share reserves arose when the Group completed previous share buyback programmes. The 13.8 million shares held in the treasury share reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\u2019s US and Canadian subsidiaries from their functional currencies (USD and CAD) into sterling for presentation in these Consolidated \ufb01nancial statements are recognised in the translation reserve. Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \ufb01nancial instruments designated into hedge accounting relationships in accordance with IFRS 9, 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 identi\ufb01able 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 pro\ufb01ts. At 31 December 2022, the Group has two (2021: three) subsidiary undertakings with NCIs. These subsidiaries were acquired during the prior year through the acquisition of Pinnacle. During the year, the Group purchased the remaining 10% of NCI in Alabama Pellets LLC increasing the Group\u2019s interest in the subsidiary to 100%. See the Transactions with NCI section below for further information. Summarised \ufb01nancial information The summarised \ufb01nancial information disclosed is shown on a 100% basis. It represents the results of each entity below that would be shown in the subsidiaries own \ufb01nancial statements prepared in accordance with IFRS, modi\ufb01ed for Group level fair value adjustments at acquisition. The comparative amounts at 31 December 2021 have been re-presented to include the Group level fair value adjustments and these adjustments have no impact to cashflow. All amounts are presented before intercompany eliminations. As at 31 December 2022 As at 31 December 2021 Principal place of business Non-controlling interest % Non-controlling interests \u00a3m Non-controlling interest % Non-controlling interests \u00a3m Alabama Pellets LLC North America 0% 10% 7. 2 Lavington Pellet Limited Partnership North America 25% 7.7 25% 8.5 Smithers Pellet Limited Partnership North America 30% 5.7 30% 5.8 Total 13.4 21.5 No dividends were paid to NCIs in the current or previous reporting period. Summarised statement of total comprehensive income Year ended 31 December 2022 Re-presented Year ended 31 December 2021 (2) Revenue \u00a3m Loss for the year \u00a3m Loss for the year attributable to the non- controlling interests \u00a3m Total comprehensive loss for the year \u00a3m Total comprehensive loss attributable to the non-controlling interests \u00a3m Revenue \u00a3m Loss for the year \u00a3m (Loss)/pro\ufb01t for the year attributable to the non- controlling interests \u00a3m Total comprehensive loss \u00a3m Total comprehensive (loss)/income attributable to the non-controlling interests \u00a3m Alabama Pellets LLC (1) 39.5 (9.5) (1.0) (9.5) (1.0) 25.6 (9.4) (1.7) (9.4) (1.7) Lavington Pellet Limited Partnership 36.5 (1.7) (0.7) (1.7) (0.7) 29.3 (0.6) 0.1 (0.6) 0 .1 Smithers Pellet Limited Partnership 13.0 (3.0) (0.9) (3.0) (0.9) 11.8 (1.1) (0.4) (1.1) (0.4) Total 89.0 (14.2) (2.6) (14.2) (2.6) 66.7 (11.1) (2.0) (11.1) (2.0) (1) The 2022 Summarised statement of total comprehensive income for Alabama Pellets LLC is for the period up to acquisition of the remaining NCI on 30 September 2022. (2) The comparative amounts at 31 December 2021 have been re-presented to include Group level fair value adjustments Summarised Balance sheet As at 31 December 2022 Re-presented As at 31 December 2021 (1) Non-current assets \u00a3m Current assets \u00a3m Current liabilities \u00a3m Non-current liabilities \u00a3m Net assets \u00a3m Non-current assets \u00a3m Current assets \u00a3m Current liabilities \u00a3m Non-current liabilities \u00a3m Net assets \u00a3m Alabama Pellets LLC 120.4 14.7 (16 .1) (0.6) 118.4 Lavington Pellet Limited Partnership 27.7 6.8 (3.1) (0.6) 30.8 2 9.1 6.9 (2.1) (0.7) 33.2 Smithers Pellet Limited Partnership 17. 3 1.8 (1.1) \u2013 18.0 17.1 2.0 (0.7) \u2013 18.4 Total 45.0 8.6 (4.2) (0.6) 48.8 166.6 23.6 (18.9) (1.3) 170.0 (1) The comparative amounts at 31 December 2021 have been re-presented to include Group level fair value adjustments. Summarised Cash flow Year ended 31 December 2022 Year ended 31 December 2021 Net cash in\ufb02ow/ (out\ufb02ow) from operating activities \u00a3m Net cash out\ufb02ow from investing activities \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow from \ufb01nancing activities \u00a3m Net cash in\ufb02ow/ (out\ufb02ow) \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow from operating activities \u00a3m Net cash out\ufb02ow from investing activities \u00a3m Net cash in\ufb02ow/ (out\ufb02ow) from \ufb01nancing activities \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow \u00a3m Alabama Pellets LLC (2.9) (47.9) 50.6 (0.2) Lavington Pellet Limited Partnership 3.5 (0.7) (2.2) 0.6 2.2 (0.5) (0 .1) 1.6 Smithers Pellet Limited Partnership (1.9) (0.2) 1.8 (0.3) (0.7) (2.5) 3.6 0.4 Total 1.6 (0.9) (0.4) 0.3 (1.4) (50.9) 5 4 .1 1.8 Transactions with NCI When the Group acquired Pinnacle during 2021, the NCI in Alabama Pellets LLC (APLLC) was 30%. In July 2021, the Group acquired a further 20% interest in APLLC for \u00a321.5 million ($29.7 million), increasing the Group\u2019s total interest in APLLC to 90% and reducing the NCI to 10%. This resulted in a \u00a30.2 million charge recognised in equity, within retained pro\ufb01ts, for the difference between the adjustment to NCI and the fair value of any consideration paid. In September 2022, the Group acquired the remaining 10% of NCI in APLLC for \u00a320.2 million ($22.2 million), resulting in the Group now owning 100% of APLLC. This resulted in a \u00a39.3 million charge recognised in equity, within retained pro\ufb01ts, for the difference between the adjustment to NCI and the fair value of any consideration paid, and a decrease in the translation reserve of \u00a30.7 million. The following table summarises the impact of changes in the Group\u2019s ownership of APLLC: Year ended 31 December 2022 \u00a3m Carrying amount of non-controlling interest acquired 10.2 Consideration paid to non-controlling interest (20.2) Decrease in equity attributable to owners of the Parent Company (10.0) Further information on changes during the year in the Group\u2019s NCIs is given in the Consolidated statement of changes in equity. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfFinancingAndCapitalStructure", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-653": { "value": "4.1 Cash and cash equivalents Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity of three months or less, and money market funds. The carrying amount of these assets is approximately equal to their fair value. It is the Group\u2019s policy to invest available cash on hand in short-term, low-risk bank accounts or deposit accounts. As at 31 December 2022 \u00a3m 2021 \u00a3m Cash at bank 102.1 35.9 Short-term deposits 19.5 23.7 Money market funds 116.4 2 57. 8 Total cash and cash equivalents 238.0 317.4 Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. At 31 December 2022, net postings of \u00a3234.0 million had been made to counterparties (2021: \u00a3172.8 million of net receipts from counterparties) to support energy hedging activity. Cash collateral payments of \u00a3234.0 million (2021: \u00a332.8 million) were recognised in other receivables and \u00a3nil (2021: \u00a3205.6 million) of cash collateral receipts were recognised in other payables. The increase in cash collateral payments is predominantly due to the signi\ufb01cant price increases seen in the power, gas and carbon markets as well as an increase in the use of collateralised exchange based trading. See note 7.6 and 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. Guarantees In addition to the amounts drawn down against the bank loans, certain members of the Group guarantee the obligations of a number of banks in respect of letters of credit issued by those banks to counterparties of the Group. As at 31 December 2022, the Group\u2019s contingent liability in respect of letters of credit issued amounted to \u00a385.9 million (2021: \u00a374.4 million), of which \u00a346.0 million (2021: \u00a374.4 million) was issued under the RCF. The Group also guarantees obligations in the form of surety bonds with a number of insurers amounting to \u00a3202.0 million (2021: \u00a3142.1 million). Collateral is sometimes required to be provided in relation to the Group\u2019s commodity and treasury trading activities. When derivative positions are out of the money for the Group, collateral may be required to be provided to the counterparty. These positions reverse when contracts are settled, and the collateral is returned. The Group has access to certain facilities to enable it to cover collateral requirements to counterparties through letters of credit or surety bonds. The letters of credit and surety bond \ufb01gures above include amounts utilised to cover commodity trading collateral requirements of \u00a354.5 million (2021: \u00a342.5 million) and \u00a3165.0 million (2 0 21: \u00a3107.1 million) respectively. See note 4.1 for details on net cash collateral the Group has paid to or received from counterparties. High levels of volatility in power and commodity markets have continued during 2022. Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. The Group actively manages the liquidity requirements, including collateral, associated with the hedging of power and other commodities. At 31 December 2022 the Group had a net posting of collateral. However, the design of the Group\u2019s trading agreements and methods of posting collateral, such as being able to utilise letters of credit and surety bonds to meet collateral requirements, aims to minimise cash outflows resulting from collateral requirements where possible. The Group has had a net cash outflow of \u00a3406.8 million during the year due to collateral (2021: \u00a3168.3 million inflow). At 31 December 2022 the Group held \u00a3nil in cash collateral receipts (2021: \u00a3205.6 million) recognised in payables and had posted \u00a3234.0 million (2021: \u00a332.8 million) of cash collateral payments recognised in receivables. The Group also had \u00a354.5 million (2021: \u00a342.5 million) of letters of credit and \u00a3165.0 million (2021: \u00a3107.1 million) of surety bonds utilised covering 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 reduced the amount by which receivables has increased. See notes 4.1 and 7.6 for further details on cash collateral receipts and non-cash collateral postings respectively. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-618": { "value": "4.1 Cash and cash equivalents Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity of three months or less, and money market funds. The carrying amount of these assets is approximately equal to their fair value. It is the Group\u2019s policy to invest available cash on hand in short-term, low-risk bank accounts or deposit accounts. As at 31 December 2022 \u00a3m 2021 \u00a3m Cash at bank 102.1 35.9 Short-term deposits 19.5 23.7 Money market funds 116.4 2 57. 8 Total cash and cash equivalents 238.0 317.4 Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. At 31 December 2022, net postings of \u00a3234.0 million had been made to counterparties (2021: \u00a3172.8 million of net receipts from counterparties) to support energy hedging activity. Cash collateral payments of \u00a3234.0 million (2021: \u00a332.8 million) were recognised in other receivables and \u00a3nil (2021: \u00a3205.6 million) of cash collateral receipts were recognised in other payables. The increase in cash collateral payments is predominantly due to the signi\ufb01cant price increases seen in the power, gas and carbon markets as well as an increase in the use of collateralised exchange based trading. See note 7.6 and 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-678": { "value": "Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity of three months or less, and money market funds. The carrying amount of these assets is approximately equal to their fair value. It is the Group\u2019s policy to invest available cash on hand in short-term, low-risk bank accounts or deposit accounts. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-677": { "value": "4.2 Borrowings Accounting policy The Group measures all debt instruments (whether \ufb01nancial assets or \ufb01nancial liabilities) initially at fair value, which equates to the principal value of the consideration paid or received. 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 \ufb01nancial 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 payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, with a \ufb01xed repayment date regardless of when the loan is drawn down, are recognised on a systematic basis over the period the Group is able to draw down if draw down is probable. Loan commitment fees payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, where the loan has the same \ufb01xed term regardless of when the loan is drawn down, are deferred until draw down and are recognised over the life of the instrument as part of the effective interest rate if draw down is probable. 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 draw down can vary at the Group\u2019s discretion, such as 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 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 \ufb01x 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 statement of comprehensive income within either foreign exchange gains/(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. The Group\u2019s net borrowings at each reporting date were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Secured borrowings at amortised cost: 2.625% loan notes \u20ac250m (1) 219.8 207. 2 6.625% loan notes $500m (2) 412.8 367.0 Index-linked loan \u00a335m (3) \u2013 40.6 UK infrastructure private placement facilities (2019) (4) 372.5 370.0 UK infrastructure private placement facilities (2020) (5) 207.9 201.2 CAD term facility C$300m (6) 183.6 175.0 Unsecured borrowings at amortised cost: Uncommitted short-term loan facility \u20ac50m (7) 44.3 \u2013 Total borrowings 1,440.9 1,361.0 Split between: Current liabilities 44.3 40.6 Non-current liabilities 1,396.6 1,320.4 (1) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.6%. (2) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.9%. (3) The index-linked loan facility matured in March 2022. On maturity the principal amount of \u00a335 million plus \u00a36.4 million of indexation was repaid wholly from cash reserves. (4) These comprise committed facilities totalling \u00a3375 million with a range of maturities extending out to between 2024 and 2029. Interest rate swaps have been used to \ufb01x floating rates. This equates to an effective sterling interest rate of 3.3%. (5) These comprise committed facilities totalling \u00a398 million and \u20ac126.5 million with a range of maturities extending out to between 2024 and 2030. Interest rate swaps have been used to \ufb01x sterling floating rates on sterling facilities. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments on euro facilities. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 2.5%. (6) This facility matures in 2024 with the option to extend by two years and has a customary margin grid reference over the Canadian Dollar Offered Rate (CDOR). No interest rate or cross-currency interest rate swaps are in place to hedge the facility, so the Group is exposed to movements in both floating interest rates and movements in the Canadian dollar. (7) This is an uncommitted short-term facility with a maturity term of one month, however this term may be extended at the option of the lender. The average \ufb01xed interest rate for this facility is 2.4%. The Group has a committed \u00a3300 million RCF and C$10 million RCF. These had no cash drawings as at 31 December 2022 or 31 December 2021. The Group has never had cash drawings under this facility since its inception, three years ago. The Group also has access to certain non-recourse trade receivable monetisation facilities and payment facilities, as described in note 4.3, which are utilised to accelerate working capital cash inflows and defer cash outflows. In December 2022, the Group secured a new \u00a3200 million committed liquidity facility with banks within its lending group. This facility provides an additional source of liquidity to the Group\u2019s existing undrawn RCFs, over the 12 months following the reporting date. This facility was temporarily drawn during December, to support optimisation of generation and associated cash collateral postings, but was undrawn at 31 December 2022. The Group has a \u20ac50 million uncommitted facility that was drawn during the second half of 2022 and at 31 December 2022 \u20ac50 million remained drawn (2021: \u00a3nil). This facility was also drawn to support optimisation of generation and associated cash collateral postings. See note 2.7 for further details on the Group\u2019s cash and committed facilities. The Group\u2019s secured borrowings are secured against the assets of a number of the Group\u2019s subsidiaries, with the exception of property owned by the US subsidiaries. The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%). Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated net income and the consolidated net income to debt ratio. The consolidated net income to debt ratio broadly equates to an EBITDA to Net debt calculation and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group is required to test its \ufb01nancial covenants every six months at \ufb01nancial full-year and half-year reporting periods, and has complied with all \ufb01nancial covenants during the current and prior year. The Group has signi\ufb01cant headroom and expects to continue to comply with these \ufb01nancial covenants in future periods under all reasonably possible downside scenarios. See the Viability statement on page 75 for further details on the scenarios considered. The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. (1) The net debt calculation for \ufb01nancial covenants is based on Net debt including cash and borrowings attributable to non-controlling interests, but excludes the impact of hedging. Reconciliation of borrowings The table below shows the movement in borrowings during the current and previous year: Year ended 31 December 2022 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,376.2 (15.2) 1,361.0 Cash movements: Repayment of Index-linked loan (41.4) \u2013 (41.4) Draw down of facilities 188.5 \u2013 188.5 Repayment of facilities (145.0) \u2013 (145.0) Non-cash movements: Indexation of linked loan 0.8 \u2013 0.8 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 6 .1 6 .1 Amortisation of USD loan note premium (0.4) \u2013 (0.4) Effect of changes in foreign exchange rates 71.1 0.2 71.3 Borrowings at 31 December 1,449.8 (8.9) 1,440.9 Year ended 31 December 2021 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,085.3 (19.6) 1,065.7 Cash movements: Drawdown of 2020 Infrastructure private placement facilities 130.8 (0.5) 130.3 Repayment of debt acquired from Pinnacle (25 3.1) \u2013 (25 3.1) Drawdown of C$300m term facility 17 3.1 (0.8) 172.3 Other cash movements (3.2) \u2013 (3.2) Non-cash movements: Borrowings acquired on acquisition of Pinnacle (note 5.1) 256.3 \u2013 256.3 Indexation of linked loan 2.2 \u2013 2.2 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 5.7 5.7 Amortisation of USD loan note premium (0.3) \u2013 (0.3) Effect of changes in foreign exchange rates (14.9) \u2013 (14.9) Borrowings at 31 December 1,376.2 (15.2) 1,361.0 As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange losses (2021: gains) on borrowings disclosed in the above tables have been offset by \u00a362.0 million of foreign exchange gains (2021: 21.2 million of losses) on cross-currency interest rate swaps that have been recycled to pro\ufb01t and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group\u2019s cash flow hedging relationships on Net debt. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-619": { "value": "4.2 Borrowings Accounting policy The Group measures all debt instruments (whether \ufb01nancial assets or \ufb01nancial liabilities) initially at fair value, which equates to the principal value of the consideration paid or received. 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 \ufb01nancial 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 payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, with a \ufb01xed repayment date regardless of when the loan is drawn down, are recognised on a systematic basis over the period the Group is able to draw down if draw down is probable. Loan commitment fees payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, where the loan has the same \ufb01xed term regardless of when the loan is drawn down, are deferred until draw down and are recognised over the life of the instrument as part of the effective interest rate if draw down is probable. 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 draw down can vary at the Group\u2019s discretion, such as 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 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 \ufb01x 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 statement of comprehensive income within either foreign exchange gains/(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. The Group\u2019s net borrowings at each reporting date were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Secured borrowings at amortised cost: 2.625% loan notes \u20ac250m (1) 219.8 207. 2 6.625% loan notes $500m (2) 412.8 367.0 Index-linked loan \u00a335m (3) \u2013 40.6 UK infrastructure private placement facilities (2019) (4) 372.5 370.0 UK infrastructure private placement facilities (2020) (5) 207.9 201.2 CAD term facility C$300m (6) 183.6 175.0 Unsecured borrowings at amortised cost: Uncommitted short-term loan facility \u20ac50m (7) 44.3 \u2013 Total borrowings 1,440.9 1,361.0 Split between: Current liabilities 44.3 40.6 Non-current liabilities 1,396.6 1,320.4 (1) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.6%. (2) These loan notes mature in 2025. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 4.9%. (3) The index-linked loan facility matured in March 2022. On maturity the principal amount of \u00a335 million plus \u00a36.4 million of indexation was repaid wholly from cash reserves. (4) These comprise committed facilities totalling \u00a3375 million with a range of maturities extending out to between 2024 and 2029. Interest rate swaps have been used to \ufb01x floating rates. This equates to an effective sterling interest rate of 3.3%. (5) These comprise committed facilities totalling \u00a398 million and \u20ac126.5 million with a range of maturities extending out to between 2024 and 2030. Interest rate swaps have been used to \ufb01x sterling floating rates on sterling facilities. Cross-currency interest rate swaps have been used to \ufb01x the sterling value of interest payments on euro facilities. This instrument also \ufb01xed the sterling repayment of the principal. This equates to an effective sterling interest rate of 2.5%. (6) This facility matures in 2024 with the option to extend by two years and has a customary margin grid reference over the Canadian Dollar Offered Rate (CDOR). No interest rate or cross-currency interest rate swaps are in place to hedge the facility, so the Group is exposed to movements in both floating interest rates and movements in the Canadian dollar. (7) This is an uncommitted short-term facility with a maturity term of one month, however this term may be extended at the option of the lender. The average \ufb01xed interest rate for this facility is 2.4%. The Group has a committed \u00a3300 million RCF and C$10 million RCF. These had no cash drawings as at 31 December 2022 or 31 December 2021. The Group has never had cash drawings under this facility since its inception, three years ago. The Group also has access to certain non-recourse trade receivable monetisation facilities and payment facilities, as described in note 4.3, which are utilised to accelerate working capital cash inflows and defer cash outflows. In December 2022, the Group secured a new \u00a3200 million committed liquidity facility with banks within its lending group. This facility provides an additional source of liquidity to the Group\u2019s existing undrawn RCFs, over the 12 months following the reporting date. This facility was temporarily drawn during December, to support optimisation of generation and associated cash collateral postings, but was undrawn at 31 December 2022. The Group has a \u20ac50 million uncommitted facility that was drawn during the second half of 2022 and at 31 December 2022 \u20ac50 million remained drawn (2021: \u00a3nil). This facility was also drawn to support optimisation of generation and associated cash collateral postings. See note 2.7 for further details on the Group\u2019s cash and committed facilities. The Group\u2019s secured borrowings are secured against the assets of a number of the Group\u2019s subsidiaries, with the exception of property owned by the US subsidiaries. The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%). Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated net income and the consolidated net income to debt ratio. The consolidated net income to debt ratio broadly equates to an EBITDA to Net debt calculation and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group is required to test its \ufb01nancial covenants every six months at \ufb01nancial full-year and half-year reporting periods, and has complied with all \ufb01nancial covenants during the current and prior year. The Group has signi\ufb01cant headroom and expects to continue to comply with these \ufb01nancial covenants in future periods under all reasonably possible downside scenarios. See the Viability statement on page 75 for further details on the scenarios considered. The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. (1) The net debt calculation for \ufb01nancial covenants is based on Net debt including cash and borrowings attributable to non-controlling interests, but excludes the impact of hedging. Reconciliation of borrowings The table below shows the movement in borrowings during the current and previous year: Year ended 31 December 2022 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,376.2 (15.2) 1,361.0 Cash movements: Repayment of Index-linked loan (41.4) \u2013 (41.4) Draw down of facilities 188.5 \u2013 188.5 Repayment of facilities (145.0) \u2013 (145.0) Non-cash movements: Indexation of linked loan 0.8 \u2013 0.8 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 6 .1 6 .1 Amortisation of USD loan note premium (0.4) \u2013 (0.4) Effect of changes in foreign exchange rates 71.1 0.2 71.3 Borrowings at 31 December 1,449.8 (8.9) 1,440.9 Year ended 31 December 2021 Borrowings before deferred \ufb01nance costs \u00a3m Deferred \ufb01nance costs \u00a3m Net borrowings \u00a3m Borrowings at 1 January 1,085.3 (19.6) 1,065.7 Cash movements: Drawdown of 2020 Infrastructure private placement facilities 130.8 (0.5) 130.3 Repayment of debt acquired from Pinnacle (25 3.1) \u2013 (25 3.1) Drawdown of C$300m term facility 17 3.1 (0.8) 172.3 Other cash movements (3.2) \u2013 (3.2) Non-cash movements: Borrowings acquired on acquisition of Pinnacle (note 5.1) 256.3 \u2013 256.3 Indexation of linked loan 2.2 \u2013 2.2 Amortisation of deferred \ufb01nance costs (note 2.5) \u2013 5.7 5.7 Amortisation of USD loan note premium (0.3) \u2013 (0.3) Effect of changes in foreign exchange rates (14.9) \u2013 (14.9) Borrowings at 31 December 1,376.2 (15.2) 1,361.0 As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange losses (2021: gains) on borrowings disclosed in the above tables have been offset by \u00a362.0 million of foreign exchange gains (2021: 21.2 million of losses) on cross-currency interest rate swaps that have been recycled to pro\ufb01t and loss as part of the hedging relationship. See note 2.7 for further details of the impact of the Group\u2019s cash flow hedging relationships on Net debt. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-654": { "value": "Accounting policy The Group measures all debt instruments (whether \ufb01nancial assets or \ufb01nancial liabilities) initially at fair value, which equates to the principal value of the consideration paid or received. 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 \ufb01nancial 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 payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, with a \ufb01xed repayment date regardless of when the loan is drawn down, are recognised on a systematic basis over the period the Group is able to draw down if draw down is probable. Loan commitment fees payable to the lender that entitle the Group to draw down at any time over a \ufb01xed period, where the loan has the same \ufb01xed term regardless of when the loan is drawn down, are deferred until draw down and are recognised over the life of the instrument as part of the effective interest rate if draw down is probable. 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 draw down can vary at the Group\u2019s discretion, such as 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 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 \ufb01x 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 statement of comprehensive income within either foreign exchange gains/(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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-620": { "value": "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 \ufb01nancing 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 \ufb01nancing activities. Cash generated from operations Cash generated from operations is the starting point of the Group\u2019s Consolidated cash flow statement on page 185. The table below makes adjustments for any non-cash accounting items to reconcile the Group\u2019s net pro\ufb01t for the year to the amount of cash generated from the Group\u2019s operations. Year ended 31 December 2022 \u00a3m 2021 \u00a3m Pro\ufb01t for the year \u2013 continuing 82.5 55.1 Pro\ufb01t for the year \u2013 discontinued \u2013 24 .1 Adjustments for: Interest payable and similar charges 83.1 70.9 Interest receivable (4.3) (0.3) Tax (credit)/charge (4.4) 6 8 .1 Research and development tax credits (5.5) (7.5) Income from associates (0.5) (0.3) Depreciation of property, plant and equipment 187.7 149.8 Amortisation of intangible assets 31.4 34.4 Depreciation of right-of-use assets 20.3 15.2 Impairment of non-current assets 41.5 \u2013 Losses on disposal of \ufb01xed assets 5.5 9.4 Gain on disposal of subsidiaries \u2013 (16.2) Other losses 0.3 \u2013 Certain remeasurements of derivative contracts (1) 288.7 (74.6) Non-cash charge for share-based payments 9.6 7.4 Effect of changes in foreign exchange rates (2.2) 1.3 Operating cash \ufb02ows before movement in working capital 733.7 336.8 Changes in working capital: (Increase)/decrease in inventories (133.4) 3 7.4 Increase in receivables (379.0) (27.4) Increase in payables 431.8 15.0 Net movement in collateral (2) (406.8) 168.3 Decrease in provisions (29.1) (4.2) Decrease/(increase) in renewable certi\ufb01cate assets 113.7 (161.8) Total cash (absorbed by)/released from working capital (402.8) 27.3 Net movement in de\ufb01ned bene\ufb01t pension obligations (3) (10.6) (9.6) Cash generated from operations 320.3 354.5 (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. (2) The \u00a3168.3 million increase in collateral received in the prior year has been re-presented. Previously this was included in the movement in receivables as a \u00a330.6 million increase and movement in payables as a \u00a3198.9 million increase. (3) The comparative \ufb01gure has been re-presented to combine the de\ufb01ned bene\ufb01t scheme current and past service costs and contributions into a net de\ufb01ned bene\ufb01t pension obligation. The Group has generated cash from operations of \u00a3320.3 million during the year (2021: \u00a3354.5 million). This resulted from a cash inflow from operating activities before working capital of \u00a3733.7 million (2021: \u00a3336.8 million). This was offset by a \u00a310.6 million (2021: \u00a39.6 million) cash outflow in respect of pension obligations and a net working capital outflow of \u00a3402.8 million (2021: \u00a327.3 million inflow), principally due to collateral payments. The most signi\ufb01cant factors making up these cash movements are explained in further detail below. The \u00a3288.7 million adjustment for certain remeasurements of derivative contracts (2021: \u00a3(74.6) million adjustment) in the current year predominantly relates to net unrealised losses recognised within the Consolidated income statement, where cash has not yet been paid or received by the Group. These net unrealised losses were offset by a net cash outflow due to realised losses on maturing trades. From time to time, where market conditions change, the Group can rebase foreign currency contracts including cross-currency interest rate swaps. Rebasing trades accelerates certain cash flows at the point of rebasing that would have been received on maturity or at contractual payment dates per the original terms of the trade. There is an equal and opposite reduction in cash flows (less rebasing fees) on the original maturity or contractual payment dates. At 31 December 2022 the Group had accelerated \u00a343.1 million of cash flows through the use of rebasing (2021: \u00a348.1 million). The reduction in accelerated cash flows reflects the unwinding of the cash bene\ufb01t as the original maturity or contractual payment dates pass. The accelerated cash flows related wholly to rebased cross-currency interest rate swaps in the current and prior year. The impact of rebasing is reflected within the Certain remeasurements of derivative contracts line in the table above. 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 certi\ufb01cate 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 explained further below. High levels of volatility in power and commodity markets have continued during 2022. Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. The Group actively manages the liquidity requirements, including collateral, associated with the hedging of power and other commodities. At 31 December 2022 the Group had a net posting of collateral. However, the design of the Group\u2019s trading agreements and methods of posting collateral, such as being able to utilise letters of credit and surety bonds to meet collateral requirements, aims to minimise cash outflows resulting from collateral requirements where possible. The Group has had a net cash outflow of \u00a3406.8 million during the year due to collateral (2021: \u00a3168.3 million inflow). At 31 December 2022 the Group held \u00a3nil in cash collateral receipts (2021: \u00a3205.6 million) recognised in payables and had posted \u00a3234.0 million (2021: \u00a332.8 million) of cash collateral payments recognised in receivables. The Group also had \u00a354.5 million (2021: \u00a342.5 million) of letters of credit and \u00a3165.0 million (2021: \u00a3107.1 million) of surety bonds utilised covering 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 reduced the amount by which receivables has increased. See notes 4.1 and 7.6 for further details on cash collateral receipts and non-cash collateral postings respectively. The \u00a3379.0 million (2021: \u00a327.4 million) cash outflow due to an increase in receivables in 2022 is predominantly related to the Customers business as a result of higher power and gas prices during the year, resulting in higher amounts receivable from customers. The Customers business has access to a facility which enables it to accelerate cash flows associated with amounts receivable from energy supply customers on a non-recourse basis. The Group has re\ufb01nanced this facility during the year, extending the maturity to January 2027 and increasing the size of the facility to \u00a3300.0 million from \u00a3200.0 million. The Group also agreed a further increase to the \u00a3300.0 million limit, to \u00a3400.0 million, for the period November 2022 to January 2024. Utilisation of the facility was \u00a3400.0 million at 31 December 2022 (2021: \u00a3200.0 million). The additional utilisation of this facility has resulted in a \u00a3200.0 million cash inflow which has offset the increase in receivables described above to lead to the net \u00a3379.0 million cash outflow. The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales, as described in note 3.3. The \u00a3113.7 million cash inflow is predominantly due to the Group\u2019s use of standard renewable certi\ufb01cate sale and renewable certi\ufb01cate purchase arrangements. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however, through these arrangements, the Group is able to accelerate cash flows over a proportion of these assets. At 31 December 2022 the Group had accelerated \u00a3331.2 million of cash flows using these standard renewable certi\ufb01cate sales (2021: \u00a3199.8 million). This cash inflow was offset by a net cash outflow as a result of renewable certi\ufb01cates generated and still held by the Group. The Group had a \u00a3431.8 million (2021: \u00a315.0 million) cash inflow due to an increase in payables during the year. This increase is predominantly due to increased levels of power repurchases within the Generation business in the current year, as well as higher accruals as a result of both increased volumes and higher prices in the Customers business. The Group has sought to normalise payments across its supplier base resulting in certain suppliers extending payment terms and some reducing terms. The Group\u2019s suppliers are able to access a supply chain \ufb01nance facility provided by a bank, for which funds can be accelerated in advance of the normal payment terms. At 31 December 2022, the Group had trade payables of \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. The facility does not directly impact the Group\u2019s 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 a number of payment facilities to leverage scale and ef\ufb01ciencies in transaction processing, whilst providing a working capital bene\ufb01t for the Group due to a short extension of payment terms of less than 12 months. The amount outstanding under these facilities at 31 December 2022 was \u00a3214.5 million (2021: \u00a362.2 million) resulting in a cash inflow of \u00a3152.3 million. Utilisation of these payment facilities has reduced the cash outflow in the purchases of property, plant and equipment line in the Consolidated cash flow statement by \u00a364.6 million and has also impacted the movement in payables line in the table above by \u00a387.7 million. The cash outflow of \u00a3133.4 million as a result of the increase in inventories results in part from the planned build-up of inventories due to the repro\ufb01ling of generation from summer into winter. Changes in liabilities arising from \ufb01nancing cash flows A reconciliation of the movements in liabilities arising from \ufb01nancing activities for both cash and non-cash movements is provided below: As at 31 December 2022 Borrowings \u00a3m Lease liabilities \u00a3m Total \u00a3m Balance at 1 January 1,361.0 125.9 1,486.9 Cash \ufb02ows from \ufb01nancing activities 2.1 (18.0) (15.9) Effect of changes in foreign exchange rates 71.3 11.5 82.8 Other movements 6.5 33.7 40.2 Balance at 31 December 1,440.9 153.1 1,594.0 As at 31 December 2021 Borrowings \u00a3m Lease liabilities \u00a3m Total \u00a3m Balance at 1 January 1,065.7 30.2 1,095.9 Cash \ufb02ows from \ufb01nancing activities 46.3 (13.2) 33.1 Effect of changes in foreign exchange rates (14.9) 2.7 (12.2) Other movements 7.6 45 .1 52.7 Acquisition of subsidiary 256.3 61.1 317.4 Balance at 31 December 1,361.0 125.9 1,486.9 Other movements principally relate to the amortisation of deferred \ufb01nance costs, discounting of lease liabilities and lease additions in the year. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-679": { "value": "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 \ufb01nancing 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 \ufb01nancing activities. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-680": { "value": "The Group has generated cash from operations of \u00a3320.3 million during the year (2021: \u00a3354.5 million). This resulted from a cash inflow from operating activities before working capital of \u00a3733.7 million (2021: \u00a3336.8 million). This was offset by a \u00a310.6 million (2021: \u00a39.6 million) cash outflow in respect of pension obligations and a net working capital outflow of \u00a3402.8 million (2021: \u00a327.3 million inflow), principally due to collateral payments. The most signi\ufb01cant factors making up these cash movements are explained in further detail below. The \u00a3288.7 million adjustment for certain remeasurements of derivative contracts (2021: \u00a3(74.6) million adjustment) in the current year predominantly relates to net unrealised losses recognised within the Consolidated income statement, where cash has not yet been paid or received by the Group. These net unrealised losses were offset by a net cash outflow due to realised losses on maturing trades. From time to time, where market conditions change, the Group can rebase foreign currency contracts including cross-currency interest rate swaps. Rebasing trades accelerates certain cash flows at the point of rebasing that would have been received on maturity or at contractual payment dates per the original terms of the trade. There is an equal and opposite reduction in cash flows (less rebasing fees) on the original maturity or contractual payment dates. At 31 December 2022 the Group had accelerated \u00a343.1 million of cash flows through the use of rebasing (2021: \u00a348.1 million). The reduction in accelerated cash flows reflects the unwinding of the cash bene\ufb01t as the original maturity or contractual payment dates pass. The accelerated cash flows related wholly to rebased cross-currency interest rate swaps in the current and prior year. The impact of rebasing is reflected within the Certain remeasurements of derivative contracts line in the table above. 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 certi\ufb01cate 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 explained further below. High levels of volatility in power and commodity markets have continued during 2022. Cash collateral is sometimes paid or received in relation to the Group\u2019s 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 contracts are settled and the collateral is returned. The Group actively manages the liquidity requirements, including collateral, associated with the hedging of power and other commodities. At 31 December 2022 the Group had a net posting of collateral. However, the design of the Group\u2019s trading agreements and methods of posting collateral, such as being able to utilise letters of credit and surety bonds to meet collateral requirements, aims to minimise cash outflows resulting from collateral requirements where possible. The Group has had a net cash outflow of \u00a3406.8 million during the year due to collateral (2021: \u00a3168.3 million inflow). At 31 December 2022 the Group held \u00a3nil in cash collateral receipts (2021: \u00a3205.6 million) recognised in payables and had posted \u00a3234.0 million (2021: \u00a332.8 million) of cash collateral payments recognised in receivables. The Group also had \u00a354.5 million (2021: \u00a342.5 million) of letters of credit and \u00a3165.0 million (2021: \u00a3107.1 million) of surety bonds utilised covering 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 reduced the amount by which receivables has increased. See notes 4.1 and 7.6 for further details on cash collateral receipts and non-cash collateral postings respectively. The \u00a3379.0 million (2021: \u00a327.4 million) cash outflow due to an increase in receivables in 2022 is predominantly related to the Customers business as a result of higher power and gas prices during the year, resulting in higher amounts receivable from customers. The Customers business has access to a facility which enables it to accelerate cash flows associated with amounts receivable from energy supply customers on a non-recourse basis. The Group has re\ufb01nanced this facility during the year, extending the maturity to January 2027 and increasing the size of the facility to \u00a3300.0 million from \u00a3200.0 million. The Group also agreed a further increase to the \u00a3300.0 million limit, to \u00a3400.0 million, for the period November 2022 to January 2024. Utilisation of the facility was \u00a3400.0 million at 31 December 2022 (2021: \u00a3200.0 million). The additional utilisation of this facility has resulted in a \u00a3200.0 million cash inflow which has offset the increase in receivables described above to lead to the net \u00a3379.0 million cash outflow. The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales, as described in note 3.3. The \u00a3113.7 million cash inflow is predominantly due to the Group\u2019s use of standard renewable certi\ufb01cate sale and renewable certi\ufb01cate purchase arrangements. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however, through these arrangements, the Group is able to accelerate cash flows over a proportion of these assets. At 31 December 2022 the Group had accelerated \u00a3331.2 million of cash flows using these standard renewable certi\ufb01cate sales (2021: \u00a3199.8 million). This cash inflow was offset by a net cash outflow as a result of renewable certi\ufb01cates generated and still held by the Group. The Group had a \u00a3431.8 million (2021: \u00a315.0 million) cash inflow due to an increase in payables during the year. This increase is predominantly due to increased levels of power repurchases within the Generation business in the current year, as well as higher accruals as a result of both increased volumes and higher prices in the Customers business. The Group has sought to normalise payments across its supplier base resulting in certain suppliers extending payment terms and some reducing terms. The Group\u2019s suppliers are able to access a supply chain \ufb01nance facility provided by a bank, for which funds can be accelerated in advance of the normal payment terms. At 31 December 2022, the Group had trade payables of \u00a353.9 million (2021: \u00a350.4 million) related to reverse factoring. The facility does not directly impact the Group\u2019s 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 a number of payment facilities to leverage scale and ef\ufb01ciencies in transaction processing, whilst providing a working capital bene\ufb01t for the Group due to a short extension of payment terms of less than 12 months. The amount outstanding under these facilities at 31 December 2022 was \u00a3214.5 million (2021: \u00a362.2 million) resulting in a cash inflow of \u00a3152.3 million. Utilisation of these payment facilities has reduced the cash outflow in the purchases of property, plant and equipment line in the Consolidated cash flow statement by \u00a364.6 million and has also impacted the movement in payables line in the table above by \u00a387.7 million. The cash outflow of \u00a3133.4 million as a result of the increase in inventories results in part from the planned build-up of inventories due to the repro\ufb01ling of generation from summer into winter. The Treasury function is responsible for liquidity, funding and settlement management under policies approved by the Board. Liquidity needs are monitored using regular forecasting of operational cash flows and \ufb01nancing commitments. The Group maintains a mixture of cash and cash equivalents, committed facilities and uncommitted facilities in order to ensure suf\ufb01cient funding for business requirements. In managing liquidity risk, the Group has the ability to accelerate the cash flows associated with certain working capital items, principally those related to ROC sales and Customers\u2019 power sales. In each case this is undertaken on a non-recourse basis and, accordingly, the ROC assets and other items are derecognised from the Consolidated balance sheet at the point of sale. The Group also utilises standard purchasing facilities to extend the working capital cycle, whilst still paying suppliers on time. The impact on the Group\u2019s cash flows is described in note 4.3. ", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-693": { "value": "4.4 Equity and reserves The Group\u2019s 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 classi\ufb01ed 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 2022 \u00a3m 2021 \u00a3m Issued and fully paid: 2022: 414,872,491 ordinary shares of 11 16 \u2044 29 pence each (2021: 413,068,027) 47.9 47.7 The movement in allotted and fully paid share capital of the Company during the year was as follows: Year ended 31 December 2022 (number) 2021 (number) At 1 January 413,068,027 410,848,934 Issued under employee share schemes 1,804,464 2,219,093 At 31 December 414,872,491 413,068,027 The Company has only one class of shares, which are ordinary shares of 11 16 \u204429 pence each, carrying no right to \ufb01xed 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\u2019s employee share schemes (see note 6.2). 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 reflect amounts received on the issue of shares under employee share schemes. Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 432.2 430.0 Issue of share capital 1.1 2.2 At 31 December 433.3 432.2 Other reserves Other equity reserves reflect the impact of certain historical transactions, which are described under the table below: Capital redemption reserve \u00a3m Translation reserve \u00a3m Merger reserve \u00a3m Treasury shares \u00a3m Total other reserves \u00a3m At 1 January 2021 1.5 35.4 710.8 (50.4) 697.3 Exchange differences on translation of foreign operations \u2013 8.7 \u2013 \u2013 8.7 At 1 January 2022 1.5 4 4 .1 710.8 (50.4) 706.0 Exchange differences on translation of foreign operations \u2013 42.4 \u2013 \u2013 42.4 Exchange differences on acquisition of interest in Alabama Pellets LLC \u2013 (0.7) \u2013 \u2013 (0.7) At 31 December 2022 1.5 85.8 710.8 (50.4) 747.7 The capital redemption and treasury share reserves arose when the Group completed previous share buyback programmes. The 13.8 million shares held in the treasury share reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\u2019s US and Canadian subsidiaries from their functional currencies (USD and CAD) into sterling for presentation in these Consolidated \ufb01nancial statements are recognised in the translation reserve. Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \ufb01nancial instruments designated into hedge accounting relationships in accordance with IFRS 9, are set out in notes 7.3 and 7.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-681": { "value": "Accounting policy Ordinary shares are classi\ufb01ed 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-655": { "value": "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 reflect amounts received on the issue of shares under employee share schemes. Year ended 31 December 2022 \u00a3m 2021 \u00a3m At 1 January 432.2 430.0 Issue of share capital 1.1 2.2 At 31 December 433.3 432.2 ", "dimensions": { "concept": "draxgroupplc:DisclosureOfSharePremium", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-621": { "value": "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 identi\ufb01able 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 pro\ufb01ts. At 31 December 2022, the Group has two (2021: three) subsidiary undertakings with NCIs. These subsidiaries were acquired during the prior year through the acquisition of Pinnacle. During the year, the Group purchased the remaining 10% of NCI in Alabama Pellets LLC increasing the Group\u2019s interest in the subsidiary to 100%. See the Transactions with NCI section below for further information. Summarised \ufb01nancial information The summarised \ufb01nancial information disclosed is shown on a 100% basis. It represents the results of each entity below that would be shown in the subsidiaries own \ufb01nancial statements prepared in accordance with IFRS, modi\ufb01ed for Group level fair value adjustments at acquisition. The comparative amounts at 31 December 2021 have been re-presented to include the Group level fair value adjustments and these adjustments have no impact to cashflow. All amounts are presented before intercompany eliminations. As at 31 December 2022 As at 31 December 2021 Principal place of business Non-controlling interest % Non-controlling interests \u00a3m Non-controlling interest % Non-controlling interests \u00a3m Alabama Pellets LLC North America 0% 10% 7. 2 Lavington Pellet Limited Partnership North America 25% 7.7 25% 8.5 Smithers Pellet Limited Partnership North America 30% 5.7 30% 5.8 Total 13.4 21.5 No dividends were paid to NCIs in the current or previous reporting period. Summarised statement of total comprehensive income Year ended 31 December 2022 Re-presented Year ended 31 December 2021 (2) Revenue \u00a3m Loss for the year \u00a3m Loss for the year attributable to the non- controlling interests \u00a3m Total comprehensive loss for the year \u00a3m Total comprehensive loss attributable to the non-controlling interests \u00a3m Revenue \u00a3m Loss for the year \u00a3m (Loss)/pro\ufb01t for the year attributable to the non- controlling interests \u00a3m Total comprehensive loss \u00a3m Total comprehensive (loss)/income attributable to the non-controlling interests \u00a3m Alabama Pellets LLC (1) 39.5 (9.5) (1.0) (9.5) (1.0) 25.6 (9.4) (1.7) (9.4) (1.7) Lavington Pellet Limited Partnership 36.5 (1.7) (0.7) (1.7) (0.7) 29.3 (0.6) 0.1 (0.6) 0 .1 Smithers Pellet Limited Partnership 13.0 (3.0) (0.9) (3.0) (0.9) 11.8 (1.1) (0.4) (1.1) (0.4) Total 89.0 (14.2) (2.6) (14.2) (2.6) 66.7 (11.1) (2.0) (11.1) (2.0) (1) The 2022 Summarised statement of total comprehensive income for Alabama Pellets LLC is for the period up to acquisition of the remaining NCI on 30 September 2022. (2) The comparative amounts at 31 December 2021 have been re-presented to include Group level fair value adjustments . Summarised Balance sheet As at 31 December 2022 Re-presented As at 31 December 2021 (1) Non-current assets \u00a3m Current assets \u00a3m Current liabilities \u00a3m Non-current liabilities \u00a3m Net assets \u00a3m Non-current assets \u00a3m Current assets \u00a3m Current liabilities \u00a3m Non-current liabilities \u00a3m Net assets \u00a3m Alabama Pellets LLC 120.4 14.7 (16 .1) (0.6) 118.4 Lavington Pellet Limited Partnership 27.7 6.8 (3.1) (0.6) 30.8 2 9.1 6.9 (2.1) (0.7) 33.2 Smithers Pellet Limited Partnership 17. 3 1.8 (1.1) \u2013 18.0 17.1 2.0 (0.7) \u2013 18.4 Total 45.0 8.6 (4.2) (0.6) 48.8 166.6 23.6 (18.9) (1.3) 170.0 (1) The comparative amounts at 31 December 2021 have been re-presented to include Group level fair value adjustments. Summarised Cash flow Year ended 31 December 2022 Year ended 31 December 2021 Net cash in\ufb02ow/ (out\ufb02ow) from operating activities \u00a3m Net cash out\ufb02ow from investing activities \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow from \ufb01nancing activities \u00a3m Net cash in\ufb02ow/ (out\ufb02ow) \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow from operating activities \u00a3m Net cash out\ufb02ow from investing activities \u00a3m Net cash in\ufb02ow/ (out\ufb02ow) from \ufb01nancing activities \u00a3m Net cash (out\ufb02ow)/ in\ufb02ow \u00a3m Alabama Pellets LLC (2.9) (47.9) 50.6 (0.2) Lavington Pellet Limited Partnership 3.5 (0.7) (2.2) 0.6 2.2 (0.5) (0 .1) 1.6 Smithers Pellet Limited Partnership (1.9) (0.2) 1.8 (0.3) (0.7) (2.5) 3.6 0.4 Total 1.6 (0.9) (0.4) 0.3 (1.4) (50.9) 5 4 .1 1.8 Transactions with NCI When the Group acquired Pinnacle during 2021, the NCI in Alabama Pellets LLC (APLLC) was 30%. In July 2021, the Group acquired a further 20% interest in APLLC for \u00a321.5 million ($29.7 million), increasing the Group\u2019s total interest in APLLC to 90% and reducing the NCI to 10%. This resulted in a \u00a30.2 million charge recognised in equity, within retained pro\ufb01ts, for the difference between the adjustment to NCI and the fair value of any consideration paid. In September 2022, the Group acquired the remaining 10% of NCI in APLLC for \u00a320.2 million ($22.2 million), resulting in the Group now owning 100% of APLLC. This resulted in a \u00a39.3 million charge recognised in equity, within retained pro\ufb01ts, for the difference between the adjustment to NCI and the fair value of any consideration paid, and a decrease in the translation reserve of \u00a30.7 million. The following table summarises the impact of changes in the Group\u2019s ownership of APLLC: Year ended 31 December 2022 \u00a3m Carrying amount of non-controlling interest acquired 10.2 Consideration paid to non-controlling interest (20.2) Decrease in equity attributable to owners of the Parent Company (10.0) Further information on changes during the year in the Group\u2019s NCIs is given in the Consolidated statement of changes in equity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-682": { "value": "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 identi\ufb01able 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 pro\ufb01ts. At 31 December 2022, the Group has two (2021: three) subsidiary undertakings with NCIs. These subsidiaries were acquired during the prior year through the acquisition of Pinnacle. During the year, the Group purchased the remaining 10% of NCI in Alabama Pellets LLC increasing the Group\u2019s interest in the subsidiary to 100%. See the Transactions with NCI section below for further information. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTransactionsWithNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-591": { "value": "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 accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the target (the acquisition date). The consideration transferred, the identi\ufb01able 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 pro\ufb01t or loss 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: \u2022 consideration transferred; less \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able net assets acquired. Share-based payment awards held by employees of the acquired business that are voluntarily replaced are recognised as post- acquisition remuneration. Share-based payment awards held by employees of the acquired business that are obliged to be replaced are allocated between post-acquisition remuneration, which is treated as an expense, and pre-acquisition remuneration, which is treated as part of the overall consideration. Acquisition of Pinnacle In the prior year the Group completed the acquisition of Pinnacle. The primary reason for the acquisition was to advance the Group\u2019s biomass strategy by more than doubling its production capacity, signi\ufb01cantly reducing its cost of biomass production and adding a major biomass supply business underpinned by long-term sales contracts with high-quality Asian and European counterparties. The Group completed the acquisition on 13 April 2021. The purchase consideration was valued on a fully diluted equity basis at \u00a3222 million (C$385 million), a price of C$11.30 per share representing a premium of 13% based on the closing market price on 5 February 2021 of C$10.04 per share. The purchase consideration consisted of the following: As at 13 April 2021 \u00a3m Cash paid to ordinary shareholders 218 .1 Cash paid to settle existing share-based payment awards 4.2 Total purchase consideration 222.3 There was no contingent consideration in relation to the acquisition. Acquisition date fair values The Group\u2019s one year measurement period from the acquisition date, to \ufb01nalise the acquisition accounting, ended in the current reporting period. There were no changes to the provisional fair values of the identi\ufb01able assets acquired, liabilities assumed and NCI as at 13 April 2021 that were recognised in the 2021 Consolidated \ufb01nancial statements. Detailed below are the relevant acquisition values and the methods used to estimate them, as presented in the prior year. As at 13 April 2021 Fair value \u00a3m Property, plant and equipment and intangible assets 326.2 Right-of-use assets 60.4 Other non-current assets 4.3 Inventories 26.8 Trade and other receivables 29.4 Cash and cash equivalents 18.8 Trade and other payables (37.1) Lease liabilities (61.1) Borrowings (256.3) Deferred tax liabilities (12.1) Other liabilities (3.3) Net identi\ufb01able assets acquired 96.0 NCI (39.6) Goodwill 165.9 Net assets acquired 222.3 As part of the accounting for the Pinnacle acquisition, the assets and liabilities acquired were measured at fair value on the acquisition date. The valuation was performed by an independent valuation specialist. A fair value uplift of \u00a323.6 million (C$40.8 million) was recognised on the carrying value of property, plant and equipment acquired as part of the acquisition. If different assumptions and inputs were used, this could have resulted in a different fair value. The Pinnacle business held a number of long-term customer contracts at the acquisition date. As part of the acquisition accounting, these existing customer contracts were required to be measured at their fair value. In determining the fair value of these contracts, estimates were required for inputs to the valuation, such as the margin associated with these customer contracts, the required return for assets used to generate these contract revenues, retention rates, and an appropriate discount rate based on the risk pro\ufb01le of these contracts. A change to any of these inputs could signi\ufb01cantly impact the fair value calculated for these customer contracts. A customer-related intangible asset with a fair value of \u00a335.9 million (C $62.1 million) was recognised in relation to customer contracts at acquisition and is being amortised over its remaining UEL. See note 5.2 for further details of the valuation approach, the key valuation inputs, the carrying value and remaining amortisation period. The Group and Pinnacle had a pre-existing relationship relating to long-term supply contracts under which Pinnacle supplied the Group with biomass pellets at a \ufb01xed price. On acquisition, the Group assessed the terms of these supply contracts compared to current market transactions for an identical contract. Pricing for current market transactions for the purpose of this exercise was assessed based on the existing portfolio of the Group and Pinnacle contracts. These supply contracts were determined to be consistent with the pricing for current market transactions for an identical contract and the settlement provision for terminating these contracts would have been immaterial. As a result, no consideration was attributed to the settlement of the pre-existing relationship and therefore no gain or loss relating to the pre-existing relationship was recognised in the prior year. The fair values of the acquired property, plant and equipment, customer-related intangible asset and pre-existing relationship are inherently judgemental and involve a high degree of estimation, meaning valuations based on different methodologies or assumptions may have resulted in a materially different fair value. However, these valuations were performed by specialists, using appropriate methodologies and information. Goodwill on acquisition predominantly related to the value of uncontracted revenues and synergies expected to be realised by combining Pinnacle with the Group\u2019s existing Pellet Production business. The increased size of the Group\u2019s Pellet Production business has enabled greater flexibility, opportunities to optimise the Group\u2019s operations and logistics across the enlarged portfolio and has increased knowledge. The goodwill is not deductible for tax purposes. Goodwill is required to be denominated in the functional currency of the operations to which the goodwill is allocated to. The goodwill on the Pinnacle acquisition relates to both CAD and USD functional currency operations. This resulted in goodwill of C$97.4 million and $151.9 million which, when translated at the acquisition date, resulted in \u00a3165.9 million of goodwill. These goodwill balances are translated at the rates prevailing at each reporting date into the Group\u2019s presentational currency of GBP (see note 5.2 for further details). The NCI was measured at the proportionate share of the identi\ufb01able net assets of the acquiree at the acquisition date (see note 4.5 for further details on NCI). Acquired receivables The Group acquired receivables with a fair value and a gross contracted value of \u00a322.9 million (C$39.6 million). No provision for receivables was recognised due to the risk of default within the Pinnacle business, as well as the wider Pellet Production business, being considered to be remote, as explained further in note 3.5. Contingent liabilities No contingent liabilities or indemni\ufb01cation assets were recognised on acquisition of Pinnacle. Reconciliation of net cash outflow from investing activities Year ended 31 December 2021 Cash out\ufb02ow/ (in\ufb02ow) \u00a3m Cash paid to acquire Pinnacle 222.3 Less balances acquired: Cash (18.8) Net cash out\ufb02ow 203.5 Acquisition of Princeton pellet plant On 3 August 2022, the Group announced that it had signed an agreement with Princeton Standard Pellet Corporation (PSPC) to acquire its pellet plant in Princeton, British Columbia, Canada for consideration of \u00a37.6 million (C$11.5 million), subject to customary working capital adjustments. The sale subsequently completed on 1 September 2022. The plant has nameplate capacity to produce 90kt of biomass pellets a year from sawmill residuals and will contribute to the Group\u2019s strategy to increase pellet production capacity. In addition to the pellet plant itself, the Group also acquired certain other assets from PSPC including inventories and other working capital balances. As part of the transaction, the employees of PSPC joined the Group. Although the legal structure of the transaction was that of an asset purchase agreement, it was concluded that the substance of the transaction met the criteria of a business combination as de\ufb01ned by IFRS 3 and therefore the Group accounted for the transaction under the acquisition method. The fair value of the assets and liabilities acquired were as follows: As at 1 September 2022 Fair values \u00a3m Property, plant and equipment 7.9 Inventories 1.0 Trade and other receivables 0.8 Trade and other payables (1.2) Deferred tax liabilities (0.9) Net identi\ufb01able assets acquired 7.6 No goodwill arose from this transaction and no contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value and gross contracted value of \u00a30.8 million. No provision was recognised due to the risk of default within the Princeton business, as well as the wider Pellet Production business, being considered to be remote. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements. 5.2 Goodwill and intangible assets Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets are not physical in nature but are identi\ufb01able and separable from other assets. Intangible assets other than goodwill can be acquired in business combinations, purchased separately or internally developed. Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. Method of amortisation Average UEL remaining 2022 (years) Brand Straight line 4 Customer-related assets: Opus Energy Reducing balance 5 Pinnacle Straight line 8 Other Straight line 11 Computer software and licences Straight line 3 Other intangibles Straight line 5 Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Opus Energy CGU and the Pinnacle CGU. The brand is attributable to the Opus Energy CGU. Details of the impairment tests relating to these CGUs are included in note 2.4. Customer- related assets \u00a3m Brand \u00a3m Computer software and licences \u00a3m Development assets \u00a3m Other intangibles \u00a3m Goodwill \u00a3m Total \u00a3m Cost and carrying amount: At 1 January 2021 211.0 11.3 131.5 21.0 \u2013 248.2 623.0 Additions at cost (acquired separately) 8.2 \u2013 \u2013 \u2013 \u2013 \u2013 8.2 Additions at cost (internally generated) \u2013 \u2013 14.1 \u2013 \u2013 \u2013 14.1 Transfers from/(to) tangible fixed assets \u2013 \u2013 1.2 (19.3) \u2013 \u2013 (18 .1) Acquired in business combinations 35.9 \u2013 0.4 \u2013 0.2 165.9 202.4 Effect of changes in foreign exchange rates 0.4 \u2013 \u2013 \u2013 0 .1 2.2 2.7 At 1 January 2022 255.5 11.3 147.2 1.7 0.3 416.3 832.3 Additions at cost (internally generated) \u2013 \u2013 9.4 \u2013 \u2013 \u2013 9.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 (19.2) (1.7) \u2013 \u2013 (20.9) Transfers between categories \u2013 \u2013 (0.5) 0.5 \u2013 \u2013 \u2013 Transfers to property, plant and equipment \u2013 \u2013 0.5 (0.5) \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 2.1 \u2013 0.3 \u2013 \u2013 7.9 10.3 At 31 December 2022 257.6 11.3 129.5 \u2013 0.3 424.2 822.9 Accumulated amortisation: At 1 January 2021 126.6 4.5 61.9 \u2013 \u2013 \u2013 193.0 Charge for the year 22.8 1.1 10.5 \u2013 \u2013 \u2013 34.4 Acquired in business combinations 0 .1 \u2013 \u2013 \u2013 0 .1 \u2013 0.2 Effect of changes in foreign exchange rates (0.1) \u2013 \u2013 \u2013 (0.1) \u2013 (0.2) At 1 January 2022 149.4 5.6 72.4 \u2013 \u2013 \u2013 227.4 Charge for the year 21.2 1.2 9.0 \u2013 \u2013 \u2013 31.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 5.7 \u2013 \u2013 \u2013 5.7 Effect of changes in foreign exchange rates \u2013 \u2013 0.1 \u2013 \u2013 \u2013 0 .1 At 31 December 2022 170.6 6.8 79.0 \u2013 \u2013 \u2013 256.4 Net book value: At 31 December 2021 10 6 .1 5.7 74.8 1.7 0.3 416.3 604.9 At 31 December 2022 87.0 4.5 50.5 \u2013 0.3 424.2 566.5 The Group has incurred research and development expenditure of \u00a312.5 million (2021: \u00a311.4 million), which is included within Operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets primarily reflects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017 and the acquisition of Pinnacle in April 2021, which provided the Group with access to customer bases with contracted cash flows. The Opus Energy asset acquisition date fair value of \u00a3211.0 million reflected the estimated value of the future cash flows associated with this customer base at the acquisition date and is dependent upon estimates of both current and expected future contract margins and assumed customer retention rates. The cash flows have been discounted using an asset speci\ufb01c discount rate of 10.7%. The asset has an estimated UEL from acquisition of 11 years, calculated based on customer churn-rate analysis which shows how many customers are expected to leave the business in a given year, and is being amortised on a reducing balance basis to reflect the diminishing rate of contract renewals over time. At 31 December 2022, the Opus Energy asset had a carrying value of \u00a347.8 million (2021: \u00a364.2 million) and a remaining UEL of approximately \ufb01ve years (2021: six years). The Pinnacle asset acquisition date fair value of \u00a335.9 million (C$ 6 2 .1 million) was estimated based on a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash flows attributable to the customer-related intangible asset, after deducting a contributory asset charge that represented the required return for \ufb01xed assets, net working capital and the assembled workforce that are required to generate the cash flows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The inputs used as part of the valuation are detailed below: Pinnacle customer- related asset Asset speci\ufb01c discount rate 10.0% Weighted average tax rate 25.2% Return on net working capital 1.5% Return on \ufb01xed assets 7.0% Return on the assembled workforce 8.5% Useful economic life 10 years The Pinnacle customer-related asset is being amortised on a straight-line basis to reflect the even spread of contract maturities over the UEL. At 31 December 2022, the Pinnacle asset had a carrying value of \u00a331.5 million (2021: \u00a333.8 million) and a remaining UEL of approximately eight years (2021: approximately nine years). The Other customer-related assets primarily relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. Opus Energy brand The Opus Energy brand was acquired as part of the acquisition in February 2017 and valued at \u00a311.3 million on a relief-from-royalty method. The brand is being amortised on a straight-line basis over its assumed 10-year UEL from acquisition. Computer software and licences Additions in the period include those in the ordinary course of business, which principally reflect ongoing investment in business systems to support the Customers segment. Software assets are amortised on a straight-line basis over their estimated UEL ranging from three to 10 years. In March 2021 The IFRIC \ufb01nalised its agenda decision regarding how to account for cost of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement. The agenda decision concluded that the con\ufb01guration and customisation costs do not normally result in an intangible asset and should therefore be recognised as an expense. The Group has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. These assets have been impaired during the year, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. See the Change in accounting policy section in the Basis of preparation for further details. As at 31 December 2022, computer software assets under the course of construction amounted to \u00a318.3 million (2021: \u00a339.3 million). The comparative amount included \u00a319.2 million for a billing system where the Group has stopped development and is engaged in active discussion with the supplier following the supplier\u2019s failure to perform under the contract. Proceedings have been issued against the supplier to recover damages for misrepresentation and breach of contract. The Group no longer expects that future economic bene\ufb01ts will be recovered as an ongoing intangible asset and as a result, the asset has been impaired in the current \ufb01nancial period. The impairment charge has been recognised against the cost the asset in the table above, and recorded as an exceptional cost. See notes 2.7 and 7.6 for further information. See note 2.4 for a summary of impairment charges recognised on \ufb01xed assets during the year. Goodwill The table below shows the carrying amount of goodwill by CGU: As at 31 December 2022 \u00a3m 2021 \u00a3m CGU allocation: Drax Energy Solutions CGU: Haven Power acquired in 2009 10.7 10.7 Opus Energy CGU: Opus Energy acquired in 2017 159.2 159.2 Lanark CGU: Drax Generation Enterprise acquired in 2018 11.3 11.3 Galloway CGU: Drax Generation Enterprise acquired in 2018 40 .1 4 0.1 Cruachan CGU: Drax Generation Enterprise acquired in 2018 26.9 26.9 Pellet group of CGUs: Pinnacle acquired in 2021 176.0 16 8 .1 Total goodwill 424.2 416.3 A full impairment assessment of CGUs with goodwill allocated to them has been performed as detailed in note 2.4. 5.3 Provisions The Group makes provisions for reinstatement to cover the estimated costs of decommissioning and demolishing or remediating the sites of its generation assets at the end of their useful economic lives (UELs). The Group has recognised a restructuring provision in respect of coal closure. Other provisions primarily relate to dilapidation provisions for leased assets. Accounting policy Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount required to settle the obligation. Speci\ufb01cally, a provision is made for the estimated decommissioning costs at the end of the UEL of the Group\u2019s generating assets, when a legal or constructive obligation arises, on a discounted basis. The amount provided is calculated on a site-by-site basis and represents the present value of the expected future costs. An amount equivalent to the discounted provision is capitalised within property, plant and equipment and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges. The Group recognises a restructuring provision when it has developed a detailed formal plan for the restructuring and has raised a valid expectation that it will carry out the restructuring either by starting to implement the plan or announcing its main features to those affected by it. The restructuring provision includes only the direct expenditures arising from the restructuring programme. These are costs that would have been avoided if the restructuring programme did not go ahead. Any costs to be incurred relating to the ongoing activities of the Group are excluded from the provision. A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination bene\ufb01t and when the Group recognises any related restructuring costs. Decommissioning provision \u00a3m Restructuring provision \u00a3m Other provisions \u00a3m Total \u00a3m Carrying amount: At 1 January 2022 69.5 16.7 0.2 86.4 Additions \u2013 0.4 0.1 0.5 Utilised (2.7) (4.4) \u2013 ( 7.1) Reclass between provision categories (1.5) \u2013 1.5 \u2013 Unwinding of discount and changes in the discount rate (1) (21.3) \u2013 \u2013 (21.3) Effect of changes in foreign exchange rates \u2013 \u2013 0.1 0.1 At 31 December 2022 44.0 12.7 1.9 58.6 (1) The unwinding of discount and changes in the discount rate is comprised of a \u00a31.1m increase to the provision relating to unwinding of the discount (see note 2.5) and a \u00a322.4m decrease in the provision relating to changes in the discount rate (see note 3.1). Decommissioning provisions are made in respect of Drax Power Station. The decommissioning provision is based on the assumption that the decommissioning and reinstatement will take place at the end of the expected UEL of Drax Power Station, currently estimated to be 2039. This has been estimated using existing technology at current prices based on independent third-party advice, updated on a triennial basis as a minimum, but more regularly where deemed appropriate due to changes in plans for decommissioning the site that would impact the expected costs. The most recent update took place in December 2020. This cost of decommissioning was estimated to be \u00a356.0 million. An inflation curve was then applied to estimate the decommissioning costs in 2039. This value was then discounted to calculate the present value of the provision to be recognised. The discount rate used is a nominal risk-free rate that reflects the duration of the liability. The discount rate is estimated using forward UK Gilt curves as a proxy for risk-free rates. The use of a risk-free rate reflects the fact that the estimated future cash flows have built-in risks speci\ufb01c to the liability. The discount rate used for the Group\u2019s decommissioning provision is 4.05% (2021: 1.16%). The decommissioning provision is not considered a key source of estimation uncertainty to which there is a signi\ufb01cant risk of a material adjustment to the carrying amount within the next \ufb01nancial year. Decommissioning provisions are based on costs suf\ufb01ciently far in the future that, given the length of time, it is not anticipated that any new, more reliable, or accurate information will be available within the next \ufb01nancial year to update this estimate that would result in a material adjustment. The cost of decommissioning a site the size of Drax Power Station will be impacted by things such as the exact composition and volumes of materials used in the structures to be decommissioned, and the presence of contaminants. Full site surveys and investigations will need to be performed once the site ceases operation to ascertain further information necessary to decommission the site which could impact the potential costs. Notwithstanding this, due to the high degree of estimation and uncertainty regarding the potential costs and timing of decommissioning Drax Power Station, there remains a risk of a material adjustment to the carrying amount in the longer-term. The present value recognised for the decommissioning provision is dependent on the inflation rate and discount rate used. Inflation rates are estimated using forward inflation curves. An increase of 10% to the cost estimates would increase the decommissioning provision by \u00a34.7 million (2021: \u00a36.8 million). An increase of 100 basis points in the inflation and discount rates used would result in a \u00a39.5 million (2021: \u00a313.8 million) increase and a \u00a37.0 million (20 21: \u00a311.1 million) decrease respectively in the amount recognised. The relationship between the change in basis points and change in amount recognised is relatively linear therefore the impact of similar sensitivities may be interpolated and extrapolated from these amounts. The restructuring provision consists of redundancy costs relating to the formal closure of the coal units at Drax Power Station which was initially planned for September 2022. It also includes costs for engineering works required to make the coal units and related assets safe when they cease operating. At the request of the UK Government, the Group has entered into an agreement with National Grid to keep the two coal units available to provide a \u201cwinter contingency\u201d service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and will only operate if and when instructed to do so by National Grid. This has delayed the formal closure of the coal units and has resulted in the utilisation of certain amounts of the restructuring provision also being delayed. This has not materially impacted the expected costs. The amount of the restructuring provision utilised in the year predominantly relates to engineering and redundancy costs. Of the balance remaining at 31 December 2022, \u00a311.6 million relates to engineering works, of which \u00a33.2 million is expected to be utilised in 2023 with the remaining amounts expected to be utilised in the period 2024 to 2026. A further \u00a30.6 million relates to redundancy costs, which are expected to be utilised in 2023, and the remaining \u00a30.5 million relates to other costs, which are expected to be utilised in the period 2024 to 2026. The full provision has been presented within non-current liabilities in the Consolidated balance sheet. 5.4 Discontinued operations A discontinued operation is a component of the Group that has been disposed of or classi\ufb01ed as held for sale and meets one of the following criteria outlined in IFRS 5: \u2022 represents a separate major line of business or geographic area of operations; \u2022 is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or \u2022 is a subsidiary acquired exclusively with a view to resale. Accounting policy The component is classi\ufb01ed as a discontinued operation at the earlier of when it is disposed of or when the component meets the held for sale criteria. When an operation is classi\ufb01ed as a discontinued operation its results are presented separately in the Consolidated income statement. The results of the discontinued operation are also re-presented in the Consolidated income statement as discontinued in the comparative period. Sale of CCGT portfolio On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited for cash consideration of up to \u00a3193 million, subject to customary adjustments. This included \u00a329 million of contingent consideration associated with the option to develop the site at Damhead Creek (see notes 3.5 and 7.1). The sale price represented a return over the Group\u2019s period of ownership signi\ufb01cantly ahead of the Group\u2019s weighted average cost of capital. The Group received initial consideration of \u00a3188 million in February 2021 which was amended to \u00a3186 million in July 2021 following conclusion of the completion accounts process. The Group recognised an overall net gain on disposal of \u00a38.5 million spread across the \ufb01nancial years ending 31 December 2020 and 31 December 2021. The Group recognised certain transaction-related and mark-to-market costs, as incurred, during the year ended 31 December 2020. As a result, recognition of the net gain on disposal in the Group\u2019s Consolidated income statement is spread across 2020 and 2021, as illustrated below. No amounts have been recognised in the current \ufb01nancial year in relation to this disposal. Year ended 31 December 2022 \u00a3m 2021 \u00a3m 2020 \u00a3m Total \u00a3m Gross gain on disposal \u2013 17.1 \u2013 17.1 Transaction costs \u2013 (0.9) (3.3) (4.2) Mark-to-market costs \u2013 (1.1) (3.3) (4.4) Net gain/(loss) on disposal \u2013 15.1 (6.6) 8.5 Discontinued operations The income and expenditure of the CCGT generation portfolio were classi\ufb01ed as discontinued operations in the comparative period. There are no items of income or expenditure from discontinued operations in the current \ufb01nancial year. Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue 51.8 (2.5) 49.3 Cost of sales (31.6) (7.2) (38.8) Gross pro\ufb01t/(loss) 20.2 (9.7) 10.5 Operating and administrative expenses 0.1 (1.9) (1.8) Adjusted EBITDA 20.3 Other gains \u2013 17.1 17.1 Operating pro\ufb01t 20.3 5.5 25.8 Pro\ufb01t before tax on discontinued operations 20.3 5.5 25.8 Total tax (charge)/credit (3.6) 1.9 (1.7) Pro\ufb01t after tax from discontinued operations and total pro\ufb01t from discontinued operations 16.7 7.4 24 .1 Earnings per share Pence Pence For net pro\ufb01t for the period from discontinued operations attributable to owners of the Parent Company \u2013 Basic 4.2 6 .1 \u2013 Diluted 4.1 5.8 ", "dimensions": { "concept": "draxgroupplc:DisclosureOfOtherAssetsAndLiabilities", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-622": { "value": "5.1 Business combinations Accounting policy Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the target (the acquisition date). The consideration transferred, the identi\ufb01able 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 pro\ufb01t or loss 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: \u2022 consideration transferred; less \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able net assets acquired. Share-based payment awards held by employees of the acquired business that are voluntarily replaced are recognised as post- acquisition remuneration. Share-based payment awards held by employees of the acquired business that are obliged to be replaced are allocated between post-acquisition remuneration, which is treated as an expense, and pre-acquisition remuneration, which is treated as part of the overall consideration. Acquisition of Pinnacle In the prior year the Group completed the acquisition of Pinnacle. The primary reason for the acquisition was to advance the Group\u2019s biomass strategy by more than doubling its production capacity, signi\ufb01cantly reducing its cost of biomass production and adding a major biomass supply business underpinned by long-term sales contracts with high-quality Asian and European counterparties. The Group completed the acquisition on 13 April 2021. The purchase consideration was valued on a fully diluted equity basis at \u00a3222 million (C$385 million), a price of C$11.30 per share representing a premium of 13% based on the closing market price on 5 February 2021 of C$10.04 per share. The purchase consideration consisted of the following: As at 13 April 2021 \u00a3m Cash paid to ordinary shareholders 218 .1 Cash paid to settle existing share-based payment awards 4.2 Total purchase consideration 222.3 There was no contingent consideration in relation to the acquisition. Acquisition date fair values The Group\u2019s one year measurement period from the acquisition date, to \ufb01nalise the acquisition accounting, ended in the current reporting period. There were no changes to the provisional fair values of the identi\ufb01able assets acquired, liabilities assumed and NCI as at 13 April 2021 that were recognised in the 2021 Consolidated \ufb01nancial statements. Detailed below are the relevant acquisition values and the methods used to estimate them, as presented in the prior year. As at 13 April 2021 Fair value \u00a3m Property, plant and equipment and intangible assets 326.2 Right-of-use assets 60.4 Other non-current assets 4.3 Inventories 26.8 Trade and other receivables 29.4 Cash and cash equivalents 18.8 Trade and other payables (37.1) Lease liabilities (61.1) Borrowings (256.3) Deferred tax liabilities (12.1) Other liabilities (3.3) Net identi\ufb01able assets acquired 96.0 NCI (39.6) Goodwill 165.9 Net assets acquired 222.3 As part of the accounting for the Pinnacle acquisition, the assets and liabilities acquired were measured at fair value on the acquisition date. The valuation was performed by an independent valuation specialist. A fair value uplift of \u00a323.6 million (C$40.8 million) was recognised on the carrying value of property, plant and equipment acquired as part of the acquisition. If different assumptions and inputs were used, this could have resulted in a different fair value. The Pinnacle business held a number of long-term customer contracts at the acquisition date. As part of the acquisition accounting, these existing customer contracts were required to be measured at their fair value. In determining the fair value of these contracts, estimates were required for inputs to the valuation, such as the margin associated with these customer contracts, the required return for assets used to generate these contract revenues, retention rates, and an appropriate discount rate based on the risk pro\ufb01le of these contracts. A change to any of these inputs could signi\ufb01cantly impact the fair value calculated for these customer contracts. A customer-related intangible asset with a fair value of \u00a335.9 million (C $62.1 million) was recognised in relation to customer contracts at acquisition and is being amortised over its remaining UEL. See note 5.2 for further details of the valuation approach, the key valuation inputs, the carrying value and remaining amortisation period. The Group and Pinnacle had a pre-existing relationship relating to long-term supply contracts under which Pinnacle supplied the Group with biomass pellets at a \ufb01xed price. On acquisition, the Group assessed the terms of these supply contracts compared to current market transactions for an identical contract. Pricing for current market transactions for the purpose of this exercise was assessed based on the existing portfolio of the Group and Pinnacle contracts. These supply contracts were determined to be consistent with the pricing for current market transactions for an identical contract and the settlement provision for terminating these contracts would have been immaterial. As a result, no consideration was attributed to the settlement of the pre-existing relationship and therefore no gain or loss relating to the pre-existing relationship was recognised in the prior year. The fair values of the acquired property, plant and equipment, customer-related intangible asset and pre-existing relationship are inherently judgemental and involve a high degree of estimation, meaning valuations based on different methodologies or assumptions may have resulted in a materially different fair value. However, these valuations were performed by specialists, using appropriate methodologies and information. Goodwill on acquisition predominantly related to the value of uncontracted revenues and synergies expected to be realised by combining Pinnacle with the Group\u2019s existing Pellet Production business. The increased size of the Group\u2019s Pellet Production business has enabled greater flexibility, opportunities to optimise the Group\u2019s operations and logistics across the enlarged portfolio and has increased knowledge. The goodwill is not deductible for tax purposes. Goodwill is required to be denominated in the functional currency of the operations to which the goodwill is allocated to. The goodwill on the Pinnacle acquisition relates to both CAD and USD functional currency operations. This resulted in goodwill of C$97.4 million and $151.9 million which, when translated at the acquisition date, resulted in \u00a3165.9 million of goodwill. These goodwill balances are translated at the rates prevailing at each reporting date into the Group\u2019s presentational currency of GBP (see note 5.2 for further details). The NCI was measured at the proportionate share of the identi\ufb01able net assets of the acquiree at the acquisition date (see note 4.5 for further details on NCI). Acquired receivables The Group acquired receivables with a fair value and a gross contracted value of \u00a322.9 million (C$39.6 million). No provision for receivables was recognised due to the risk of default within the Pinnacle business, as well as the wider Pellet Production business, being considered to be remote, as explained further in note 3.5. Contingent liabilities No contingent liabilities or indemni\ufb01cation assets were recognised on acquisition of Pinnacle. Reconciliation of net cash outflow from investing activities Year ended 31 December 2021 Cash out\ufb02ow/ (in\ufb02ow) \u00a3m Cash paid to acquire Pinnacle 222.3 Less balances acquired: Cash (18.8) Net cash out\ufb02ow 203.5 Acquisition of Princeton pellet plant On 3 August 2022, the Group announced that it had signed an agreement with Princeton Standard Pellet Corporation (PSPC) to acquire its pellet plant in Princeton, British Columbia, Canada for consideration of \u00a37.6 million (C$11.5 million), subject to customary working capital adjustments. The sale subsequently completed on 1 September 2022. The plant has nameplate capacity to produce 90kt of biomass pellets a year from sawmill residuals and will contribute to the Group\u2019s strategy to increase pellet production capacity. In addition to the pellet plant itself, the Group also acquired certain other assets from PSPC including inventories and other working capital balances. As part of the transaction, the employees of PSPC joined the Group. Although the legal structure of the transaction was that of an asset purchase agreement, it was concluded that the substance of the transaction met the criteria of a business combination as de\ufb01ned by IFRS 3 and therefore the Group accounted for the transaction under the acquisition method. The fair value of the assets and liabilities acquired were as follows: As at 1 September 2022 Fair values \u00a3m Property, plant and equipment 7.9 Inventories 1.0 Trade and other receivables 0.8 Trade and other payables (1.2) Deferred tax liabilities (0.9) Net identi\ufb01able assets acquired 7.6 No goodwill arose from this transaction and no contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value and gross contracted value of \u00a30.8 million. No provision was recognised due to the risk of default within the Princeton business, as well as the wider Pellet Production business, being considered to be remote. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-724": { "value": "Accounting policy Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the target (the acquisition date). The consideration transferred, the identi\ufb01able 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 pro\ufb01t or loss 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: \u2022 consideration transferred; less \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able net assets acquired. Share-based payment awards held by employees of the acquired business that are voluntarily replaced are recognised as post- acquisition remuneration. Share-based payment awards held by employees of the acquired business that are obliged to be replaced are allocated between post-acquisition remuneration, which is treated as an expense, and pre-acquisition remuneration, which is treated as part of the overall consideration. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-656": { "value": "Accounting policy Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the target (the acquisition date). The consideration transferred, the identi\ufb01able 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 pro\ufb01t or loss 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: \u2022 consideration transferred; less \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able net assets acquired. Share-based payment awards held by employees of the acquired business that are voluntarily replaced are recognised as post- acquisition remuneration. Share-based payment awards held by employees of the acquired business that are obliged to be replaced are allocated between post-acquisition remuneration, which is treated as an expense, and pre-acquisition remuneration, which is treated as part of the overall consideration. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-683": { "value": "Acquisition date fair values The Group\u2019s one year measurement period from the acquisition date, to \ufb01nalise the acquisition accounting, ended in the current reporting period. There were no changes to the provisional fair values of the identi\ufb01able assets acquired, liabilities assumed and NCI as at 13 April 2021 that were recognised in the 2021 Consolidated \ufb01nancial statements. Detailed below are the relevant acquisition values and the methods used to estimate them, as presented in the prior year. As at 13 April 2021 Fair value \u00a3m Property, plant and equipment and intangible assets 326.2 Right-of-use assets 60.4 Other non-current assets 4.3 Inventories 26.8 Trade and other receivables 29.4 Cash and cash equivalents 18.8 Trade and other payables (37.1) Lease liabilities (61.1) Borrowings (256.3) Deferred tax liabilities (12.1) Other liabilities (3.3) Net identi\ufb01able assets acquired 96.0 NCI (39.6) Goodwill 165.9 Net assets acquired 222.3 As part of the accounting for the Pinnacle acquisition, the assets and liabilities acquired were measured at fair value on the acquisition date. The valuation was performed by an independent valuation specialist. A fair value uplift of \u00a323.6 million (C$40.8 million) was recognised on the carrying value of property, plant and equipment acquired as part of the acquisition. If different assumptions and inputs were used, this could have resulted in a different fair value. The Pinnacle business held a number of long-term customer contracts at the acquisition date. As part of the acquisition accounting, these existing customer contracts were required to be measured at their fair value. In determining the fair value of these contracts, estimates were required for inputs to the valuation, such as the margin associated with these customer contracts, the required return for assets used to generate these contract revenues, retention rates, and an appropriate discount rate based on the risk pro\ufb01le of these contracts. A change to any of these inputs could signi\ufb01cantly impact the fair value calculated for these customer contracts. A customer-related intangible asset with a fair value of \u00a335.9 million (C $62.1 million) was recognised in relation to customer contracts at acquisition and is being amortised over its remaining UEL. See note 5.2 for further details of the valuation approach, the key valuation inputs, the carrying value and remaining amortisation period. The Group and Pinnacle had a pre-existing relationship relating to long-term supply contracts under which Pinnacle supplied the Group with biomass pellets at a \ufb01xed price. On acquisition, the Group assessed the terms of these supply contracts compared to current market transactions for an identical contract. Pricing for current market transactions for the purpose of this exercise was assessed based on the existing portfolio of the Group and Pinnacle contracts. These supply contracts were determined to be consistent with the pricing for current market transactions for an identical contract and the settlement provision for terminating these contracts would have been immaterial. As a result, no consideration was attributed to the settlement of the pre-existing relationship and therefore no gain or loss relating to the pre-existing relationship was recognised in the prior year. The fair values of the acquired property, plant and equipment, customer-related intangible asset and pre-existing relationship are inherently judgemental and involve a high degree of estimation, meaning valuations based on different methodologies or assumptions may have resulted in a materially different fair value. However, these valuations were performed by specialists, using appropriate methodologies and information. The fair value of the assets and liabilities acquired were as follows: As at 1 September 2022 Fair values \u00a3m Property, plant and equipment 7.9 Inventories 1.0 Trade and other receivables 0.8 Trade and other payables (1.2) Deferred tax liabilities (0.9) Net identi\ufb01able assets acquired 7.6 No goodwill arose from this transaction and no contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value and gross contracted value of \u00a30.8 million. No provision was recognised due to the risk of default within the Princeton business, as well as the wider Pellet Production business, being considered to be remote. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements. Changes in the fair value of plan assets are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets at 1 January 369.8 386.3 Interest on plan assets 6.7 5.7 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Employer contributions 17.7 13.3 Bene\ufb01ts paid (26.6) (50.8) Fair value of plan assets at 31 December 219.6 369.8 The fair values of the major categories of plan assets were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Gilts 117. 2 150.0 Equities (1) 6.5 26.5 Fixed interest bonds(2) 4.8 30.3 Property 28.6 32.1 Investment funds 4.3 25.0 Cash and other assets (3) 58.2 105.9 Fair value of total plan assets 219.6 369.8 (1) At 31 December 2022 DPG ESPS\u2019s long-term asset strategy was: diversi\ufb01ed growth funds (37%), direct lending (10%), absolute return bonds (3%), liability driven investing (40%) and long-lease property (10%). The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. (2) Fixed interest bonds include a mixture of corporate, Government and absolute return bonds. (3) Other assets include \u00a329.9 million (202 1: \u00a3 2 7.1 million) of investments in direct lending, a type of private equity vehicle which is not quoted in an active market. The fair value of these investments is derived in accordance with International Private Equity and Venture Capital Valuation (IPEV) Guidelines. All other assets are quoted in an active market. This section provides disclosures around \ufb01nancial risk management, including the \ufb01nancial instruments the Group uses to mitigate such risks. 7.1 Financial instruments and their fair values The Group holds a variety of derivative and non-derivative \ufb01nancial instruments, including cash and cash equivalents, borrowings, payables and receivables arising from operations. Accounting classi\ufb01cations and fair values IFRS 13 requires categorisation of the Group\u2019s \ufb01nancial instruments in accordance with the following hierarchy in order to explain the basis on which their fair values have been determined: \u2022 Level 1 \u2013 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2022 Level 2 \u2013 Fair value measurements are those derived from inputs, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2022 Level 3 \u2013 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Categorisation within this fair value measurement hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability. The table below shows the carrying amounts and fair values of \ufb01nancial assets and liabilities, including their levels in the fair value hierarchy as de\ufb01ned by IFRS 13. It does not include fair value information for leases or for \ufb01nancial assets and \ufb01nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Cash and cash equivalents (note 4.1), trade and other receivables (note 3.5) and trade and other payables (note 3.7) generally have a short time to maturity. For this reason, their carrying values, on the historical cost basis, are approximate to their fair values. The Group\u2019s borrowings relate principally to the publicly traded high-yield loan notes and amounts drawn against term loans (note 4.2). These \ufb01nancial liabilities are measured at amortised cost. Carrying amount Fair value As at 31 December 2022 \u00a3m Fair value- hedging instruments Mandatorily at FVTPL- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Tot al Financial assets measured at fair value Commodity contracts 549.9 84.2 \u2013 \u2013 \u2013 63 4.1 \u2013 63 4.1 \u2013 634.1 Financial contracts \u2013 232.8 \u2013 \u2013 \u2013 232.8 \u2013 232.8 \u2013 232.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 297.1 Interest rate and cross- currency contracts 54.0 \u2013 \u2013 \u2013 \u2013 54.0 \u2013 54.0 \u2013 54.0 Contingent consideration \u2013 27.4 \u2013 \u2013 \u2013 27.4 \u2013 \u2013 27.4 27. 4 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 1,071.9 \u2013 1,071.9 Cash and cash equivalents \u2013 \u2013 \u2013 238.0 \u2013 238.0 Financial liabilities measured at fair value Commodity contracts (804.3) (62.5) \u2013 \u2013 \u2013 (866.8) \u2013 (866.8) \u2013 (866.8) Financial contracts \u2013 (467.0) \u2013 \u2013 \u2013 (467.0) \u2013 (467.0) \u2013 (467.0) Foreign currency exchange contracts (0.4) (69.0) \u2013 \u2013 \u2013 (69.4) \u2013 (69.4) \u2013 (69.4) Interest rate and cross- currency contracts (14.3) \u2013 \u2013 \u2013 \u2013 (14.3) \u2013 (14.3) \u2013 (14.3) In\ufb02ation rate contracts (307.3) \u2013 \u2013 \u2013 \u2013 (307.3) \u2013 ( 307.3) (1) \u2013 ( 3 07.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (764.0) (764.0) \u2013 (759.9) \u2013 (759.9) Unsecured bank loans \u2013 \u2013 \u2013 \u2013 (44.3) (44.3) \u2013 (44.3) \u2013 (44.3) Secured loan notes \u2013 \u2013 \u2013 \u2013 (632.6) (632.6) (593.9) \u2013 \u2013 (593.9) Lease liabilities \u2013 \u2013 \u2013 \u2013 (153.1) (153.1) Trade and other payables \u2013 \u2013 \u2013 \u2013 (1,065.9) (1,065.9 ) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value valuation techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a323.8 million of derivative liabilities relating to the UK CPI inflation rate contracts. Carrying amount Fair value As at 31 December 2021 \u00a3m Fair value- hedging instruments Mandatorily a t F V TP L- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Commodity contracts 877.5 121.3 \u2013 \u2013 \u2013 998.8 \u2013 998.8 \u2013 998.8 Financial contracts \u2013 143.9 \u2013 \u2013 \u2013 143.9 \u2013 143.9 \u2013 143.9 Foreign currency exchange contracts 56.9 40.6 \u2013 \u2013 \u2013 97.5 \u2013 97.5 \u2013 97.5 Interest rate and cross- currency contracts 4.6 \u2013 \u2013 \u2013 \u2013 4.6 \u2013 4.6 \u2013 4.6 In\ufb02ation rate contracts 1.3 \u2013 \u2013 \u2013 \u2013 1.3 \u2013 1.3 (1) \u2013 1.3 Contingent consideration \u2013 27.7 \u2013 \u2013 \u2013 27.7 \u2013 \u2013 27.7 27.7 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 516.8 \u2013 516.8 Cash and cash equivalents \u2013 \u2013 \u2013 317.4 \u2013 317.4 Financial liabilities measured at fair value Commodity contracts (1,054.8) (33.1) \u2013 \u2013 \u2013 (1,0 87.9) \u2013 (1,0 87.9) \u2013 (1,0 87.9) Financial contracts \u2013 (90.2) \u2013 \u2013 \u2013 (90.2) \u2013 (90.2) \u2013 (90.2) Foreign currency exchange contracts (29.3) (108.4) \u2013 \u2013 \u2013 (137.7) \u2013 (137.7) \u2013 (137.7) Interest rate and cross- currency contracts (48.4) \u2013 \u2013 \u2013 \u2013 (48.4) \u2013 (48.4) \u2013 (48.4) In\ufb02ation rate contracts (93.7) (46.6) \u2013 \u2013 \u2013 (140.3) \u2013 (140.3) (1) \u2013 (140.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (786.8) (786.8) \u2013 (805.9) \u2013 (805.9) Secured bond issues \u2013 \u2013 \u2013 \u2013 (574.2) (574.2) (598.3) \u2013 \u2013 (598.3) Lease liabilities \u2013 \u2013 \u2013 \u2013 (125.9) (125.9) Trade and other payables \u2013 \u2013 \u2013 \u2013 (869.5) (869.5) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a31.3 million of derivative assets and \u00a311.5 million of derivative liabilities relating to the UK CPI inflation rate contracts. The derivative \ufb01nancial instruments used by the Group and not subject to the own-use exemption have been categorised as follows: \u2022 Commodity contracts \u2013 forward contracts for the sale or purchase of a physical commodity which is expected to be settled through delivery of the commodity. \u2022 Financial contracts \u2013 weather-related contracts, as well as contracts for commodities that are not expected to be settled through physical delivery of the commodity. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, vanilla options and structured option products. \u2022 Interest rate and cross-currency contracts \u2013 contracts which swap one interest rate for another in a single currency, including floating-to-\ufb01xed interest rate swaps, and contracts which swap interest and principal cash flows in one currency for another currency, including \ufb01xed-to-\ufb01xed and floating-to- \ufb01xed cross-currency interest rate swaps. \u2022 Inflation rate contracts \u2013 swap contracts, such as floating-to-\ufb01xed, which are linked to an inflation index such as RPI or CPI, and inflation swaptions. Fair value measurement \u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated by reference to forward market prices at the reporting date. \u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward currency exchange market rates at the reporting date. \u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting date for the relevant interest index. \u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market rates and interest index for floating-to-\ufb01xed swaps. \u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting date for the relevant inflation index. Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts. The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent within the instrument. Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value. The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the host contract. The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore, these contracts are categorised as Level 2. There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs. The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required with each valuation. Level 3 fair values The fair value of the UK CPI inflation swaps comprises an RPI and CPI component. Whilst the RPI component is based on observable market rates, CPI is based on unobservable rates and therefore deemed to be Level 3 in the fair value hierarchy. However, this component is not material to the overall valuation and therefore the instruments as a whole have been classi\ufb01ed as Level 2. The valuation technique used for non-listed equity investments comprises unobservable inputs and these are therefore classi\ufb01ed as Level 3. However, given the valuation as a whole for Level 3 equity investments are immaterial, it is not deemed necessary to include all Level 3 disclosures in these Consolidated \ufb01nancial statements. The consideration receivable by the Group for the sale of the CCGT generation portfolio in 2021 includes \u00a329.0 million that is contingent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of these assets. The fair value measurement for the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used. Valuation approach Signi\ufb01cant unobservable inputs and range of inputs (probability weighted) Relationship between signi\ufb01cant unobservable input and fair value measurement Contingent consideration The fair value of the contingent consideration is determined using a discounted cash flow model. The valuation approach is based on a calculation of the probability of the option to develop the Damhead Creek land being exercised. This probability is calculated using a range of forecasts for future Capacity Market auctions and the assumption that the option to develop the land would be exercised if the Capacity Market price were to clear above a certain level, providing suf\ufb01cient certainty on the economics of the development. Forecasted future Capacity Market clearing prices: \u00a37.00/kW \u2013 \u00a364.64/kW (\u00a335.91/kW) (2021: \u00a34.81/kW \u2013 \u00a364.13/kW) (2021: (\u00a318.70/kW)) Estimated bid price at which Damhead Creek 2 is to be entered into the Capacity Market auction: \u00a340.00/kW (2021: \u00a320.00/kW) The fair value measurement would increase/(decrease) with: \u2013 higher/(lower) forecasted Capacity Market clearing prices causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. \u2013 higher/(lower) estimated bid price required for the Damhead Creek 2 development to proceed causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-694": { "value": "As part of the accounting for the Pinnacle acquisition, the assets and liabilities acquired were measured at fair value on the acquisition date. The valuation was performed by an independent valuation specialist. A fair value uplift of \u00a323.6 million (C$40.8 million) was recognised on the carrying value of property, plant and equipment acquired as part of the acquisition. If different assumptions and inputs were used, this could have resulted in a different fair value. The Pinnacle business held a number of long-term customer contracts at the acquisition date. As part of the acquisition accounting, these existing customer contracts were required to be measured at their fair value. In determining the fair value of these contracts, estimates were required for inputs to the valuation, such as the margin associated with these customer contracts, the required return for assets used to generate these contract revenues, retention rates, and an appropriate discount rate based on the risk pro\ufb01le of these contracts. A change to any of these inputs could signi\ufb01cantly impact the fair value calculated for these customer contracts. A customer-related intangible asset with a fair value of \u00a335.9 million (C $62.1 million) was recognised in relation to customer contracts at acquisition and is being amortised over its remaining UEL. See note 5.2 for further details of the valuation approach, the key valuation inputs, the carrying value and remaining amortisation period. The Group and Pinnacle had a pre-existing relationship relating to long-term supply contracts under which Pinnacle supplied the Group with biomass pellets at a \ufb01xed price. On acquisition, the Group assessed the terms of these supply contracts compared to current market transactions for an identical contract. Pricing for current market transactions for the purpose of this exercise was assessed based on the existing portfolio of the Group and Pinnacle contracts. These supply contracts were determined to be consistent with the pricing for current market transactions for an identical contract and the settlement provision for terminating these contracts would have been immaterial. As a result, no consideration was attributed to the settlement of the pre-existing relationship and therefore no gain or loss relating to the pre-existing relationship was recognised in the prior year. The fair values of the acquired property, plant and equipment, customer-related intangible asset and pre-existing relationship are inherently judgemental and involve a high degree of estimation, meaning valuations based on different methodologies or assumptions may have resulted in a materially different fair value. However, these valuations were performed by specialists, using appropriate methodologies and information. Accounting policy The LTIP, PSP, DSP, One Drax Awards and SAYE share-based payment schemes are equity-settled. In accordance with IFRS 2, equity-settled share-based payments are measured at the fair value of the equity instrument at the date of grant. The corresponding expense is recognised in the Consolidated income statement on a straight-line basis over the relevant vesting period, based on an estimate of the number of shares that will ultimately vest as a result of the effect of non-market based vesting conditions, which is revised at each reporting date. Market based conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. Fair value measurement \u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated by reference to forward market prices at the reporting date. \u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward currency exchange market rates at the reporting date. \u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting date for the relevant interest index. \u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market rates and interest index for floating-to-\ufb01xed swaps. \u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting date for the relevant inflation index. Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts. The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent within the instrument. Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value. The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the host contract. The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore, these contracts are categorised as Level 2. There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs. The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required with each valuation. Level 3 fair values The fair value of the UK CPI inflation swaps comprises an RPI and CPI component. Whilst the RPI component is based on observable market rates, CPI is based on unobservable rates and therefore deemed to be Level 3 in the fair value hierarchy. However, this component is not material to the overall valuation and therefore the instruments as a whole have been classi\ufb01ed as Level 2. The valuation technique used for non-listed equity investments comprises unobservable inputs and these are therefore classi\ufb01ed as Level 3. However, given the valuation as a whole for Level 3 equity investments are immaterial, it is not deemed necessary to include all Level 3 disclosures in these Consolidated \ufb01nancial statements. The consideration receivable by the Group for the sale of the CCGT generation portfolio in 2021 includes \u00a329.0 million that is contingent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of these assets. The fair value measurement for the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-684": { "value": "5.2 Goodwill and intangible assets Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets are not physical in nature but are identi\ufb01able and separable from other assets. Intangible assets other than goodwill can be acquired in business combinations, purchased separately or internally developed. Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. Method of amortisation Average UEL remaining 2022 (years) Brand Straight line 4 Customer-related assets: Opus Energy Reducing balance 5 Pinnacle Straight line 8 Other Straight line 11 Computer software and licences Straight line 3 Other intangibles Straight line 5 Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Opus Energy CGU and the Pinnacle CGU. The brand is attributable to the Opus Energy CGU. Details of the impairment tests relating to these CGUs are included in note 2.4. Customer- related assets \u00a3m Brand \u00a3m Computer software and licences \u00a3m Development assets \u00a3m Other intangibles \u00a3m Goodwill \u00a3m Total \u00a3m Cost and carrying amount: At 1 January 2021 211.0 11.3 131.5 21.0 \u2013 248.2 623.0 Additions at cost (acquired separately) 8.2 \u2013 \u2013 \u2013 \u2013 \u2013 8.2 Additions at cost (internally generated) \u2013 \u2013 14.1 \u2013 \u2013 \u2013 14.1 Transfers from/(to) tangible fixed assets \u2013 \u2013 1.2 (19.3) \u2013 \u2013 (18 .1) Acquired in business combinations 35.9 \u2013 0.4 \u2013 0.2 165.9 202.4 Effect of changes in foreign exchange rates 0.4 \u2013 \u2013 \u2013 0 .1 2.2 2.7 At 1 January 2022 255.5 11.3 147.2 1.7 0.3 416.3 832.3 Additions at cost (internally generated) \u2013 \u2013 9.4 \u2013 \u2013 \u2013 9.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 (19.2) (1.7) \u2013 \u2013 (20.9) Transfers between categories \u2013 \u2013 (0.5) 0.5 \u2013 \u2013 \u2013 Transfers to property, plant and equipment \u2013 \u2013 0.5 (0.5) \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 2.1 \u2013 0.3 \u2013 \u2013 7.9 10.3 At 31 December 2022 257.6 11.3 129.5 \u2013 0.3 424.2 822.9 Accumulated amortisation: At 1 January 2021 126.6 4.5 61.9 \u2013 \u2013 \u2013 193.0 Charge for the year 22.8 1.1 10.5 \u2013 \u2013 \u2013 34.4 Acquired in business combinations 0 .1 \u2013 \u2013 \u2013 0 .1 \u2013 0.2 Effect of changes in foreign exchange rates (0.1) \u2013 \u2013 \u2013 (0.1) \u2013 (0.2) At 1 January 2022 149.4 5.6 72.4 \u2013 \u2013 \u2013 227.4 Charge for the year 21.2 1.2 9.0 \u2013 \u2013 \u2013 31.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 5.7 \u2013 \u2013 \u2013 5.7 Effect of changes in foreign exchange rates \u2013 \u2013 0.1 \u2013 \u2013 \u2013 0 .1 At 31 December 2022 170.6 6.8 79.0 \u2013 \u2013 \u2013 256.4 Net book value: At 31 December 2021 10 6 .1 5.7 74.8 1.7 0.3 416.3 604.9 At 31 December 2022 87.0 4.5 50.5 \u2013 0.3 424.2 566.5 The Group has incurred research and development expenditure of \u00a312.5 million (2021: \u00a311.4 million), which is included within Operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets primarily reflects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017 and the acquisition of Pinnacle in April 2021, which provided the Group with access to customer bases with contracted cash flows. The Opus Energy asset acquisition date fair value of \u00a3211.0 million reflected the estimated value of the future cash flows associated with this customer base at the acquisition date and is dependent upon estimates of both current and expected future contract margins and assumed customer retention rates. The cash flows have been discounted using an asset speci\ufb01c discount rate of 10.7%. The asset has an estimated UEL from acquisition of 11 years, calculated based on customer churn-rate analysis which shows how many customers are expected to leave the business in a given year, and is being amortised on a reducing balance basis to reflect the diminishing rate of contract renewals over time. At 31 December 2022, the Opus Energy asset had a carrying value of \u00a347.8 million (2021: \u00a364.2 million) and a remaining UEL of approximately \ufb01ve years (2021: six years). The Pinnacle asset acquisition date fair value of \u00a335.9 million (C$ 6 2 .1 million) was estimated based on a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash flows attributable to the customer-related intangible asset, after deducting a contributory asset charge that represented the required return for \ufb01xed assets, net working capital and the assembled workforce that are required to generate the cash flows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The inputs used as part of the valuation are detailed below: Pinnacle customer- related asset Asset speci\ufb01c discount rate 10.0% Weighted average tax rate 25.2% Return on net working capital 1.5% Return on \ufb01xed assets 7.0% Return on the assembled workforce 8.5% Useful economic life 10 years The Pinnacle customer-related asset is being amortised on a straight-line basis to reflect the even spread of contract maturities over the UEL. At 31 December 2022, the Pinnacle asset had a carrying value of \u00a331.5 million (2021: \u00a333.8 million) and a remaining UEL of approximately eight years (2021: approximately nine years). The Other customer-related assets primarily relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. Opus Energy brand The Opus Energy brand was acquired as part of the acquisition in February 2017 and valued at \u00a311.3 million on a relief-from-royalty method. The brand is being amortised on a straight-line basis over its assumed 10-year UEL from acquisition. Computer software and licences Additions in the period include those in the ordinary course of business, which principally reflect ongoing investment in business systems to support the Customers segment. Software assets are amortised on a straight-line basis over their estimated UEL ranging from three to 10 years. In March 2021 The IFRIC \ufb01nalised its agenda decision regarding how to account for cost of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement. The agenda decision concluded that the con\ufb01guration and customisation costs do not normally result in an intangible asset and should therefore be recognised as an expense. The Group has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. These assets have been impaired during the year, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. See the Change in accounting policy section in the Basis of preparation for further details. As at 31 December 2022, computer software assets under the course of construction amounted to \u00a318.3 million (2021: \u00a339.3 million). The comparative amount included \u00a319.2 million for a billing system where the Group has stopped development and is engaged in active discussion with the supplier following the supplier\u2019s failure to perform under the contract. Proceedings have been issued against the supplier to recover damages for misrepresentation and breach of contract. The Group no longer expects that future economic bene\ufb01ts will be recovered as an ongoing intangible asset and as a result, the asset has been impaired in the current \ufb01nancial period. The impairment charge has been recognised against the cost the asset in the table above, and recorded as an exceptional cost. See notes 2.7 and 7.6 for further information. See note 2.4 for a summary of impairment charges recognised on \ufb01xed assets during the year. Goodwill The table below shows the carrying amount of goodwill by CGU: As at 31 December 2022 \u00a3m 2021 \u00a3m CGU allocation: Drax Energy Solutions CGU: Haven Power acquired in 2009 10.7 10.7 Opus Energy CGU: Opus Energy acquired in 2017 159.2 159.2 Lanark CGU: Drax Generation Enterprise acquired in 2018 11.3 11.3 Galloway CGU: Drax Generation Enterprise acquired in 2018 40 .1 4 0.1 Cruachan CGU: Drax Generation Enterprise acquired in 2018 26.9 26.9 Pellet group of CGUs: Pinnacle acquired in 2021 176.0 16 8 .1 Total goodwill 424.2 416.3 A full impairment assessment of CGUs with goodwill allocated to them has been performed as detailed in note 2.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-657": { "value": "5.2 Goodwill and intangible assets Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets are not physical in nature but are identi\ufb01able and separable from other assets. Intangible assets other than goodwill can be acquired in business combinations, purchased separately or internally developed. Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. Method of amortisation Average UEL remaining 2022 (years) Brand Straight line 4 Customer-related assets: Opus Energy Reducing balance 5 Pinnacle Straight line 8 Other Straight line 11 Computer software and licences Straight line 3 Other intangibles Straight line 5 Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Opus Energy CGU and the Pinnacle CGU. The brand is attributable to the Opus Energy CGU. Details of the impairment tests relating to these CGUs are included in note 2.4. Customer- related assets \u00a3m Brand \u00a3m Computer software and licences \u00a3m Development assets \u00a3m Other intangibles \u00a3m Goodwill \u00a3m Total \u00a3m Cost and carrying amount: At 1 January 2021 211.0 11.3 131.5 21.0 \u2013 248.2 623.0 Additions at cost (acquired separately) 8.2 \u2013 \u2013 \u2013 \u2013 \u2013 8.2 Additions at cost (internally generated) \u2013 \u2013 14.1 \u2013 \u2013 \u2013 14.1 Transfers from/(to) tangible fixed assets \u2013 \u2013 1.2 (19.3) \u2013 \u2013 (18 .1) Acquired in business combinations 35.9 \u2013 0.4 \u2013 0.2 165.9 202.4 Effect of changes in foreign exchange rates 0.4 \u2013 \u2013 \u2013 0 .1 2.2 2.7 At 1 January 2022 255.5 11.3 147.2 1.7 0.3 416.3 832.3 Additions at cost (internally generated) \u2013 \u2013 9.4 \u2013 \u2013 \u2013 9.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 (19.2) (1.7) \u2013 \u2013 (20.9) Transfers between categories \u2013 \u2013 (0.5) 0.5 \u2013 \u2013 \u2013 Transfers to property, plant and equipment \u2013 \u2013 0.5 (0.5) \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 2.1 \u2013 0.3 \u2013 \u2013 7.9 10.3 At 31 December 2022 257.6 11.3 129.5 \u2013 0.3 424.2 822.9 Accumulated amortisation: At 1 January 2021 126.6 4.5 61.9 \u2013 \u2013 \u2013 193.0 Charge for the year 22.8 1.1 10.5 \u2013 \u2013 \u2013 34.4 Acquired in business combinations 0 .1 \u2013 \u2013 \u2013 0 .1 \u2013 0.2 Effect of changes in foreign exchange rates (0.1) \u2013 \u2013 \u2013 (0.1) \u2013 (0.2) At 1 January 2022 149.4 5.6 72.4 \u2013 \u2013 \u2013 227.4 Charge for the year 21.2 1.2 9.0 \u2013 \u2013 \u2013 31.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 5.7 \u2013 \u2013 \u2013 5.7 Effect of changes in foreign exchange rates \u2013 \u2013 0.1 \u2013 \u2013 \u2013 0 .1 At 31 December 2022 170.6 6.8 79.0 \u2013 \u2013 \u2013 256.4 Net book value: At 31 December 2021 10 6 .1 5.7 74.8 1.7 0.3 416.3 604.9 At 31 December 2022 87.0 4.5 50.5 \u2013 0.3 424.2 566.5 The Group has incurred research and development expenditure of \u00a312.5 million (2021: \u00a311.4 million), which is included within Operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets primarily reflects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017 and the acquisition of Pinnacle in April 2021, which provided the Group with access to customer bases with contracted cash flows. The Opus Energy asset acquisition date fair value of \u00a3211.0 million reflected the estimated value of the future cash flows associated with this customer base at the acquisition date and is dependent upon estimates of both current and expected future contract margins and assumed customer retention rates. The cash flows have been discounted using an asset speci\ufb01c discount rate of 10.7%. The asset has an estimated UEL from acquisition of 11 years, calculated based on customer churn-rate analysis which shows how many customers are expected to leave the business in a given year, and is being amortised on a reducing balance basis to reflect the diminishing rate of contract renewals over time. At 31 December 2022, the Opus Energy asset had a carrying value of \u00a347.8 million (2021: \u00a364.2 million) and a remaining UEL of approximately \ufb01ve years (2021: six years). The Pinnacle asset acquisition date fair value of \u00a335.9 million (C$ 6 2 .1 million) was estimated based on a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash flows attributable to the customer-related intangible asset, after deducting a contributory asset charge that represented the required return for \ufb01xed assets, net working capital and the assembled workforce that are required to generate the cash flows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The inputs used as part of the valuation are detailed below: Pinnacle customer- related asset Asset speci\ufb01c discount rate 10.0% Weighted average tax rate 25.2% Return on net working capital 1.5% Return on \ufb01xed assets 7.0% Return on the assembled workforce 8.5% Useful economic life 10 years The Pinnacle customer-related asset is being amortised on a straight-line basis to reflect the even spread of contract maturities over the UEL. At 31 December 2022, the Pinnacle asset had a carrying value of \u00a331.5 million (2021: \u00a333.8 million) and a remaining UEL of approximately eight years (2021: approximately nine years). The Other customer-related assets primarily relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. Opus Energy brand The Opus Energy brand was acquired as part of the acquisition in February 2017 and valued at \u00a311.3 million on a relief-from-royalty method. The brand is being amortised on a straight-line basis over its assumed 10-year UEL from acquisition. Computer software and licences Additions in the period include those in the ordinary course of business, which principally reflect ongoing investment in business systems to support the Customers segment. Software assets are amortised on a straight-line basis over their estimated UEL ranging from three to 10 years. In March 2021 The IFRIC \ufb01nalised its agenda decision regarding how to account for cost of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement. The agenda decision concluded that the con\ufb01guration and customisation costs do not normally result in an intangible asset and should therefore be recognised as an expense. The Group has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. These assets have been impaired during the year, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. See the Change in accounting policy section in the Basis of preparation for further details. As at 31 December 2022, computer software assets under the course of construction amounted to \u00a318.3 million (2021: \u00a339.3 million). The comparative amount included \u00a319.2 million for a billing system where the Group has stopped development and is engaged in active discussion with the supplier following the supplier\u2019s failure to perform under the contract. Proceedings have been issued against the supplier to recover damages for misrepresentation and breach of contract. The Group no longer expects that future economic bene\ufb01ts will be recovered as an ongoing intangible asset and as a result, the asset has been impaired in the current \ufb01nancial period. The impairment charge has been recognised against the cost the asset in the table above, and recorded as an exceptional cost. See notes 2.7 and 7.6 for further information. See note 2.4 for a summary of impairment charges recognised on \ufb01xed assets during the year. Goodwill The table below shows the carrying amount of goodwill by CGU: As at 31 December 2022 \u00a3m 2021 \u00a3m CGU allocation: Drax Energy Solutions CGU: Haven Power acquired in 2009 10.7 10.7 Opus Energy CGU: Opus Energy acquired in 2017 159.2 159.2 Lanark CGU: Drax Generation Enterprise acquired in 2018 11.3 11.3 Galloway CGU: Drax Generation Enterprise acquired in 2018 40 .1 4 0.1 Cruachan CGU: Drax Generation Enterprise acquired in 2018 26.9 26.9 Pellet group of CGUs: Pinnacle acquired in 2021 176.0 16 8 .1 Total goodwill 424.2 416.3 A full impairment assessment of CGUs with goodwill allocated to them has been performed as detailed in note 2.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-623": { "value": "5.2 Goodwill and intangible assets Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets are not physical in nature but are identi\ufb01able and separable from other assets. Intangible assets other than goodwill can be acquired in business combinations, purchased separately or internally developed. Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. Method of amortisation Average UEL remaining 2022 (years) Brand Straight line 4 Customer-related assets: Opus Energy Reducing balance 5 Pinnacle Straight line 8 Other Straight line 11 Computer software and licences Straight line 3 Other intangibles Straight line 5 Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Opus Energy CGU and the Pinnacle CGU. The brand is attributable to the Opus Energy CGU. Details of the impairment tests relating to these CGUs are included in note 2.4. Customer- related assets \u00a3m Brand \u00a3m Computer software and licences \u00a3m Development assets \u00a3m Other intangibles \u00a3m Goodwill \u00a3m Total \u00a3m Cost and carrying amount: At 1 January 2021 211.0 11.3 131.5 21.0 \u2013 248.2 623.0 Additions at cost (acquired separately) 8.2 \u2013 \u2013 \u2013 \u2013 \u2013 8.2 Additions at cost (internally generated) \u2013 \u2013 14.1 \u2013 \u2013 \u2013 14.1 Transfers from/(to) tangible fixed assets \u2013 \u2013 1.2 (19.3) \u2013 \u2013 (18 .1) Acquired in business combinations 35.9 \u2013 0.4 \u2013 0.2 165.9 202.4 Effect of changes in foreign exchange rates 0.4 \u2013 \u2013 \u2013 0 .1 2.2 2.7 At 1 January 2022 255.5 11.3 147.2 1.7 0.3 416.3 832.3 Additions at cost (internally generated) \u2013 \u2013 9.4 \u2013 \u2013 \u2013 9.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 (19.2) (1.7) \u2013 \u2013 (20.9) Transfers between categories \u2013 \u2013 (0.5) 0.5 \u2013 \u2013 \u2013 Transfers to property, plant and equipment \u2013 \u2013 0.5 (0.5) \u2013 \u2013 \u2013 Effect of changes in foreign exchange rates 2.1 \u2013 0.3 \u2013 \u2013 7.9 10.3 At 31 December 2022 257.6 11.3 129.5 \u2013 0.3 424.2 822.9 Accumulated amortisation: At 1 January 2021 126.6 4.5 61.9 \u2013 \u2013 \u2013 193.0 Charge for the year 22.8 1.1 10.5 \u2013 \u2013 \u2013 34.4 Acquired in business combinations 0 .1 \u2013 \u2013 \u2013 0 .1 \u2013 0.2 Effect of changes in foreign exchange rates (0.1) \u2013 \u2013 \u2013 (0.1) \u2013 (0.2) At 1 January 2022 149.4 5.6 72.4 \u2013 \u2013 \u2013 227.4 Charge for the year 21.2 1.2 9.0 \u2013 \u2013 \u2013 31.4 Disposals \u2013 \u2013 (8.2) \u2013 \u2013 \u2013 (8.2) Impairment \u2013 \u2013 5.7 \u2013 \u2013 \u2013 5.7 Effect of changes in foreign exchange rates \u2013 \u2013 0.1 \u2013 \u2013 \u2013 0 .1 At 31 December 2022 170.6 6.8 79.0 \u2013 \u2013 \u2013 256.4 Net book value: At 31 December 2021 10 6 .1 5.7 74.8 1.7 0.3 416.3 604.9 At 31 December 2022 87.0 4.5 50.5 \u2013 0.3 424.2 566.5 The Group has incurred research and development expenditure of \u00a312.5 million (2021: \u00a311.4 million), which is included within Operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets primarily reflects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017 and the acquisition of Pinnacle in April 2021, which provided the Group with access to customer bases with contracted cash flows. The Opus Energy asset acquisition date fair value of \u00a3211.0 million reflected the estimated value of the future cash flows associated with this customer base at the acquisition date and is dependent upon estimates of both current and expected future contract margins and assumed customer retention rates. The cash flows have been discounted using an asset speci\ufb01c discount rate of 10.7%. The asset has an estimated UEL from acquisition of 11 years, calculated based on customer churn-rate analysis which shows how many customers are expected to leave the business in a given year, and is being amortised on a reducing balance basis to reflect the diminishing rate of contract renewals over time. At 31 December 2022, the Opus Energy asset had a carrying value of \u00a347.8 million (2021: \u00a364.2 million) and a remaining UEL of approximately \ufb01ve years (2021: six years). The Pinnacle asset acquisition date fair value of \u00a335.9 million (C$ 6 2 .1 million) was estimated based on a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash flows attributable to the customer-related intangible asset, after deducting a contributory asset charge that represented the required return for \ufb01xed assets, net working capital and the assembled workforce that are required to generate the cash flows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The inputs used as part of the valuation are detailed below: Pinnacle customer- related asset Asset speci\ufb01c discount rate 10.0% Weighted average tax rate 25.2% Return on net working capital 1.5% Return on \ufb01xed assets 7.0% Return on the assembled workforce 8.5% Useful economic life 10 years The Pinnacle customer-related asset is being amortised on a straight-line basis to reflect the even spread of contract maturities over the UEL. At 31 December 2022, the Pinnacle asset had a carrying value of \u00a331.5 million (2021: \u00a333.8 million) and a remaining UEL of approximately eight years (2021: approximately nine years). The Other customer-related assets primarily relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. Opus Energy brand The Opus Energy brand was acquired as part of the acquisition in February 2017 and valued at \u00a311.3 million on a relief-from-royalty method. The brand is being amortised on a straight-line basis over its assumed 10-year UEL from acquisition. Computer software and licences Additions in the period include those in the ordinary course of business, which principally reflect ongoing investment in business systems to support the Customers segment. Software assets are amortised on a straight-line basis over their estimated UEL ranging from three to 10 years. In March 2021 The IFRIC \ufb01nalised its agenda decision regarding how to account for cost of con\ufb01guring or customising a supplier\u2019s application software in a SaaS arrangement. The agenda decision concluded that the con\ufb01guration and customisation costs do not normally result in an intangible asset and should therefore be recognised as an expense. The Group has subsequently applied a new accounting policy for SaaS costs, consistent with the agenda decision, from 1 January 2022. SaaS costs capitalised by the Group at 1 January 2022, and impacted by this change in accounting policy, had a net book value of \u00a35.7 million. These assets have been impaired during the year, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in Operating and administrative expenses. See the Change in accounting policy section in the Basis of preparation for further details. As at 31 December 2022, computer software assets under the course of construction amounted to \u00a318.3 million (2021: \u00a339.3 million). The comparative amount included \u00a319.2 million for a billing system where the Group has stopped development and is engaged in active discussion with the supplier following the supplier\u2019s failure to perform under the contract. Proceedings have been issued against the supplier to recover damages for misrepresentation and breach of contract. The Group no longer expects that future economic bene\ufb01ts will be recovered as an ongoing intangible asset and as a result, the asset has been impaired in the current \ufb01nancial period. The impairment charge has been recognised against the cost the asset in the table above, and recorded as an exceptional cost. See notes 2.7 and 7.6 for further information. See note 2.4 for a summary of impairment charges recognised on \ufb01xed assets during the year. Goodwill The table below shows the carrying amount of goodwill by CGU: As at 31 December 2022 \u00a3m 2021 \u00a3m CGU allocation: Drax Energy Solutions CGU: Haven Power acquired in 2009 10.7 10.7 Opus Energy CGU: Opus Energy acquired in 2017 159.2 159.2 Lanark CGU: Drax Generation Enterprise acquired in 2018 11.3 11.3 Galloway CGU: Drax Generation Enterprise acquired in 2018 40 .1 4 0.1 Cruachan CGU: Drax Generation Enterprise acquired in 2018 26.9 26.9 Pellet group of CGUs: Pinnacle acquired in 2021 176.0 16 8 .1 Total goodwill 424.2 416.3 A full impairment assessment of CGUs with goodwill allocated to them has been performed as detailed in note 2.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-725": { "value": "Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-695": { "value": "Accounting policy Goodwill is measured as the excess of the: \u2022 consideration transferred; \u2022 amount of any non-controlling interest in the acquired entity; and \u2022 acquisition date fair value of any previous equity interest in the acquired entity; over the fair value of the identi\ufb01able 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 translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is considered to have an inde\ufb01nite useful life, is not depreciated, and is assessed annually for impairment (see note 2.4). 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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-709": { "value": "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 to bring the asset into the condition and location required for use as intended by management. Intangible assets are amortised over their anticipated UELs, which are reviewed at each reporting date. No changes to UELs were made during the period. Amortisation calculations are speci\ufb01c to each category of assets and are explained in further detail below. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-710": { "value": "The Group has incurred research and development expenditure of \u00a312.5 million (2021: \u00a311.4 million), which is included within Operating and administrative expenses in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-696": { "value": "5.3 Provisions The Group makes provisions for reinstatement to cover the estimated costs of decommissioning and demolishing or remediating the sites of its generation assets at the end of their useful economic lives (UELs). The Group has recognised a restructuring provision in respect of coal closure. Other provisions primarily relate to dilapidation provisions for leased assets. Accounting policy Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount required to settle the obligation. Speci\ufb01cally, a provision is made for the estimated decommissioning costs at the end of the UEL of the Group\u2019s generating assets, when a legal or constructive obligation arises, on a discounted basis. The amount provided is calculated on a site-by-site basis and represents the present value of the expected future costs. An amount equivalent to the discounted provision is capitalised within property, plant and equipment and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges. The Group recognises a restructuring provision when it has developed a detailed formal plan for the restructuring and has raised a valid expectation that it will carry out the restructuring either by starting to implement the plan or announcing its main features to those affected by it. The restructuring provision includes only the direct expenditures arising from the restructuring programme. These are costs that would have been avoided if the restructuring programme did not go ahead. Any costs to be incurred relating to the ongoing activities of the Group are excluded from the provision. A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination bene\ufb01t and when the Group recognises any related restructuring costs. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDecommissioningRestorationAndRehabilitationProvisionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-658": { "value": "Accounting policy Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount required to settle the obligation. Speci\ufb01cally, a provision is made for the estimated decommissioning costs at the end of the UEL of the Group\u2019s generating assets, when a legal or constructive obligation arises, on a discounted basis. The amount provided is calculated on a site-by-site basis and represents the present value of the expected future costs. An amount equivalent to the discounted provision is capitalised within property, plant and equipment and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges. The Group recognises a restructuring provision when it has developed a detailed formal plan for the restructuring and has raised a valid expectation that it will carry out the restructuring either by starting to implement the plan or announcing its main features to those affected by it. The restructuring provision includes only the direct expenditures arising from the restructuring programme. These are costs that would have been avoided if the restructuring programme did not go ahead. Any costs to be incurred relating to the ongoing activities of the Group are excluded from the provision. A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination bene\ufb01t and when the Group recognises any related restructuring costs. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-685": { "value": "A provision for termination bene\ufb01ts is recognised at the earlier of when the Group can no longer withdraw the offer of the termination bene\ufb01t and when the Group recognises any related restructuring costs. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTerminationBenefits", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-697": { "value": "5.4 Discontinued operations A discontinued operation is a component of the Group that has been disposed of or classi\ufb01ed as held for sale and meets one of the following criteria outlined in IFRS 5: \u2022 represents a separate major line of business or geographic area of operations; \u2022 is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or \u2022 is a subsidiary acquired exclusively with a view to resale. Accounting policy The component is classi\ufb01ed as a discontinued operation at the earlier of when it is disposed of or when the component meets the held for sale criteria. When an operation is classi\ufb01ed as a discontinued operation its results are presented separately in the Consolidated income statement. The results of the discontinued operation are also re-presented in the Consolidated income statement as discontinued in the comparative period. Sale of CCGT portfolio On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited for cash consideration of up to \u00a3193 million, subject to customary adjustments. This included \u00a329 million of contingent consideration associated with the option to develop the site at Damhead Creek (see notes 3.5 and 7.1). The sale price represented a return over the Group\u2019s period of ownership signi\ufb01cantly ahead of the Group\u2019s weighted average cost of capital. The Group received initial consideration of \u00a3188 million in February 2021 which was amended to \u00a3186 million in July 2021 following conclusion of the completion accounts process. The Group recognised an overall net gain on disposal of \u00a38.5 million spread across the \ufb01nancial years ending 31 December 2020 and 31 December 2021. The Group recognised certain transaction-related and mark-to-market costs, as incurred, during the year ended 31 December 2020. As a result, recognition of the net gain on disposal in the Group\u2019s Consolidated income statement is spread across 2020 and 2021, as illustrated below. No amounts have been recognised in the current \ufb01nancial year in relation to this disposal. Year ended 31 December 2022 \u00a3m 2021 \u00a3m 2020 \u00a3m Total \u00a3m Gross gain on disposal \u2013 17.1 \u2013 17.1 Transaction costs \u2013 (0.9) (3.3) (4.2) Mark-to-market costs \u2013 (1.1) (3.3) (4.4) Net gain/(loss) on disposal \u2013 15.1 (6.6) 8.5 Discontinued operations The income and expenditure of the CCGT generation portfolio were classi\ufb01ed as discontinued operations in the comparative period. There are no items of income or expenditure from discontinued operations in the current \ufb01nancial year. Year ended 31 December 2021 Adjusted results \u00a3m Exceptional items and certain remeasurements \u00a3m Total results \u00a3m Revenue 51.8 (2.5) 49.3 Cost of sales (31.6) (7.2) (38.8) Gross pro\ufb01t/(loss) 20.2 (9.7) 10.5 Operating and administrative expenses 0.1 (1.9) (1.8) Adjusted EBITDA 20.3 Other gains \u2013 17.1 17.1 Operating pro\ufb01t 20.3 5.5 25.8 Pro\ufb01t before tax on discontinued operations 20.3 5.5 25.8 Total tax (charge)/credit (3.6) 1.9 (1.7) Pro\ufb01t after tax from discontinued operations and total pro\ufb01t from discontinued operations 16.7 7.4 24 .1 Earnings per share Pence Pence For net pro\ufb01t for the period from discontinued operations attributable to owners of the Parent Company \u2013 Basic 4.2 6 .1 \u2013 Diluted 4.1 5.8 ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-659": { "value": "Accounting policy The component is classi\ufb01ed as a discontinued operation at the earlier of when it is disposed of or when the component meets the held for sale criteria. When an operation is classi\ufb01ed as a discontinued operation its results are presented separately in the Consolidated income statement. The results of the discontinued operation are also re-presented in the Consolidated income statement as discontinued in the comparative period. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-592": { "value": "Section 6: People costs The notes in this section relate to the remuneration of the Directors and employees of the Group, including the Group\u2019s obligations under retirement bene\ufb01t schemes. 6.1 Colleagues including directors and employees This note provides a more detailed breakdown of the cost of employees, including Executive directors of the Group. The average number of employees in Operations (staff based at production and generation sites), Customers (employees in the Group\u2019s Customers segment) and Central corporate and commercial functions are also provided. Further information in relation to pay and remuneration of the Executive directors can be found in the Remuneration Committee report, starting on page 127. Staff costs (including Executive directors) Year ended 31 December 2022 \u00a3m 2021 \u00a3m Wages and salaries 201.8 167.9 Social security costs 21.6 20.0 De\ufb01ned bene\ufb01t pension service cost (note 6.3) 4.7 6.3 De\ufb01ned contribution pension cost (note 6.3) 16.7 15.7 Share-based payments (note 6.2) 9.6 7. 4 Termination bene\ufb01ts 1.4 7.3 Total staff costs 255.8 224.6 Staff costs capitalised (6.9) ( 7.5) Staff costs included in discontinued operations \u2013 1.5 Staff costs included in operating and administrative expenses from continuing operations 248.9 218.6 Termination bene\ufb01ts of \u00a31.4 million (2021: \u00a37.3 million) includes a de\ufb01ned bene\ufb01t past service credit of \u00a3nil (2021: credit of \u00a32.6 million). See note 6.3. Average monthly number of people employed (including Executive directors) Year ended 31 December 2022 (number) 2021 (number) Operations (Generation) 685 754 Operations (Pellet Production) 696 520 Customers 866 964 Central corporate and commercial functions 880 884 Total average monthly number of people employed 3,127 3,122 6.2 Share-based payments The Group operates three share option schemes for employees: the Long Term Incentive Plan (LTIP) for Executive directors and senior employees (which replaced the Performance Share Plan (PSP) from 2020), the Deferred Share Plan (DSP) for Executive directors, and the Sharesave Plan (SAYE) for all UK qualifying employees. Awards are made to certain employees below senior management under the rules of the LTIP \u2013 such awards are retention and recognition awards, designated as One Drax Awards, for more junior colleagues. The Group incurs a non-cash charge in respect of these schemes in the Consolidated income statement, which is set out below along with a detailed description of each scheme and the number of options outstanding at the reporting date. Accounting policy The LTIP, PSP, DSP, One Drax Awards and SAYE share-based payment schemes are equity-settled. In accordance with IFRS 2, equity-settled share-based payments are measured at the fair value of the equity instrument at the date of grant. The corresponding expense is recognised in the Consolidated income statement on a straight-line basis over the relevant vesting period, based on an estimate of the number of shares that will ultimately vest as a result of the effect of non-market based vesting conditions, which is revised at each reporting date. Market based conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. Costs recognised in the Consolidated income statement in relation to share-based payments during the year were as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Equity-settled LTIP (granted from 2020) 5.6 3.6 PSP (granted from 2017 to 2019) 0.5 0.9 DSP (granted from 2017) 0.4 0.6 One Drax Awards 1.0 0.7 SAYE 2.1 1.6 Total share-based payment expense included within staff costs (note 6.1) 9.6 7.4 Movements in the number of share options outstanding at the reporting date for each scheme is shown below. Only the SAYE options have exercise prices listed as all other schemes have no exercise price. SAYE LTIP (number) PSP (number) DSP (number) One Drax Awards (number) Three-year weighted average exercise price (pence) SAYE three-year (number) Five-year weighted average exercise price (pence) SAYE \ufb01ve-year (number) At 1 January 2021 3 , 055,16 8 1,807,607 690,438 \u2013 137 9,523,816 139 3,649,625 Granted 1,990,385 \u2013 99,367 226,852 331 790,701 331 109,566 Forfeited (445,760) (325,362) (40,568) (10,083) 141 (813,391) 132 (607,663) Exercised \u2013 (627,10 1) (135,972) \u2013 174 (828,697) 180 (516,317) Expired (29,565) (138,722) (45,839) (703) 170 (295,606) 164 (95,501) At 1 January 2022 4,570,228 716,422 5 67,4 26 216,066 149 8,376,823 140 2,539,710 Granted 1,399,952 \u2013 71,399 143,439 563 700,799 563 107,122 Forfeited (2 38 ,121) (46,716) (5,598) (11,235) 176 (222,311) 154 (80,928) Exercised \u2013 (622,989) (265,482) (211,265) 206 (545,220) 188 (72,097) Expired (32,688) (46,717) \u2013 (258) 304 (146,423) 254 (28,945) At 31 December 2022 5,699,371 \u2013 367,745 136,747 178 8,163,6 6 8 155 2,464,862 The fair value of share options is calculated using either a Monte-Carlo model or a Black-Scholes model, depending on which model is deemed most appropriate for the nature of the share options. The Black-Scholes model compares exercise price to share price at the date of grant. The Monte-Carlo model takes into account the estimated probability of different levels of vesting for share options with market based conditions. The key inputs to the valuation models for the options are the share price at the date of grant, expected volatility and risk-free interest rate. Expected volatility was determined by calculating the historical volatility of the Group\u2019s share price. The expected life used in the model has been adjusted, based on management\u2019s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Information about the valuation models used and relevant inputs to the models is set out in the table below, along with key information about each scheme for options granted and exercised in the current and prior year: Year ended 31 December 2022 Scheme LTIP PSP DSP One Drax Awards SAYE three-year SAYE \ufb01ve-year Valuation model used Monte-Carlo Black-Scholes Black-Scholes Black-Scholes Black-Scholes Dividend yield for Black-Scholes model N/A N/A N/A 2.85% 3.15% Annual risk-free interest rate 1.20% 1.20% 1.20% 2.46% 2.38% Expected volatility 40% 40% 40% 41% 38% Grant date 18 March 2022 18 March 2022 18 March 2022 12 April 2022 12 April 2022 Share price at grant date (pence) 726 726 726 783 783 Weighted average fair value of options granted at measurement date (pence) 697 726 726 293 291 Fair value of options granted (\u00a3m) 9.8 0.5 1.0 2 .1 0.3 Vesting period of options granted 3 years 3 years 1 year 3 years 5 years Weighted average share price of options exercised during the period at the date of exercise (pence) \u2013 711 729 729 729 722 Number of options exercisable at year end \u2013 \u2013 17,05 8 \u2013 605 \u2013 Range of exercise price of options outstanding at year end (pence) Between 127 and 563 Between 127 and 563 Weighted average remaining contractual life (months) 13 \u2013 11 3 8 30 Year ended 31 December 2021 Scheme LTIP PSP DSP One Drax Awards SAYE three-year SAYE \ufb01ve-year Valuation model used Monte-Carlo Black-Scholes Black-Scholes Black-Scholes Black-Scholes Dividend yield for Black-Scholes model N/A N/A N/A 4.3% 4.7% Annual risk-free interest rate 0.12% 0 .12% 0.12% 0.43% 0.68% Expected volatility 40% 40% 40% 38% 36% Grant date 1 April 2021 1 April 2021 1 April 2021 13 April 2021 13 April 2021 Share price at grant date (pence) 418 418 418 413 413 Weighted average fair value of options granted at measurement date (pence) 388 418 418 111 105 Fair value of options granted (\u00a3m) 7.7 0.4 0.9 0.9 0.1 Vesting period of options granted 3 years 3 years 1 year 3 years 5 years Weighted average share price of options exercised during the period at the date of exercise (pence) \u2013 380 380 \u2013 449 420 Number of options exercisable at year end \u2013 \u2013 \u2013 \u2013 8,551 \u2013 Range of exercise price of options outstanding at year end (pence) Between 127 and 331 Between 127 and 331 Weighted average remaining contractual life (months) 21 4 11 3 18 41 LTIP The LTIP was introduced in 2020 for Executive directors and senior employees. This replaced the PSP, which operated from 2017 to 2019 (see below). Under the LTIP, annual awards of performance and service-related shares are made for no consideration to Executive directors and other senior employees up to a maximum of 200% of their annual base salary. Vesting of a proportion of shares (50%) is conditional upon whether the Group\u2019s Total Shareholder Return (TSR) matches or outperforms an index (determined in accordance with the scheme rules) over three years, and vesting of a proportion of shares (50%) is conditional upon performance of cumulative Adjusted EPS (de\ufb01ned to be derived from Adjusted results) over three years. Shares are forfeited due to employees failing to meet the continuing service conditions of the grant and as such do not attract a charge. Shares expire due to employees not meeting market-based conditions, withdrawing (by choice) part way through the vesting period or for any other reason not exercising their options in the exercise period after they vest. Under IFRS 2 such options still attract a charge. PSP The PSP was introduced for Executive directors and senior employees to replace the Bonus Matching Plan from 2017. Under the PSP, annual awards of performance and service-related shares were made for no consideration up to a maximum of 175% of their annual base salary. Vesting of a proportion of shares (50%) was conditional upon whether the Group\u2019s TSR matches or outperforms an index (determined in accordance with the scheme rules) over three years and vesting of a proportion of shares (50%) was conditional upon performance against the Group Scorecard (see page 147). DSP The Group operates the DSP, under which Executive directors receive 40% (2021: 40%) of their annual bonus in shares. DSP awards are granted at nil cost and vest after three years subject to continued employment or \u201cgood leaver\u201d termination provisions. One Drax Awards One Drax Awards are granted under the rules of the LTIP to certain employees below senior management and vest after one year subject to continuous employment. The number of shares awarded to the employee is equivalent to 10% of their base salary based on the Group\u2019s share price as at the grant date. SAYE In April 2022, participation in the SAYE plan was offered again to all UK qualifying employees. Options were granted for employees to acquire shares at a discount of 20% to the prevailing market price at the grant date, determined in accordance with the scheme rules. The options are exercisable at the end of three or \ufb01ve-year savings contracts. Additional information in relation to the Group\u2019s share-based incentive plans is included in the Remuneration Committee report on pages 138 and 139. 6.3 Retirement bene\ufb01t obligations The Group operates two de\ufb01ned bene\ufb01t and \ufb01ve de\ufb01ned contribution pension schemes. Name of scheme Type of Bene\ufb01t Status Country Drax Power Group (DPG) section of the Electricity Supply Pension Scheme (ESPS) De\ufb01ned bene\ufb01t \ufb01nal salary Closed to new members in 2002 UK Drax 2019 Scheme De\ufb01ned bene\ufb01t \ufb01nal salary Closed to new members on transfer in 2019 UK Drax Group Personal Pension Plan De\ufb01ned contribution Open to new members UK Drax Energy Solutions Personal Pension Plan De\ufb01ned contribution Open to new members UK Opus Energy Group Personal Pension Plan De\ufb01ned contribution Open to new members UK Drax Biomass Inc. 401(K) Plan De\ufb01ned contribution Open to new members US Pinnacle Registered Retirement Savings Plan De\ufb01ned contribution Open to new members Canada Trustee governance (de\ufb01ned bene\ufb01t pension schemes) The UK de\ufb01ned bene\ufb01t schemes are administered by a board of Trustees, which is legally separate from the Group. The Trustees are composed of representatives of both the employer and employees. The Trustees are required by law to act in the interest of all relevant bene\ufb01ciaries and are responsible for the investment policy for the assets and the day-to-day administration of the bene\ufb01t schemes. Accounting policy Payments to de\ufb01ned contribution schemes are recognised as an expense when employees have rendered services that entitle them to the contributions. The Consolidated income statement charge for the de\ufb01ned contribution scheme represents the total contributions to be paid by the Group in respect of the current period. For the de\ufb01ned bene\ufb01t pension schemes, the cost of providing bene\ufb01ts is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement of the obligation, comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest), is recognised immediately in the Consolidated balance sheet with a charge or credit to the Consolidated statement of comprehensive income in the period in which it occurs. De\ufb01ned bene\ufb01t costs, including current service costs, past service costs and gains and losses on curtailments and settlements, are recognised in the Consolidated income statement as part of operating and administrative expenses in the period in which they occur. The net interest expense or credit is recognised in interest payable and similar charges or interest receivable. Signi\ufb01cant estimation uncertainty Measurement of the de\ufb01ned bene\ufb01t pension obligation using the projected unit credit method involves the use of key assumptions, including discount rates, inflation rates, salary and pension increases and mortality rates. These actuarial assumptions are reviewed annually and modi\ufb01ed as appropriate. The Group believes that the assumptions utilised in measuring obligations under the schemes are reasonable based on prior experience, market conditions and the advice of pension scheme actuaries. However, actual results may differ from such assumptions. The assumptions applied in 2022 have been prepared in accordance with independent actuarial advice received and are consistent with those applied in the prior period. De\ufb01ned contribution schemes The Group operates \ufb01ve de\ufb01ned contribution schemes for all qualifying employees. Pension costs for the de\ufb01ned contribution schemes are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total included in staff costs (note 6.1) 16.7 15.7 As at 31 December 2022, contributions of \u00a31.5 million (20 21: \u00a3 1.1 million) due in respect of the current reporting period had not been paid over to the schemes. The Group has no further outstanding payment obligations in respect of the current reporting period once these contributions have been paid. De\ufb01ned bene\ufb01t schemes Any pension surplus and obligation are shown gross on the Consolidated balance sheet as there is no legal right of offset between the two de\ufb01ned bene\ufb01t pension schemes. The net pension surplus for the two de\ufb01ned bene\ufb01t pension schemes is as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m DPG section of the ESPS (DPG ESPS) 32.4 44.0 Drax 2019 Scheme 6.1 4.9 Total net surplus recognised in the Consolidated balance sheet 38.5 48.9 The DPG ESPS and the Drax 2019 Scheme are collectively referred to as \u201cthe Schemes\u201d below. At 31 December 2022, application of the accounting assumptions used in relation to the Schemes, which are described in further detail below, continued to result in a net position of surplus assets over liabilities. Both of the Schemes are de\ufb01ned bene\ufb01t \ufb01nal salary pension plans, which provide bene\ufb01ts to members in the form of a guaranteed level of pension payable for life. The level of bene\ufb01ts provided depends on members\u2019 length of service and their salary in the \ufb01nal years leading up to retirement. Pension bene\ufb01ts are updated in line with inflationary increases. The DPG ESPS was closed to new members as of 1 January 2002 unless they had quali\ufb01ed through being existing members of another part of the ESPS. Employed members who joined before this date continue to build up pension bene\ufb01ts as part of the scheme. Members are typically entitled to an annual pension on retirement of 1/80th of \ufb01nal pensionable salary for each year of service plus a tax-free lump sum of three times the member\u2019s annual pension at retirement. The Drax 2019 Scheme was set up following a transaction on 31 December 2018, when the Group acquired assets from Scottish Power Limited. Under the terms of the sale and purchase agreement, employees with de\ufb01ned bene\ufb01t pension rights who moved to the Group as part of the transaction were able to build up a future de\ufb01ned bene\ufb01t pension and were also able to transfer their de\ufb01ned bene\ufb01ts they had already built up to the Group. The scheme was set up to facilitate this from 1 January 2020. From this date, 96 members joined the Drax 2019 scheme and continued to build up a future de\ufb01ned bene\ufb01t pension. Of these, 81 members agreed to transfer their past service bene\ufb01ts into the scheme. Under the Drax 2019 Scheme, employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on attainment of retirement age (or earlier withdrawal or death). No other post-retirement bene\ufb01ts are provided. The scheme is open to future accrual of bene\ufb01ts but closed to new members. The Group and Trustees have agreed a long-term strategy for reducing investment risk as and when appropriate. This includes an asset-liability matching policy which aims to reduce the volatility of the funding level of the Schemes by investing in assets that perform in line with the liabilities to protect against interest rates being lower or inflation being higher than expected, for example. The Schemes expose the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be: Investment risk The Schemes\u2019 liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this creates a de\ufb01cit. The DPG ESPS holds a signi\ufb01cant proportion of growth assets (diversi\ufb01ed growth funds, direct lending and absolute return bonds) which, though expected to outperform corporate bonds in the long term, create volatility and risk in the short term. The allocation to growth assets is monitored to ensure it remains appropriate given this scheme\u2019s long-term objectives. The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. The scheme has moved towards a fully hedged position but continues to maintain return-generating assets such as equity options and credit strategies. Discount rate risk A decrease in corporate bond yields will increase the value placed upon the Schemes\u2019 liabilities, although this will be partially offset by an increase in the value of the Schemes\u2019 bond holdings. Longevity risk The majority of the Schemes\u2019 obligations are to provide bene\ufb01ts for the life of the member, so increases in life expectancy will result in an increase in the liabilities of the Schemes. In\ufb02ation risk The majority of the Schemes\u2019 obligations to pay bene\ufb01ts are linked to in\ufb02ation and, as such, higher in\ufb02ation leads to higher liabilities. In most cases, caps on in\ufb02ationary increases are in place to protect against extreme in\ufb02ation. The Schemes have a signi\ufb01cant holding in liability-driven investments and around 85% of in\ufb02ation risk in the Schemes is hedged on a low-risk measure (2021: around 85%). Credit risk Around 85% of the Schemes\u2019 overall funded liabilities are currently hedged against interest rates and inflation using liability-driven investments. The Schemes hedge interest rate risks on a statutory and long-term funding basis (gilts) whereas AA corporate bonds are implicit in the discount rate and so there is a degree of mismatching risk to the Group should yields on gilts and corporate bonds diverge. The Schemes\u2019 holding in corporate bonds mitigates this risk to some extent. During the year, particularly around September and October 2022, there was signi\ufb01cant yield volatility. However, with the exception of one week over which hedge ratios reduced for the DPG ESPS, the Schemes were able to maintain their target hedge levels throughout this period. Other risks include operational risks (such as paying out the wrong bene\ufb01ts), legislative risks (such as the Government increasing the burden on pension schemes through new regulation) and other demographic risks (such as making a higher proportion of members with dependents eligible to receive pensions from the Group). The Trustees ensure certain bene\ufb01ts are payable on death before retirement. A quali\ufb01ed independent actuary, Aon, carried out the most recent funding valuation of the DPG ESPS as at 31 March 2019, and the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2021. The actuarial review at 31 December 2022 is based on the same membership and other data as these funding valuations. The Schemes\u2019 Boards accepted the advice of the actuary and approved the use of these assumptions for the purpose of assessing the Schemes\u2019 costs. The results of the latest funding valuations have been adjusted to 31 December 2022, taking into account experience over the period since that date, changes in market conditions and differences in \ufb01nancial and demographic assumptions. The present value of the de\ufb01ned bene\ufb01t obligation and the related current service costs were measured using the projected unit credit method. The principal assumptions for the Schemes are set out below. Where absolute assumptions differ between the two schemes, reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average is shown. As at 31 December 2022 % p.a. 2021 % p.a. Discount rate 4.8 1.9 In\ufb02ation (RPI) 3.0 3.0 Rate of increase in pensions in payment and deferred pensions 2.8 2.9 Rate of increase in pensionable salaries 3.6 3.6 Whilst actual inflation has been high over 2022, long-term expectations as at 31 December 2022 are in line with long-term expectations as at 31 December 2021. The de\ufb01ned bene\ufb01t obligation for the Schemes allows for expected bene\ufb01t increases that will be awarded in 2023, based on known 2022 indices. Mortality assumptions are based on recent actual mortality experience of the Schemes\u2019 members and allow for expected future improvements in mortality rates. The assumptions are that a member aged 60 in 2022 will live, on average, for a further 26 years if they are male (2021: 26 years) and for a further 28 years if they are female (2021: 28 years). Life expectancy at age 60 for male and female non-pensioners currently aged 45 is assumed to be 27 and 29 years respectively (2021: 27 and 29 years respectively). The weighted average duration of the DPG ESPS at 31 December 2022 based on the IAS 19 position was 18 years (2021: 20 years). The weighted average duration of the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 21 years (2021: 24 years). The DPG ESPS de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (45%), former employees of the Group who are yet to retire (5%) and retired pensioners (50%). The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (55%), former employees of the Group who are yet to retire (43%) and retired pensioners (2%). The net surplus recognised in the Consolidated balance sheet in respect of the Schemes is the excess of the fair value of the plan assets over the present value of the de\ufb01ned bene\ufb01t obligation, determined as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets 219.6 369.8 De\ufb01ned bene\ufb01t obligation (181.1) (320.9) Net surplus recognised in the Consolidated balance sheet 38.5 48.9 The total charges and credits recognised in the Consolidated income statement, within other operating and administrative expenses and interest receivable, are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Included in staff costs (note 6.1): Current service cost 4.7 6.3 Past service credit \u2013 (2.6) Included in interest receivable (note 2.5): Interest income on net de\ufb01ned bene\ufb01t surplus (1.0) (0.3) Total amount recognised in the Consolidated income statement 3.7 3.4 On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited. The past service credit in 2021 relates to this sale, which led to 42 members, of a pre-transaction total of 96, ceasing to accrue bene\ufb01ts in the Drax 2019 Scheme and becoming deferred members. The past service credit calculation was performed by a quali\ufb01ed independent actuary using the same assumptions as those applied to the rest of the Schemes. The past service credit represents the difference between the liability relating to the standard Drax 2019 Scheme bene\ufb01ts as an active member as per the reserve in the calculation of the Group\u2019s IAS 19 position at that time, and the corresponding liability in respect of the equivalent bene\ufb01ts as deferred members (including allowance for two members who were offered enhanced past service bene\ufb01ts). Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m De\ufb01ned bene\ufb01t obligation at 1 January 320.9 37 8 .1 Current service cost 4.7 6.3 Past service credit \u2013 (2.6) Interest cost 5.7 5.3 Actuarial gains (123.6) (15.4) Bene\ufb01ts paid (26.6) (50.8) De\ufb01ned bene\ufb01t obligation at 31 December 181.1 320.9 The actuarial gains of \u00a3123.6 million (2021: \u00a315.4 million) reflect gains of \u00a3133.3 million (2021: \u00a310.3 million) arising from changes in financial assumptions, losses arising from scheme experience of \u00a39.9 million (2021: gains of \u00a34.3 million) and gains of \u00a30.2 million (2021: \u00a30.8 million) arising from changes in demographic assumptions. The gains due to changes in \ufb01nancial assumptions principally reflect the decrease in the present value of the Schemes\u2019 liabilities arising as a result of the movement in discount rate assumption to 4.8% p.a. (2021: 1.9% p.a.) following an increase in corporate bond yields, coupled with a slight decrease in overall long-term inflationary assumptions reflecting market pricing. Changes in the fair value of plan assets are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets at 1 January 369.8 386.3 Interest on plan assets 6.7 5.7 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Employer contributions 17.7 13.3 Bene\ufb01ts paid (26.6) (50.8) Fair value of plan assets at 31 December 219.6 369.8 Employer contributions included payments totalling \u00a37.6 million (2021: \u00a37.2 million) to reduce the actuarial de\ufb01cit in the DPG ESPS. There were contributions of \u00a33.2 million outstanding at the end of the year (2021: \u00a31.0 million). The actual return on plan assets in the period was a \u00a3141.3 million loss (2021: \u00a321.0 million gain). Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a324.4 million (2021: gains of \u00a330.7 million) were recognised in the Consolidated statement of comprehensive income. These are made up as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Actuarial gains on de\ufb01ned bene\ufb01t obligation 123.6 15.4 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Total remeasurement (losses)/gains recognised in other comprehensive income (24.4) 30.7 The fair values of the major categories of plan assets were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Gilts 117. 2 150.0 Equities (1) 6.5 26.5 Fixed interest bonds(2) 4.8 30.3 Property 28.6 32.1 Investment funds 4.3 25.0 Cash and other assets (3) 58.2 105.9 Fair value of total plan assets 219.6 369.8 (1) At 31 December 2022 DPG ESPS\u2019s long-term asset strategy was: diversi\ufb01ed growth funds (37%), direct lending (10%), absolute return bonds (3%), liability driven investing (40%) and long-lease property (10%). The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. (2) Fixed interest bonds include a mixture of corporate, Government and absolute return bonds. (3) Other assets include \u00a329.9 million (202 1: \u00a3 2 7.1 million) of investments in direct lending, a type of private equity vehicle which is not quoted in an active market. The fair value of these investments is derived in accordance with International Private Equity and Venture Capital Valuation (IPEV) Guidelines. All other assets are quoted in an active market. The pension plan assets do not include any ordinary shares issued by Drax Group plc or any property occupied by the Group. The valuation of the pension liabilities has been disclosed as a key source of estimation uncertainty due to the assumptions used in the valuation. The assumptions for discount rate, inflation rate (and related inflation linked bene\ufb01ts) and life expectancy have a potentially signi\ufb01cant effect on the measurement of the Schemes\u2019 surpluses. The following table provides an indication of the sensitivity of the net pension surplus at 31 December 2022 to changes in these assumptions, considering the impact on the de\ufb01ned bene\ufb01t obligation only. If a combination of the below reasonably possible changes to key assumptions were used in the valuation of the pension liabilities, this could result in a material change to the amount recognised. Increase/(decrease) in net surplus As at 31 December 2022 \u00a3m 2021 \u00a3m Discount rate \u2013 Increase 0.25% 8.0 17.3 \u2013 Decrease 0.25% (8.5) (19.5) In\ufb02ation rate(1) \u2013 Increase 0.25% ( 7. 0) (15.1) \u2013 Decrease 0.25% 6.6 13.8 Life expectancy \u2013 Increase 1 year (6.2) (13.2) \u2013 Decrease 1 year 6.4 12.7 (1) The sensitivity of the Schemes\u2019 liabilities to salary and pension increases is closely correlated with inflation, therefore separate sensitivities have not been performed on salary and pension increases and the inflationary sensitivity incorporates these. The Group is exposed to investment and other risks. However, this risk is mitigated by the Schemes being around 85% hedged against movements in government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Schemes are broadly only exposed to changes in credit spreads plus around 15% of changes in underlying gilt yields and, for inflation, the Schemes\u2019 exposure is around 15% of any actual changes. Future contributions UK legislation requires that pension schemes are funded prudently (i.e. to a level in excess of the current expected cost of providing bene\ufb01ts). This funding is carried out with reference to actuarial valuations which are required by law to take place at intervals of no more than three years. Following each valuation, the Trustees and the Group must agree the contributions required (if any) such that the Schemes are fully funded over time on the basis of suitably prudent assumptions. The Group expects to make total contributions of \u00a312.8 million to the Schemes during the 12 months ending 31 December 2023. The latest actuarial valuation of the Drax 2019 Scheme which was carried out as at 31 March 2020 resulted in a funding surplus of \u00a31.3 million and so no de\ufb01cit recovery plan was required. The last actuarial valuation of the DPG ESPS was carried out as at 31 March 2019. Following this actuarial valuation, the Group agreed to repair the funding de\ufb01cit of \u00a335.9 million as at 31 March 2019 over the period to 30 June 2024, subject to the actuarial assumptions adopted for the triennial valuation as at 31 March 2019 being borne out in practice. The agreement includes payments of \u00a37.2 million per annum (indexed with RPI) to be paid until 30 June 2024. The Group has also agreed to make additional contributions to the DPG ESPS over the period to 31 December 2025 to eliminate the self-suf\ufb01ciency de\ufb01cit. At this point, the DPG ESPS is expected to be self-suf\ufb01cient and fully funded, unless material adverse changes in economic conditions arise compared to those assumed in the valuation. The Group is satis\ufb01ed that the additional contributions are manageable within the Group\u2019s business plan. The Trust Deeds of the DPG ESPS and the Drax 2019 Scheme provide the sponsors of the Schemes with an unconditional right to a refund of surplus assets assuming the gradual settlement of plan liabilities over time. Furthermore, in the ordinary course of business, the Trustees have no right to unilaterally wind up, or otherwise augment the bene\ufb01ts due to members of the DPG ESPS. Based on these rights, any net surplus in the plan is recognised in full in the Consolidated balance sheet. Post balance sheet event On 31 January 2023 the DPG ESPS\u2019s assets and liabilities were transferred to the Drax 2019 Scheme, and it is expected that the DPG ESPS will be wound-up in due course. The Drax 2019 Scheme will continue to provide the same level of pension bene\ufb01ts to current and former employees as they were previously entitled to, with the combination allowing the resulting scheme to operate in a more ef\ufb01cient and focused manner, with a reduced administrative burden and associated cost. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfPeopleCosts", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-686": { "value": "6.1 Colleagues including directors and employees This note provides a more detailed breakdown of the cost of employees, including Executive directors of the Group. The average number of employees in Operations (staff based at production and generation sites), Customers (employees in the Group\u2019s Customers segment) and Central corporate and commercial functions are also provided. Further information in relation to pay and remuneration of the Executive directors can be found in the Remuneration Committee report, starting on page 127. Staff costs (including Executive directors) Year ended 31 December 2022 \u00a3m 2021 \u00a3m Wages and salaries 201.8 167.9 Social security costs 21.6 20.0 De\ufb01ned bene\ufb01t pension service cost (note 6.3) 4.7 6.3 De\ufb01ned contribution pension cost (note 6.3) 16.7 15.7 Share-based payments (note 6.2) 9.6 7. 4 Termination bene\ufb01ts 1.4 7.3 Total staff costs 255.8 224.6 Staff costs capitalised (6.9) ( 7.5) Staff costs included in discontinued operations \u2013 1.5 Staff costs included in operating and administrative expenses from continuing operations 248.9 218.6 Termination bene\ufb01ts of \u00a31.4 million (2021: \u00a37.3 million) includes a de\ufb01ned bene\ufb01t past service credit of \u00a3nil (2021: credit of \u00a32.6 million). See note 6.3. Average monthly number of people employed (including Executive directors) Year ended 31 December 2022 (number) 2021 (number) Operations (Generation) 685 754 Operations (Pellet Production) 696 520 Customers 866 964 Central corporate and commercial functions 880 884 Total average monthly number of people employed 3,127 3,122 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-625": { "value": "6.1 Colleagues including directors and employees This note provides a more detailed breakdown of the cost of employees, including Executive directors of the Group. The average number of employees in Operations (staff based at production and generation sites), Customers (employees in the Group\u2019s Customers segment) and Central corporate and commercial functions are also provided. Further information in relation to pay and remuneration of the Executive directors can be found in the Remuneration Committee report, starting on page 127. Staff costs (including Executive directors) Year ended 31 December 2022 \u00a3m 2021 \u00a3m Wages and salaries 201.8 167.9 Social security costs 21.6 20.0 De\ufb01ned bene\ufb01t pension service cost (note 6.3) 4.7 6.3 De\ufb01ned contribution pension cost (note 6.3) 16.7 15.7 Share-based payments (note 6.2) 9.6 7. 4 Termination bene\ufb01ts 1.4 7.3 Total staff costs 255.8 224.6 Staff costs capitalised (6.9) ( 7.5) Staff costs included in discontinued operations \u2013 1.5 Staff costs included in operating and administrative expenses from continuing operations 248.9 218.6 Termination bene\ufb01ts of \u00a31.4 million (2021: \u00a37.3 million) includes a de\ufb01ned bene\ufb01t past service credit of \u00a3nil (2021: credit of \u00a32.6 million). See note 6.3. Average monthly number of people employed (including Executive directors) Year ended 31 December 2022 (number) 2021 (number) Operations (Generation) 685 754 Operations (Pellet Production) 696 520 Customers 866 964 Central corporate and commercial functions 880 884 Total average monthly number of people employed 3,127 3,122 6.3 Retirement bene\ufb01t obligations The Group operates two de\ufb01ned bene\ufb01t and \ufb01ve de\ufb01ned contribution pension schemes. Name of scheme Type of Bene\ufb01t Status Country Drax Power Group (DPG) section of the Electricity Supply Pension Scheme (ESPS) De\ufb01ned bene\ufb01t \ufb01nal salary Closed to new members in 2002 UK Drax 2019 Scheme De\ufb01ned bene\ufb01t \ufb01nal salary Closed to new members on transfer in 2019 UK Drax Group Personal Pension Plan De\ufb01ned contribution Open to new members UK Drax Energy Solutions Personal Pension Plan De\ufb01ned contribution Open to new members UK Opus Energy Group Personal Pension Plan De\ufb01ned contribution Open to new members UK Drax Biomass Inc. 401(K) Plan De\ufb01ned contribution Open to new members US Pinnacle Registered Retirement Savings Plan De\ufb01ned contribution Open to new members Canada Trustee governance (de\ufb01ned bene\ufb01t pension schemes) The UK de\ufb01ned bene\ufb01t schemes are administered by a board of Trustees, which is legally separate from the Group. The Trustees are composed of representatives of both the employer and employees. The Trustees are required by law to act in the interest of all relevant bene\ufb01ciaries and are responsible for the investment policy for the assets and the day-to-day administration of the bene\ufb01t schemes. Accounting policy Payments to de\ufb01ned contribution schemes are recognised as an expense when employees have rendered services that entitle them to the contributions. The Consolidated income statement charge for the de\ufb01ned contribution scheme represents the total contributions to be paid by the Group in respect of the current period. For the de\ufb01ned bene\ufb01t pension schemes, the cost of providing bene\ufb01ts is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement of the obligation, comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest), is recognised immediately in the Consolidated balance sheet with a charge or credit to the Consolidated statement of comprehensive income in the period in which it occurs. De\ufb01ned bene\ufb01t costs, including current service costs, past service costs and gains and losses on curtailments and settlements, are recognised in the Consolidated income statement as part of operating and administrative expenses in the period in which they occur. The net interest expense or credit is recognised in interest payable and similar charges or interest receivable. Signi\ufb01cant estimation uncertainty Measurement of the de\ufb01ned bene\ufb01t pension obligation using the projected unit credit method involves the use of key assumptions, including discount rates, inflation rates, salary and pension increases and mortality rates. These actuarial assumptions are reviewed annually and modi\ufb01ed as appropriate. The Group believes that the assumptions utilised in measuring obligations under the schemes are reasonable based on prior experience, market conditions and the advice of pension scheme actuaries. However, actual results may differ from such assumptions. The assumptions applied in 2022 have been prepared in accordance with independent actuarial advice received and are consistent with those applied in the prior period. De\ufb01ned contribution schemes The Group operates \ufb01ve de\ufb01ned contribution schemes for all qualifying employees. Pension costs for the de\ufb01ned contribution schemes are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total included in staff costs (note 6.1) 16.7 15.7 As at 31 December 2022, contributions of \u00a31.5 million (20 21: \u00a3 1.1 million) due in respect of the current reporting period had not been paid over to the schemes. The Group has no further outstanding payment obligations in respect of the current reporting period once these contributions have been paid. De\ufb01ned bene\ufb01t schemes Any pension surplus and obligation are shown gross on the Consolidated balance sheet as there is no legal right of offset between the two de\ufb01ned bene\ufb01t pension schemes. The net pension surplus for the two de\ufb01ned bene\ufb01t pension schemes is as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m DPG section of the ESPS (DPG ESPS) 32.4 44.0 Drax 2019 Scheme 6.1 4.9 Total net surplus recognised in the Consolidated balance sheet 38.5 48.9 The DPG ESPS and the Drax 2019 Scheme are collectively referred to as \u201cthe Schemes\u201d below. At 31 December 2022, application of the accounting assumptions used in relation to the Schemes, which are described in further detail below, continued to result in a net position of surplus assets over liabilities. Both of the Schemes are de\ufb01ned bene\ufb01t \ufb01nal salary pension plans, which provide bene\ufb01ts to members in the form of a guaranteed level of pension payable for life. The level of bene\ufb01ts provided depends on members\u2019 length of service and their salary in the \ufb01nal years leading up to retirement. Pension bene\ufb01ts are updated in line with inflationary increases. The DPG ESPS was closed to new members as of 1 January 2002 unless they had quali\ufb01ed through being existing members of another part of the ESPS. Employed members who joined before this date continue to build up pension bene\ufb01ts as part of the scheme. Members are typically entitled to an annual pension on retirement of 1/80th of \ufb01nal pensionable salary for each year of service plus a tax-free lump sum of three times the member\u2019s annual pension at retirement. The Drax 2019 Scheme was set up following a transaction on 31 December 2018, when the Group acquired assets from Scottish Power Limited. Under the terms of the sale and purchase agreement, employees with de\ufb01ned bene\ufb01t pension rights who moved to the Group as part of the transaction were able to build up a future de\ufb01ned bene\ufb01t pension and were also able to transfer their de\ufb01ned bene\ufb01ts they had already built up to the Group. The scheme was set up to facilitate this from 1 January 2020. From this date, 96 members joined the Drax 2019 scheme and continued to build up a future de\ufb01ned bene\ufb01t pension. Of these, 81 members agreed to transfer their past service bene\ufb01ts into the scheme. Under the Drax 2019 Scheme, employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on attainment of retirement age (or earlier withdrawal or death). No other post-retirement bene\ufb01ts are provided. The scheme is open to future accrual of bene\ufb01ts but closed to new members. The Group and Trustees have agreed a long-term strategy for reducing investment risk as and when appropriate. This includes an asset-liability matching policy which aims to reduce the volatility of the funding level of the Schemes by investing in assets that perform in line with the liabilities to protect against interest rates being lower or inflation being higher than expected, for example. The Schemes expose the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be: Investment risk The Schemes\u2019 liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this creates a de\ufb01cit. The DPG ESPS holds a signi\ufb01cant proportion of growth assets (diversi\ufb01ed growth funds, direct lending and absolute return bonds) which, though expected to outperform corporate bonds in the long term, create volatility and risk in the short term. The allocation to growth assets is monitored to ensure it remains appropriate given this scheme\u2019s long-term objectives. The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. The scheme has moved towards a fully hedged position but continues to maintain return-generating assets such as equity options and credit strategies. Discount rate risk A decrease in corporate bond yields will increase the value placed upon the Schemes\u2019 liabilities, although this will be partially offset by an increase in the value of the Schemes\u2019 bond holdings. Longevity risk The majority of the Schemes\u2019 obligations are to provide bene\ufb01ts for the life of the member, so increases in life expectancy will result in an increase in the liabilities of the Schemes. In\ufb02ation risk The majority of the Schemes\u2019 obligations to pay bene\ufb01ts are linked to in\ufb02ation and, as such, higher in\ufb02ation leads to higher liabilities. In most cases, caps on in\ufb02ationary increases are in place to protect against extreme in\ufb02ation. The Schemes have a signi\ufb01cant holding in liability-driven investments and around 85% of in\ufb02ation risk in the Schemes is hedged on a low-risk measure (2021: around 85%). Credit risk Around 85% of the Schemes\u2019 overall funded liabilities are currently hedged against interest rates and inflation using liability-driven investments. The Schemes hedge interest rate risks on a statutory and long-term funding basis (gilts) whereas AA corporate bonds are implicit in the discount rate and so there is a degree of mismatching risk to the Group should yields on gilts and corporate bonds diverge. The Schemes\u2019 holding in corporate bonds mitigates this risk to some extent. During the year, particularly around September and October 2022, there was signi\ufb01cant yield volatility. However, with the exception of one week over which hedge ratios reduced for the DPG ESPS, the Schemes were able to maintain their target hedge levels throughout this period. Other risks include operational risks (such as paying out the wrong bene\ufb01ts), legislative risks (such as the Government increasing the burden on pension schemes through new regulation) and other demographic risks (such as making a higher proportion of members with dependents eligible to receive pensions from the Group). The Trustees ensure certain bene\ufb01ts are payable on death before retirement. A quali\ufb01ed independent actuary, Aon, carried out the most recent funding valuation of the DPG ESPS as at 31 March 2019, and the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2021. The actuarial review at 31 December 2022 is based on the same membership and other data as these funding valuations. The Schemes\u2019 Boards accepted the advice of the actuary and approved the use of these assumptions for the purpose of assessing the Schemes\u2019 costs. The results of the latest funding valuations have been adjusted to 31 December 2022, taking into account experience over the period since that date, changes in market conditions and differences in \ufb01nancial and demographic assumptions. The present value of the de\ufb01ned bene\ufb01t obligation and the related current service costs were measured using the projected unit credit method. The principal assumptions for the Schemes are set out below. Where absolute assumptions differ between the two schemes, reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average is shown. As at 31 December 2022 % p.a. 2021 % p.a. Discount rate 4.8 1.9 In\ufb02ation (RPI) 3.0 3.0 Rate of increase in pensions in payment and deferred pensions 2.8 2.9 Rate of increase in pensionable salaries 3.6 3.6 Whilst actual inflation has been high over 2022, long-term expectations as at 31 December 2022 are in line with long-term expectations as at 31 December 2021. The de\ufb01ned bene\ufb01t obligation for the Schemes allows for expected bene\ufb01t increases that will be awarded in 2023, based on known 2022 indices. Mortality assumptions are based on recent actual mortality experience of the Schemes\u2019 members and allow for expected future improvements in mortality rates. The assumptions are that a member aged 60 in 2022 will live, on average, for a further 26 years if they are male (2021: 26 years) and for a further 28 years if they are female (2021: 28 years). Life expectancy at age 60 for male and female non-pensioners currently aged 45 is assumed to be 27 and 29 years respectively (2021: 27 and 29 years respectively). The weighted average duration of the DPG ESPS at 31 December 2022 based on the IAS 19 position was 18 years (2021: 20 years). The weighted average duration of the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 21 years (2021: 24 years). The DPG ESPS de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (45%), former employees of the Group who are yet to retire (5%) and retired pensioners (50%). The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (55%), former employees of the Group who are yet to retire (43%) and retired pensioners (2%). The net surplus recognised in the Consolidated balance sheet in respect of the Schemes is the excess of the fair value of the plan assets over the present value of the de\ufb01ned bene\ufb01t obligation, determined as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets 219.6 369.8 De\ufb01ned bene\ufb01t obligation (181.1) (320.9) Net surplus recognised in the Consolidated balance sheet 38.5 48.9 The total charges and credits recognised in the Consolidated income statement, within other operating and administrative expenses and interest receivable, are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Included in staff costs (note 6.1): Current service cost 4.7 6.3 Past service credit \u2013 (2.6) Included in interest receivable (note 2.5): Interest income on net de\ufb01ned bene\ufb01t surplus (1.0) (0.3) Total amount recognised in the Consolidated income statement 3.7 3.4 On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited. The past service credit in 2021 relates to this sale, which led to 42 members, of a pre-transaction total of 96, ceasing to accrue bene\ufb01ts in the Drax 2019 Scheme and becoming deferred members. The past service credit calculation was performed by a quali\ufb01ed independent actuary using the same assumptions as those applied to the rest of the Schemes. The past service credit represents the difference between the liability relating to the standard Drax 2019 Scheme bene\ufb01ts as an active member as per the reserve in the calculation of the Group\u2019s IAS 19 position at that time, and the corresponding liability in respect of the equivalent bene\ufb01ts as deferred members (including allowance for two members who were offered enhanced past service bene\ufb01ts). Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m De\ufb01ned bene\ufb01t obligation at 1 January 320.9 37 8 .1 Current service cost 4.7 6.3 Past service credit \u2013 (2.6) Interest cost 5.7 5.3 Actuarial gains (123.6) (15.4) Bene\ufb01ts paid (26.6) (50.8) De\ufb01ned bene\ufb01t obligation at 31 December 181.1 320.9 The actuarial gains of \u00a3123.6 million (2021: \u00a315.4 million) reflect gains of \u00a3133.3 million (2021: \u00a310.3 million) arising from changes in financial assumptions, losses arising from scheme experience of \u00a39.9 million (2021: gains of \u00a34.3 million) and gains of \u00a30.2 million (2021: \u00a30.8 million) arising from changes in demographic assumptions. The gains due to changes in \ufb01nancial assumptions principally reflect the decrease in the present value of the Schemes\u2019 liabilities arising as a result of the movement in discount rate assumption to 4.8% p.a. (2021: 1.9% p.a.) following an increase in corporate bond yields, coupled with a slight decrease in overall long-term inflationary assumptions reflecting market pricing. Changes in the fair value of plan assets are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets at 1 January 369.8 386.3 Interest on plan assets 6.7 5.7 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Employer contributions 17.7 13.3 Bene\ufb01ts paid (26.6) (50.8) Fair value of plan assets at 31 December 219.6 369.8 Employer contributions included payments totalling \u00a37.6 million (2021: \u00a37.2 million) to reduce the actuarial de\ufb01cit in the DPG ESPS. There were contributions of \u00a33.2 million outstanding at the end of the year (2021: \u00a31.0 million). The actual return on plan assets in the period was a \u00a3141.3 million loss (2021: \u00a321.0 million gain). Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a324.4 million (2021: gains of \u00a330.7 million) were recognised in the Consolidated statement of comprehensive income. These are made up as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Actuarial gains on de\ufb01ned bene\ufb01t obligation 123.6 15.4 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Total remeasurement (losses)/gains recognised in other comprehensive income (24.4) 30.7 The fair values of the major categories of plan assets were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Gilts 117. 2 150.0 Equities (1) 6.5 26.5 Fixed interest bonds(2) 4.8 30.3 Property 28.6 32.1 Investment funds 4.3 25.0 Cash and other assets (3) 58.2 105.9 Fair value of total plan assets 219.6 369.8 (1) At 31 December 2022 DPG ESPS\u2019s long-term asset strategy was: diversi\ufb01ed growth funds (37%), direct lending (10%), absolute return bonds (3%), liability driven investing (40%) and long-lease property (10%). The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. (2) Fixed interest bonds include a mixture of corporate, Government and absolute return bonds. (3) Other assets include \u00a329.9 million (202 1: \u00a3 2 7.1 million) of investments in direct lending, a type of private equity vehicle which is not quoted in an active market. The fair value of these investments is derived in accordance with International Private Equity and Venture Capital Valuation (IPEV) Guidelines. All other assets are quoted in an active market. The pension plan assets do not include any ordinary shares issued by Drax Group plc or any property occupied by the Group. The valuation of the pension liabilities has been disclosed as a key source of estimation uncertainty due to the assumptions used in the valuation. The assumptions for discount rate, inflation rate (and related inflation linked bene\ufb01ts) and life expectancy have a potentially signi\ufb01cant effect on the measurement of the Schemes\u2019 surpluses. The following table provides an indication of the sensitivity of the net pension surplus at 31 December 2022 to changes in these assumptions, considering the impact on the de\ufb01ned bene\ufb01t obligation only. If a combination of the below reasonably possible changes to key assumptions were used in the valuation of the pension liabilities, this could result in a material change to the amount recognised. Increase/(decrease) in net surplus As at 31 December 2022 \u00a3m 2021 \u00a3m Discount rate \u2013 Increase 0.25% 8.0 17.3 \u2013 Decrease 0.25% (8.5) (19.5) In\ufb02ation rate(1) \u2013 Increase 0.25% ( 7. 0) (15.1) \u2013 Decrease 0.25% 6.6 13.8 Life expectancy \u2013 Increase 1 year (6.2) (13.2) \u2013 Decrease 1 year 6.4 12.7 (1) The sensitivity of the Schemes\u2019 liabilities to salary and pension increases is closely correlated with inflation, therefore separate sensitivities have not been performed on salary and pension increases and the inflationary sensitivity incorporates these. The Group is exposed to investment and other risks. However, this risk is mitigated by the Schemes being around 85% hedged against movements in government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Schemes are broadly only exposed to changes in credit spreads plus around 15% of changes in underlying gilt yields and, for inflation, the Schemes\u2019 exposure is around 15% of any actual changes. Future contributions UK legislation requires that pension schemes are funded prudently (i.e. to a level in excess of the current expected cost of providing bene\ufb01ts). This funding is carried out with reference to actuarial valuations which are required by law to take place at intervals of no more than three years. Following each valuation, the Trustees and the Group must agree the contributions required (if any) such that the Schemes are fully funded over time on the basis of suitably prudent assumptions. The Group expects to make total contributions of \u00a312.8 million to the Schemes during the 12 months ending 31 December 2023. The latest actuarial valuation of the Drax 2019 Scheme which was carried out as at 31 March 2020 resulted in a funding surplus of \u00a31.3 million and so no de\ufb01cit recovery plan was required. The last actuarial valuation of the DPG ESPS was carried out as at 31 March 2019. Following this actuarial valuation, the Group agreed to repair the funding de\ufb01cit of \u00a335.9 million as at 31 March 2019 over the period to 30 June 2024, subject to the actuarial assumptions adopted for the triennial valuation as at 31 March 2019 being borne out in practice. The agreement includes payments of \u00a37.2 million per annum (indexed with RPI) to be paid until 30 June 2024. The Group has also agreed to make additional contributions to the DPG ESPS over the period to 31 December 2025 to eliminate the self-suf\ufb01ciency de\ufb01cit. At this point, the DPG ESPS is expected to be self-suf\ufb01cient and fully funded, unless material adverse changes in economic conditions arise compared to those assumed in the valuation. The Group is satis\ufb01ed that the additional contributions are manageable within the Group\u2019s business plan. The Trust Deeds of the DPG ESPS and the Drax 2019 Scheme provide the sponsors of the Schemes with an unconditional right to a refund of surplus assets assuming the gradual settlement of plan liabilities over time. Furthermore, in the ordinary course of business, the Trustees have no right to unilaterally wind up, or otherwise augment the bene\ufb01ts due to members of the DPG ESPS. Based on these rights, any net surplus in the plan is recognised in full in the Consolidated balance sheet. Post balance sheet event On 31 January 2023 the DPG ESPS\u2019s assets and liabilities were transferred to the Drax 2019 Scheme, and it is expected that the DPG ESPS will be wound-up in due course. The Drax 2019 Scheme will continue to provide the same level of pension bene\ufb01ts to current and former employees as they were previously entitled to, with the combination allowing the resulting scheme to operate in a more ef\ufb01cient and focused manner, with a reduced administrative burden and associated cost. Remuneration of key management personnel The remuneration of the Directors and Executive management, who are considered to be the key management personnel of the Group, is set out below in aggregate for each of the categories speci\ufb01ed in IAS 24. Further information about the remuneration of individual directors, together with the directors\u2019 interests in the share capital of the Company, is provided in the audited part of the Remuneration Committee report. Year ended 31 December 2022 \u00a3000 2021 \u00a3000 Short-term employee bene\ufb01ts 7,531 6,755 Share-based payments 3,964 2,826 Post-employment bene\ufb01ts 489 635 Total remuneration 11,984 10,216 Compensation of the Group\u2019s key management personnel includes short-term employee bene\ufb01ts, which includes salaries, other short-term bene\ufb01ts, and contributions to post-employment money purchase pension schemes. Share-based payments compensation represents the amounts receivable under share-based incentive schemes as disclosed in note 6.2. Amounts included in the table above reflect the remuneration of the 17 (2021: 17) members of the Board and Executive management. There were no other transactions with directors for the periods covered by these Consolidated \ufb01nancial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-624": { "value": "6.2 Share-based payments The Group operates three share option schemes for employees: the Long Term Incentive Plan (LTIP) for Executive directors and senior employees (which replaced the Performance Share Plan (PSP) from 2020), the Deferred Share Plan (DSP) for Executive directors, and the Sharesave Plan (SAYE) for all UK qualifying employees. Awards are made to certain employees below senior management under the rules of the LTIP \u2013 such awards are retention and recognition awards, designated as One Drax Awards, for more junior colleagues. The Group incurs a non-cash charge in respect of these schemes in the Consolidated income statement, which is set out below along with a detailed description of each scheme and the number of options outstanding at the reporting date. Accounting policy The LTIP, PSP, DSP, One Drax Awards and SAYE share-based payment schemes are equity-settled. In accordance with IFRS 2, equity-settled share-based payments are measured at the fair value of the equity instrument at the date of grant. The corresponding expense is recognised in the Consolidated income statement on a straight-line basis over the relevant vesting period, based on an estimate of the number of shares that will ultimately vest as a result of the effect of non-market based vesting conditions, which is revised at each reporting date. Market based conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. Costs recognised in the Consolidated income statement in relation to share-based payments during the year were as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Equity-settled LTIP (granted from 2020) 5.6 3.6 PSP (granted from 2017 to 2019) 0.5 0.9 DSP (granted from 2017) 0.4 0.6 One Drax Awards 1.0 0.7 SAYE 2.1 1.6 Total share-based payment expense included within staff costs (note 6.1) 9.6 7.4 Movements in the number of share options outstanding at the reporting date for each scheme is shown below. Only the SAYE options have exercise prices listed as all other schemes have no exercise price. SAYE LTIP (number) PSP (number) DSP (number) One Drax Awards (number) Three-year weighted average exercise price (pence) SAYE three-year (number) Five-year weighted average exercise price (pence) SAYE \ufb01ve-year (number) At 1 January 2021 3 , 055,16 8 1,807,607 690,438 \u2013 137 9,523,816 139 3,649,625 Granted 1,990,385 \u2013 99,367 226,852 331 790,701 331 109,566 Forfeited (445,760) (325,362) (40,568) (10,083) 141 (813,391) 132 (607,663) Exercised \u2013 (627,10 1) (135,972) \u2013 174 (828,697) 180 (516,317) Expired (29,565) (138,722) (45,839) (703) 170 (295,606) 164 (95,501) At 1 January 2022 4,570,228 716,422 5 67,4 26 216,066 149 8,376,823 140 2,539,710 Granted 1,399,952 \u2013 71,399 143,439 563 700,799 563 107,122 Forfeited (2 38 ,121) (46,716) (5,598) (11,235) 176 (222,311) 154 (80,928) Exercised \u2013 (622,989) (265,482) (211,265) 206 (545,220) 188 (72,097) Expired (32,688) (46,717) \u2013 (258) 304 (146,423) 254 (28,945) At 31 December 2022 5,699,371 \u2013 367,745 136,747 178 8,163,6 6 8 155 2,464,862 The fair value of share options is calculated using either a Monte-Carlo model or a Black-Scholes model, depending on which model is deemed most appropriate for the nature of the share options. The Black-Scholes model compares exercise price to share price at the date of grant. The Monte-Carlo model takes into account the estimated probability of different levels of vesting for share options with market based conditions. The key inputs to the valuation models for the options are the share price at the date of grant, expected volatility and risk-free interest rate. Expected volatility was determined by calculating the historical volatility of the Group\u2019s share price. The expected life used in the model has been adjusted, based on management\u2019s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Information about the valuation models used and relevant inputs to the models is set out in the table below, along with key information about each scheme for options granted and exercised in the current and prior year: Year ended 31 December 2022 Scheme LTIP PSP DSP One Drax Awards SAYE three-year SAYE \ufb01ve-year Valuation model used Monte-Carlo Black-Scholes Black-Scholes Black-Scholes Black-Scholes Dividend yield for Black-Scholes model N/A N/A N/A 2.85% 3.15% Annual risk-free interest rate 1.20% 1.20% 1.20% 2.46% 2.38% Expected volatility 40% 40% 40% 41% 38% Grant date 18 March 2022 18 March 2022 18 March 2022 12 April 2022 12 April 2022 Share price at grant date (pence) 726 726 726 783 783 Weighted average fair value of options granted at measurement date (pence) 697 726 726 293 291 Fair value of options granted (\u00a3m) 9.8 0.5 1.0 2 .1 0.3 Vesting period of options granted 3 years 3 years 1 year 3 years 5 years Weighted average share price of options exercised during the period at the date of exercise (pence) \u2013 711 729 729 729 722 Number of options exercisable at year end \u2013 \u2013 17,05 8 \u2013 605 \u2013 Range of exercise price of options outstanding at year end (pence) Between 127 and 563 Between 127 and 563 Weighted average remaining contractual life (months) 13 \u2013 11 3 8 30 Year ended 31 December 2021 Scheme LTIP PSP DSP One Drax Awards SAYE three-year SAYE \ufb01ve-year Valuation model used Monte-Carlo Black-Scholes Black-Scholes Black-Scholes Black-Scholes Dividend yield for Black-Scholes model N/A N/A N/A 4.3% 4.7% Annual risk-free interest rate 0.12% 0 .12% 0.12% 0.43% 0.68% Expected volatility 40% 40% 40% 38% 36% Grant date 1 April 2021 1 April 2021 1 April 2021 13 April 2021 13 April 2021 Share price at grant date (pence) 418 418 418 413 413 Weighted average fair value of options granted at measurement date (pence) 388 418 418 111 105 Fair value of options granted (\u00a3m) 7.7 0.4 0.9 0.9 0.1 Vesting period of options granted 3 years 3 years 1 year 3 years 5 years Weighted average share price of options exercised during the period at the date of exercise (pence) \u2013 380 380 \u2013 449 420 Number of options exercisable at year end \u2013 \u2013 \u2013 \u2013 8,551 \u2013 Range of exercise price of options outstanding at year end (pence) Between 127 and 331 Between 127 and 331 Weighted average remaining contractual life (months) 21 4 11 3 18 41 LTIP The LTIP was introduced in 2020 for Executive directors and senior employees. This replaced the PSP, which operated from 2017 to 2019 (see below). Under the LTIP, annual awards of performance and service-related shares are made for no consideration to Executive directors and other senior employees up to a maximum of 200% of their annual base salary. Vesting of a proportion of shares (50%) is conditional upon whether the Group\u2019s Total Shareholder Return (TSR) matches or outperforms an index (determined in accordance with the scheme rules) over three years, and vesting of a proportion of shares (50%) is conditional upon performance of cumulative Adjusted EPS (de\ufb01ned to be derived from Adjusted results) over three years. Shares are forfeited due to employees failing to meet the continuing service conditions of the grant and as such do not attract a charge. Shares expire due to employees not meeting market-based conditions, withdrawing (by choice) part way through the vesting period or for any other reason not exercising their options in the exercise period after they vest. Under IFRS 2 such options still attract a charge. PSP The PSP was introduced for Executive directors and senior employees to replace the Bonus Matching Plan from 2017. Under the PSP, annual awards of performance and service-related shares were made for no consideration up to a maximum of 175% of their annual base salary. Vesting of a proportion of shares (50%) was conditional upon whether the Group\u2019s TSR matches or outperforms an index (determined in accordance with the scheme rules) over three years and vesting of a proportion of shares (50%) was conditional upon performance against the Group Scorecard (see page 147). DSP The Group operates the DSP, under which Executive directors receive 40% (2021: 40%) of their annual bonus in shares. DSP awards are granted at nil cost and vest after three years subject to continued employment or \u201cgood leaver\u201d termination provisions. One Drax Awards One Drax Awards are granted under the rules of the LTIP to certain employees below senior management and vest after one year subject to continuous employment. The number of shares awarded to the employee is equivalent to 10% of their base salary based on the Group\u2019s share price as at the grant date. SAYE In April 2022, participation in the SAYE plan was offered again to all UK qualifying employees. Options were granted for employees to acquire shares at a discount of 20% to the prevailing market price at the grant date, determined in accordance with the scheme rules. The options are exercisable at the end of three or \ufb01ve-year savings contracts. Additional information in relation to the Group\u2019s share-based incentive plans is included in the Remuneration Committee report on pages 138 and 139. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-660": { "value": "Accounting policy The LTIP, PSP, DSP, One Drax Awards and SAYE share-based payment schemes are equity-settled. In accordance with IFRS 2, equity-settled share-based payments are measured at the fair value of the equity instrument at the date of grant. The corresponding expense is recognised in the Consolidated income statement on a straight-line basis over the relevant vesting period, based on an estimate of the number of shares that will ultimately vest as a result of the effect of non-market based vesting conditions, which is revised at each reporting date. Market based conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-661": { "value": "Accounting policy Payments to de\ufb01ned contribution schemes are recognised as an expense when employees have rendered services that entitle them to the contributions. The Consolidated income statement charge for the de\ufb01ned contribution scheme represents the total contributions to be paid by the Group in respect of the current period. For the de\ufb01ned bene\ufb01t pension schemes, the cost of providing bene\ufb01ts is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement of the obligation, comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest), is recognised immediately in the Consolidated balance sheet with a charge or credit to the Consolidated statement of comprehensive income in the period in which it occurs. De\ufb01ned bene\ufb01t costs, including current service costs, past service costs and gains and losses on curtailments and settlements, are recognised in the Consolidated income statement as part of operating and administrative expenses in the period in which they occur. The net interest expense or credit is recognised in interest payable and similar charges or interest receivable. Signi\ufb01cant estimation uncertainty Measurement of the de\ufb01ned bene\ufb01t pension obligation using the projected unit credit method involves the use of key assumptions, including discount rates, inflation rates, salary and pension increases and mortality rates. These actuarial assumptions are reviewed annually and modi\ufb01ed as appropriate. The Group believes that the assumptions utilised in measuring obligations under the schemes are reasonable based on prior experience, market conditions and the advice of pension scheme actuaries. However, actual results may differ from such assumptions. The assumptions applied in 2022 have been prepared in accordance with independent actuarial advice received and are consistent with those applied in the prior period. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-662": { "value": "De\ufb01ned contribution schemes The Group operates \ufb01ve de\ufb01ned contribution schemes for all qualifying employees. Pension costs for the de\ufb01ned contribution schemes are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Total included in staff costs (note 6.1) 16.7 15.7 As at 31 December 2022, contributions of \u00a31.5 million (20 21: \u00a3 1.1 million) due in respect of the current reporting period had not been paid over to the schemes. The Group has no further outstanding payment obligations in respect of the current reporting period once these contributions have been paid. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedContributionPlansExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-663": { "value": "De\ufb01ned bene\ufb01t schemes Any pension surplus and obligation are shown gross on the Consolidated balance sheet as there is no legal right of offset between the two de\ufb01ned bene\ufb01t pension schemes. The net pension surplus for the two de\ufb01ned bene\ufb01t pension schemes is as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m DPG section of the ESPS (DPG ESPS) 32.4 44.0 Drax 2019 Scheme 6.1 4.9 Total net surplus recognised in the Consolidated balance sheet 38.5 48.9 The DPG ESPS and the Drax 2019 Scheme are collectively referred to as \u201cthe Schemes\u201d below. At 31 December 2022, application of the accounting assumptions used in relation to the Schemes, which are described in further detail below, continued to result in a net position of surplus assets over liabilities. Both of the Schemes are de\ufb01ned bene\ufb01t \ufb01nal salary pension plans, which provide bene\ufb01ts to members in the form of a guaranteed level of pension payable for life. The level of bene\ufb01ts provided depends on members\u2019 length of service and their salary in the \ufb01nal years leading up to retirement. Pension bene\ufb01ts are updated in line with inflationary increases. The DPG ESPS was closed to new members as of 1 January 2002 unless they had quali\ufb01ed through being existing members of another part of the ESPS. Employed members who joined before this date continue to build up pension bene\ufb01ts as part of the scheme. Members are typically entitled to an annual pension on retirement of 1/80th of \ufb01nal pensionable salary for each year of service plus a tax-free lump sum of three times the member\u2019s annual pension at retirement. The Drax 2019 Scheme was set up following a transaction on 31 December 2018, when the Group acquired assets from Scottish Power Limited. Under the terms of the sale and purchase agreement, employees with de\ufb01ned bene\ufb01t pension rights who moved to the Group as part of the transaction were able to build up a future de\ufb01ned bene\ufb01t pension and were also able to transfer their de\ufb01ned bene\ufb01ts they had already built up to the Group. The scheme was set up to facilitate this from 1 January 2020. From this date, 96 members joined the Drax 2019 scheme and continued to build up a future de\ufb01ned bene\ufb01t pension. Of these, 81 members agreed to transfer their past service bene\ufb01ts into the scheme. Under the Drax 2019 Scheme, employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on attainment of retirement age (or earlier withdrawal or death). No other post-retirement bene\ufb01ts are provided. The scheme is open to future accrual of bene\ufb01ts but closed to new members. The Group and Trustees have agreed a long-term strategy for reducing investment risk as and when appropriate. This includes an asset-liability matching policy which aims to reduce the volatility of the funding level of the Schemes by investing in assets that perform in line with the liabilities to protect against interest rates being lower or inflation being higher than expected, for example. The Schemes expose the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be: Investment risk The Schemes\u2019 liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this creates a de\ufb01cit. The DPG ESPS holds a signi\ufb01cant proportion of growth assets (diversi\ufb01ed growth funds, direct lending and absolute return bonds) which, though expected to outperform corporate bonds in the long term, create volatility and risk in the short term. The allocation to growth assets is monitored to ensure it remains appropriate given this scheme\u2019s long-term objectives. The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. The scheme has moved towards a fully hedged position but continues to maintain return-generating assets such as equity options and credit strategies. Discount rate risk A decrease in corporate bond yields will increase the value placed upon the Schemes\u2019 liabilities, although this will be partially offset by an increase in the value of the Schemes\u2019 bond holdings. Longevity risk The majority of the Schemes\u2019 obligations are to provide bene\ufb01ts for the life of the member, so increases in life expectancy will result in an increase in the liabilities of the Schemes. In\ufb02ation risk The majority of the Schemes\u2019 obligations to pay bene\ufb01ts are linked to in\ufb02ation and, as such, higher in\ufb02ation leads to higher liabilities. In most cases, caps on in\ufb02ationary increases are in place to protect against extreme in\ufb02ation. The Schemes have a signi\ufb01cant holding in liability-driven investments and around 85% of in\ufb02ation risk in the Schemes is hedged on a low-risk measure (2021: around 85%). Credit risk Around 85% of the Schemes\u2019 overall funded liabilities are currently hedged against interest rates and inflation using liability-driven investments. The Schemes hedge interest rate risks on a statutory and long-term funding basis (gilts) whereas AA corporate bonds are implicit in the discount rate and so there is a degree of mismatching risk to the Group should yields on gilts and corporate bonds diverge. The Schemes\u2019 holding in corporate bonds mitigates this risk to some extent. During the year, particularly around September and October 2022, there was signi\ufb01cant yield volatility. However, with the exception of one week over which hedge ratios reduced for the DPG ESPS, the Schemes were able to maintain their target hedge levels throughout this period. Other risks include operational risks (such as paying out the wrong bene\ufb01ts), legislative risks (such as the Government increasing the burden on pension schemes through new regulation) and other demographic risks (such as making a higher proportion of members with dependents eligible to receive pensions from the Group). The Trustees ensure certain bene\ufb01ts are payable on death before retirement. A quali\ufb01ed independent actuary, Aon, carried out the most recent funding valuation of the DPG ESPS as at 31 March 2019, and the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2021. The actuarial review at 31 December 2022 is based on the same membership and other data as these funding valuations. The Schemes\u2019 Boards accepted the advice of the actuary and approved the use of these assumptions for the purpose of assessing the Schemes\u2019 costs. The results of the latest funding valuations have been adjusted to 31 December 2022, taking into account experience over the period since that date, changes in market conditions and differences in \ufb01nancial and demographic assumptions. The present value of the de\ufb01ned bene\ufb01t obligation and the related current service costs were measured using the projected unit credit method. The principal assumptions for the Schemes are set out below. Where absolute assumptions differ between the two schemes, reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average is shown. As at 31 December 2022 % p.a. 2021 % p.a. Discount rate 4.8 1.9 In\ufb02ation (RPI) 3.0 3.0 Rate of increase in pensions in payment and deferred pensions 2.8 2.9 Rate of increase in pensionable salaries 3.6 3.6 Whilst actual inflation has been high over 2022, long-term expectations as at 31 December 2022 are in line with long-term expectations as at 31 December 2021. The de\ufb01ned bene\ufb01t obligation for the Schemes allows for expected bene\ufb01t increases that will be awarded in 2023, based on known 2022 indices. Mortality assumptions are based on recent actual mortality experience of the Schemes\u2019 members and allow for expected future improvements in mortality rates. The assumptions are that a member aged 60 in 2022 will live, on average, for a further 26 years if they are male (2021: 26 years) and for a further 28 years if they are female (2021: 28 years). Life expectancy at age 60 for male and female non-pensioners currently aged 45 is assumed to be 27 and 29 years respectively (2021: 27 and 29 years respectively). The weighted average duration of the DPG ESPS at 31 December 2022 based on the IAS 19 position was 18 years (2021: 20 years). The weighted average duration of the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 21 years (2021: 24 years). The DPG ESPS de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (45%), former employees of the Group who are yet to retire (5%) and retired pensioners (50%). The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (55%), former employees of the Group who are yet to retire (43%) and retired pensioners (2%). The net surplus recognised in the Consolidated balance sheet in respect of the Schemes is the excess of the fair value of the plan assets over the present value of the de\ufb01ned bene\ufb01t obligation, determined as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets 219.6 369.8 De\ufb01ned bene\ufb01t obligation (181.1) (320.9) Net surplus recognised in the Consolidated balance sheet 38.5 48.9 The total charges and credits recognised in the Consolidated income statement, within other operating and administrative expenses and interest receivable, are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Included in staff costs (note 6.1): Current service cost 4.7 6.3 Past service credit \u2013 (2.6) Included in interest receivable (note 2.5): Interest income on net de\ufb01ned bene\ufb01t surplus (1.0) (0.3) Total amount recognised in the Consolidated income statement 3.7 3.4 On 31 January 2021, the Group completed the sale of its CCGT generation portfolio to VPI Generation Limited. The past service credit in 2021 relates to this sale, which led to 42 members, of a pre-transaction total of 96, ceasing to accrue bene\ufb01ts in the Drax 2019 Scheme and becoming deferred members. The past service credit calculation was performed by a quali\ufb01ed independent actuary using the same assumptions as those applied to the rest of the Schemes. The past service credit represents the difference between the liability relating to the standard Drax 2019 Scheme bene\ufb01ts as an active member as per the reserve in the calculation of the Group\u2019s IAS 19 position at that time, and the corresponding liability in respect of the equivalent bene\ufb01ts as deferred members (including allowance for two members who were offered enhanced past service bene\ufb01ts). Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m De\ufb01ned bene\ufb01t obligation at 1 January 320.9 37 8 .1 Current service cost 4.7 6.3 Past service credit \u2013 (2.6) Interest cost 5.7 5.3 Actuarial gains (123.6) (15.4) Bene\ufb01ts paid (26.6) (50.8) De\ufb01ned bene\ufb01t obligation at 31 December 181.1 320.9 The actuarial gains of \u00a3123.6 million (2021: \u00a315.4 million) reflect gains of \u00a3133.3 million (2021: \u00a310.3 million) arising from changes in financial assumptions, losses arising from scheme experience of \u00a39.9 million (2021: gains of \u00a34.3 million) and gains of \u00a30.2 million (2021: \u00a30.8 million) arising from changes in demographic assumptions. The gains due to changes in \ufb01nancial assumptions principally reflect the decrease in the present value of the Schemes\u2019 liabilities arising as a result of the movement in discount rate assumption to 4.8% p.a. (2021: 1.9% p.a.) following an increase in corporate bond yields, coupled with a slight decrease in overall long-term inflationary assumptions reflecting market pricing. Changes in the fair value of plan assets are as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Fair value of plan assets at 1 January 369.8 386.3 Interest on plan assets 6.7 5.7 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Employer contributions 17.7 13.3 Bene\ufb01ts paid (26.6) (50.8) Fair value of plan assets at 31 December 219.6 369.8 Employer contributions included payments totalling \u00a37.6 million (2021: \u00a37.2 million) to reduce the actuarial de\ufb01cit in the DPG ESPS. There were contributions of \u00a33.2 million outstanding at the end of the year (2021: \u00a31.0 million). The actual return on plan assets in the period was a \u00a3141.3 million loss (2021: \u00a321.0 million gain). Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a324.4 million (2021: gains of \u00a330.7 million) were recognised in the Consolidated statement of comprehensive income. These are made up as follows: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Actuarial gains on de\ufb01ned bene\ufb01t obligation 123.6 15.4 Remeasurement (losses)/gains on fair value of plan assets (148.0) 15.3 Total remeasurement (losses)/gains recognised in other comprehensive income (24.4) 30.7 The fair values of the major categories of plan assets were as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Gilts 117. 2 150.0 Equities (1) 6.5 26.5 Fixed interest bonds(2) 4.8 30.3 Property 28.6 32.1 Investment funds 4.3 25.0 Cash and other assets (3) 58.2 105.9 Fair value of total plan assets 219.6 369.8 (1) At 31 December 2022 DPG ESPS\u2019s long-term asset strategy was: diversi\ufb01ed growth funds (37%), direct lending (10%), absolute return bonds (3%), liability driven investing (40%) and long-lease property (10%). The Drax 2019 Scheme\u2019s long-term investment strategy and strategic asset allocation is 70% in gilts and cash to support liability hedging and equity derivative overlay strategies, 15% allocated to synthetic credit and 15% to credit opportunities. (2) Fixed interest bonds include a mixture of corporate, Government and absolute return bonds. (3) Other assets include \u00a329.9 million (202 1: \u00a3 2 7.1 million) of investments in direct lending, a type of private equity vehicle which is not quoted in an active market. The fair value of these investments is derived in accordance with International Private Equity and Venture Capital Valuation (IPEV) Guidelines. All other assets are quoted in an active market. The pension plan assets do not include any ordinary shares issued by Drax Group plc or any property occupied by the Group. The valuation of the pension liabilities has been disclosed as a key source of estimation uncertainty due to the assumptions used in the valuation. The assumptions for discount rate, inflation rate (and related inflation linked bene\ufb01ts) and life expectancy have a potentially signi\ufb01cant effect on the measurement of the Schemes\u2019 surpluses. The following table provides an indication of the sensitivity of the net pension surplus at 31 December 2022 to changes in these assumptions, considering the impact on the de\ufb01ned bene\ufb01t obligation only. If a combination of the below reasonably possible changes to key assumptions were used in the valuation of the pension liabilities, this could result in a material change to the amount recognised. Increase/(decrease) in net surplus As at 31 December 2022 \u00a3m 2021 \u00a3m Discount rate \u2013 Increase 0.25% 8.0 17.3 \u2013 Decrease 0.25% (8.5) (19.5) In\ufb02ation rate(1) \u2013 Increase 0.25% ( 7. 0) (15.1) \u2013 Decrease 0.25% 6.6 13.8 Life expectancy \u2013 Increase 1 year (6.2) (13.2) \u2013 Decrease 1 year 6.4 12.7 (1) The sensitivity of the Schemes\u2019 liabilities to salary and pension increases is closely correlated with inflation, therefore separate sensitivities have not been performed on salary and pension increases and the inflationary sensitivity incorporates these. The Group is exposed to investment and other risks. However, this risk is mitigated by the Schemes being around 85% hedged against movements in government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Schemes are broadly only exposed to changes in credit spreads plus around 15% of changes in underlying gilt yields and, for inflation, the Schemes\u2019 exposure is around 15% of any actual changes. Future contributions UK legislation requires that pension schemes are funded prudently (i.e. to a level in excess of the current expected cost of providing bene\ufb01ts). This funding is carried out with reference to actuarial valuations which are required by law to take place at intervals of no more than three years. Following each valuation, the Trustees and the Group must agree the contributions required (if any) such that the Schemes are fully funded over time on the basis of suitably prudent assumptions. The Group expects to make total contributions of \u00a312.8 million to the Schemes during the 12 months ending 31 December 2023. The latest actuarial valuation of the Drax 2019 Scheme which was carried out as at 31 March 2020 resulted in a funding surplus of \u00a31.3 million and so no de\ufb01cit recovery plan was required. The last actuarial valuation of the DPG ESPS was carried out as at 31 March 2019. Following this actuarial valuation, the Group agreed to repair the funding de\ufb01cit of \u00a335.9 million as at 31 March 2019 over the period to 30 June 2024, subject to the actuarial assumptions adopted for the triennial valuation as at 31 March 2019 being borne out in practice. The agreement includes payments of \u00a37.2 million per annum (indexed with RPI) to be paid until 30 June 2024. The Group has also agreed to make additional contributions to the DPG ESPS over the period to 31 December 2025 to eliminate the self-suf\ufb01ciency de\ufb01cit. At this point, the DPG ESPS is expected to be self-suf\ufb01cient and fully funded, unless material adverse changes in economic conditions arise compared to those assumed in the valuation. The Group is satis\ufb01ed that the additional contributions are manageable within the Group\u2019s business plan. The Trust Deeds of the DPG ESPS and the Drax 2019 Scheme provide the sponsors of the Schemes with an unconditional right to a refund of surplus assets assuming the gradual settlement of plan liabilities over time. Furthermore, in the ordinary course of business, the Trustees have no right to unilaterally wind up, or otherwise augment the bene\ufb01ts due to members of the DPG ESPS. Based on these rights, any net surplus in the plan is recognised in full in the Consolidated balance sheet. Post balance sheet event On 31 January 2023 the DPG ESPS\u2019s assets and liabilities were transferred to the Drax 2019 Scheme, and it is expected that the DPG ESPS will be wound-up in due course. The Drax 2019 Scheme will continue to provide the same level of pension bene\ufb01ts to current and former employees as they were previously entitled to, with the combination allowing the resulting scheme to operate in a more ef\ufb01cient and focused manner, with a reduced administrative burden and associated cost. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-593": { "value": "Section 7: Risk management This section provides disclosures around \ufb01nancial risk management, including the \ufb01nancial instruments the Group uses to mitigate such risks. 7.1 Financial instruments and their fair values The Group holds a variety of derivative and non-derivative \ufb01nancial instruments, including cash and cash equivalents, borrowings, payables and receivables arising from operations. Accounting classi\ufb01cations and fair values IFRS 13 requires categorisation of the Group\u2019s \ufb01nancial instruments in accordance with the following hierarchy in order to explain the basis on which their fair values have been determined: \u2022 Level 1 \u2013 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2022 Level 2 \u2013 Fair value measurements are those derived from inputs, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2022 Level 3 \u2013 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Categorisation within this fair value measurement hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability. The table below shows the carrying amounts and fair values of \ufb01nancial assets and liabilities, including their levels in the fair value hierarchy as de\ufb01ned by IFRS 13. It does not include fair value information for leases or for \ufb01nancial assets and \ufb01nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Cash and cash equivalents (note 4.1), trade and other receivables (note 3.5) and trade and other payables (note 3.7) generally have a short time to maturity. For this reason, their carrying values, on the historical cost basis, are approximate to their fair values. The Group\u2019s borrowings relate principally to the publicly traded high-yield loan notes and amounts drawn against term loans (note 4.2). These \ufb01nancial liabilities are measured at amortised cost. Carrying amount Fair value As at 31 December 2022 \u00a3m Fair value- hedging instruments Mandatorily at FVTPL- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Tot al Financial assets measured at fair value Commodity contracts 549.9 84.2 \u2013 \u2013 \u2013 63 4.1 \u2013 63 4.1 \u2013 634.1 Financial contracts \u2013 232.8 \u2013 \u2013 \u2013 232.8 \u2013 232.8 \u2013 232.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 297.1 Interest rate and cross- currency contracts 54.0 \u2013 \u2013 \u2013 \u2013 54.0 \u2013 54.0 \u2013 54.0 Contingent consideration \u2013 27.4 \u2013 \u2013 \u2013 27.4 \u2013 \u2013 27.4 27. 4 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 1,071.9 \u2013 1,071.9 Cash and cash equivalents \u2013 \u2013 \u2013 238.0 \u2013 238.0 Financial liabilities measured at fair value Commodity contracts (804.3) (62.5) \u2013 \u2013 \u2013 (866.8) \u2013 (866.8) \u2013 (866.8) Financial contracts \u2013 (467.0) \u2013 \u2013 \u2013 (467.0) \u2013 (467.0) \u2013 (467.0) Foreign currency exchange contracts (0.4) (69.0) \u2013 \u2013 \u2013 (69.4) \u2013 (69.4) \u2013 (69.4) Interest rate and cross- currency contracts (14.3) \u2013 \u2013 \u2013 \u2013 (14.3) \u2013 (14.3) \u2013 (14.3) In\ufb02ation rate contracts (307.3) \u2013 \u2013 \u2013 \u2013 (307.3) \u2013 ( 307.3) (1) \u2013 ( 3 07.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (764.0) (764.0) \u2013 (759.9) \u2013 (759.9) Unsecured bank loans \u2013 \u2013 \u2013 \u2013 (44.3) (44.3) \u2013 (44.3) \u2013 (44.3) Secured loan notes \u2013 \u2013 \u2013 \u2013 (632.6) (632.6) (593.9) \u2013 \u2013 (593.9) Lease liabilities \u2013 \u2013 \u2013 \u2013 (153.1) (153.1) Trade and other payables \u2013 \u2013 \u2013 \u2013 (1,065.9) (1,065.9 ) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value valuation techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a323.8 million of derivative liabilities relating to the UK CPI inflation rate contracts. Carrying amount Fair value As at 31 December 2021 \u00a3m Fair value- hedging instruments Mandatorily a t F V TP L- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Commodity contracts 877.5 121.3 \u2013 \u2013 \u2013 998.8 \u2013 998.8 \u2013 998.8 Financial contracts \u2013 143.9 \u2013 \u2013 \u2013 143.9 \u2013 143.9 \u2013 143.9 Foreign currency exchange contracts 56.9 40.6 \u2013 \u2013 \u2013 97.5 \u2013 97.5 \u2013 97.5 Interest rate and cross- currency contracts 4.6 \u2013 \u2013 \u2013 \u2013 4.6 \u2013 4.6 \u2013 4.6 In\ufb02ation rate contracts 1.3 \u2013 \u2013 \u2013 \u2013 1.3 \u2013 1.3 (1) \u2013 1.3 Contingent consideration \u2013 27.7 \u2013 \u2013 \u2013 27.7 \u2013 \u2013 27.7 27.7 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 516.8 \u2013 516.8 Cash and cash equivalents \u2013 \u2013 \u2013 317.4 \u2013 317.4 Financial liabilities measured at fair value Commodity contracts (1,054.8) (33.1) \u2013 \u2013 \u2013 (1,0 87.9) \u2013 (1,0 87.9) \u2013 (1,0 87.9) Financial contracts \u2013 (90.2) \u2013 \u2013 \u2013 (90.2) \u2013 (90.2) \u2013 (90.2) Foreign currency exchange contracts (29.3) (108.4) \u2013 \u2013 \u2013 (137.7) \u2013 (137.7) \u2013 (137.7) Interest rate and cross- currency contracts (48.4) \u2013 \u2013 \u2013 \u2013 (48.4) \u2013 (48.4) \u2013 (48.4) In\ufb02ation rate contracts (93.7) (46.6) \u2013 \u2013 \u2013 (140.3) \u2013 (140.3) (1) \u2013 (140.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (786.8) (786.8) \u2013 (805.9) \u2013 (805.9) Secured bond issues \u2013 \u2013 \u2013 \u2013 (574.2) (574.2) (598.3) \u2013 \u2013 (598.3) Lease liabilities \u2013 \u2013 \u2013 \u2013 (125.9) (125.9) Trade and other payables \u2013 \u2013 \u2013 \u2013 (869.5) (869.5) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a31.3 million of derivative assets and \u00a311.5 million of derivative liabilities relating to the UK CPI inflation rate contracts. The derivative \ufb01nancial instruments used by the Group and not subject to the own-use exemption have been categorised as follows: \u2022 Commodity contracts \u2013 forward contracts for the sale or purchase of a physical commodity which is expected to be settled through delivery of the commodity. \u2022 Financial contracts \u2013 weather-related contracts, as well as contracts for commodities that are not expected to be settled through physical delivery of the commodity. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, vanilla options and structured option products. \u2022 Interest rate and cross-currency contracts \u2013 contracts which swap one interest rate for another in a single currency, including floating-to-\ufb01xed interest rate swaps, and contracts which swap interest and principal cash flows in one currency for another currency, including \ufb01xed-to-\ufb01xed and floating-to- \ufb01xed cross-currency interest rate swaps. \u2022 Inflation rate contracts \u2013 swap contracts, such as floating-to-\ufb01xed, which are linked to an inflation index such as RPI or CPI, and inflation swaptions. Fair value measurement \u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated by reference to forward market prices at the reporting date. \u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward currency exchange market rates at the reporting date. \u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting date for the relevant interest index. \u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market rates and interest index for floating-to-\ufb01xed swaps. \u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting date for the relevant inflation index. Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts. The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent within the instrument. Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value. The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the host contract. The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore, these contracts are categorised as Level 2. There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs. The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required with each valuation. Level 3 fair values The fair value of the UK CPI inflation swaps comprises an RPI and CPI component. Whilst the RPI component is based on observable market rates, CPI is based on unobservable rates and therefore deemed to be Level 3 in the fair value hierarchy. However, this component is not material to the overall valuation and therefore the instruments as a whole have been classi\ufb01ed as Level 2. The valuation technique used for non-listed equity investments comprises unobservable inputs and these are therefore classi\ufb01ed as Level 3. However, given the valuation as a whole for Level 3 equity investments are immaterial, it is not deemed necessary to include all Level 3 disclosures in these Consolidated \ufb01nancial statements. The consideration receivable by the Group for the sale of the CCGT generation portfolio in 2021 includes \u00a329.0 million that is contingent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of these assets. The fair value measurement for the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used. Valuation approach Signi\ufb01cant unobservable inputs and range of inputs (probability weighted) Relationship between signi\ufb01cant unobservable input and fair value measurement Contingent consideration The fair value of the contingent consideration is determined using a discounted cash flow model. The valuation approach is based on a calculation of the probability of the option to develop the Damhead Creek land being exercised. This probability is calculated using a range of forecasts for future Capacity Market auctions and the assumption that the option to develop the land would be exercised if the Capacity Market price were to clear above a certain level, providing suf\ufb01cient certainty on the economics of the development. Forecasted future Capacity Market clearing prices: \u00a37.00/kW \u2013 \u00a364.64/kW (\u00a335.91/kW) (2021: \u00a34.81/kW \u2013 \u00a364.13/kW) (2021: (\u00a318.70/kW)) Estimated bid price at which Damhead Creek 2 is to be entered into the Capacity Market auction: \u00a340.00/kW (2021: \u00a320.00/kW) The fair value measurement would increase/(decrease) with: \u2013 higher/(lower) forecasted Capacity Market clearing prices causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. \u2013 higher/(lower) estimated bid price required for the Damhead Creek 2 development to proceed causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. A reconciliation of the contingent consideration is detailed below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Balance at 1 January 27.7 \u2013 Contingent consideration receivable recognised on the sale of the CCGT generation portfolio \u2013 27.7 Net change in fair value (unrealised) (0.3) \u2013 Balance at 31 December 27.4 27.7 Sensitivities are disclosed below for reasonably possible changes to the unobservable inputs that would have a signi\ufb01cant impact on the fair value measurement: Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2022 Forecasted future Capacity Market clearing prices (25%) (3.7) 0.7 Estimated bid price (25%) 1.0 (3.2) Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2021 Forecasted future Capacity Market clearing prices (25%) (2.9) 1.1 Estimated bid price (25%) 1.1 (2.2) Accounting for derivatives Derivatives (subject to certain exemptions described below) must be measured at fair value, which represents the difference between the price the Group has secured in the contract, and the price the Group could achieve in the market at the reporting date. Changes in fair value are recognised either within the Consolidated income statement or the hedge reserve and cost of hedging reserve, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). Where applicable the Group applies the own-use exemption which allows qualifying contracts to be excluded from fair value mark-to- market accounting. This applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. Contracts for non-\ufb01nancial assets which do not qualify for the own-use exemption (principally power, gas, \ufb01nancial oil and carbon emissions allowances) are accounted for as derivatives in accordance with IFRS 9 and are recorded in the Consolidated balance sheet at fair value. Changes in fair value are reflected through the hedge reserve (note 7.3) to the extent that the contracts are designated as effective hedges in accordance with IFRS 9, or the Consolidated income statement where the hedge accounting requirements are not met, or the hedges are ineffective. To ensure these derivatives are not reflected in the underlying performance of the Group, they are excluded from the Adjusted results in the Consolidated income statement until the contract matures (see note 2.7 for further details). The Group\u2019s biomass risk management policy permits some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain, limited circumstances. As such, the own-use exemption would likely not apply to these biomass contracts. However, the nature of these contracts means they cannot be readily net settled in cash or other \ufb01nancial instruments and, as a result, they remain outside of the scope of IFRS 9 and are excluded from fair value mark-to-market accounting. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are: As at 31 December 2022 \u00a3m 2021 \u00a3m Non-current derivative \ufb01nancial instrument assets 421.7 357.5 Current derivative \ufb01nancial instrument assets 796.3 888.6 Total derivative \ufb01nancial instrument assets 1,218.0 1,24 6 .1 Non-current derivative \ufb01nancial instrument liabilities (735.4) (541.8) Current derivative \ufb01nancial instrument liabilities (989.4) (962.7) Total derivative \ufb01nancial instrument liabilities (1,724.8) (1,504.5) Total net derivative \ufb01nancial instruments (506.8) (258.4) The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at FVTPL are detailed below. The Group had no \ufb01nancial assets or \ufb01nancial liabilities voluntarily designated at FVTPL. In addition to the amounts disclosed below, gains and losses relating to derivatives qualifying for hedge accounting are disclosed in notes 7.2 to 7.4. Gains or losses recognised 2022 \u00a3m 2021 \u00a3m Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in revenue (441.4) ( 7 7.0) Gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in cost of sales 32.6 36.6 Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest payable and similar charges (0.4) (0.3) Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in foreign exchange gains/(losses) (3.8) ( 5.1) Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting (413.0) (45.8) Rebasing is explained in the glossary. When the Group rebases derivative contracts, the Group retains the contractual rights to the cash flows, the risks and rewards, and control of the derivative asset. The Group does not assume any obligation to pay the cash flows to another recipient. Accordingly, the derivative asset is not derecognised. The cash flows received at the point of rebasing reduce the cash flows to be received on maturity of the trade, and as such the cash flows over the life of the instrument are the same whether a trade is rebased or not, minus fees. At the point of rebasing, the Group recognises a reduction in the fair value of the derivative asset, equivalent to the fair value difference between the original rate per the contract and the rebased rate. The Group also recognises the cash received, or due, as a result of the rebasing. Any difference between the reduction in the fair value of the derivative asset, and the cash received, is recognised as a fee charged for rebasing and is recognised within operating and administrative expenses. The total gain or loss recognised in the period on the derivative contract, including rebased amounts, is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. The total gain or loss on the derivative contract, including the amount rebased, is recognised in Adjusted results on the contractual maturity date of the contract. If a rebased trade is hedge accounted, the rebased amount is deferred or released from the hedge reserve in line with the hedge accounting requirements of IFRS 9. 7.2 Financial risk management The Group\u2019s activities expose it to a variety of \ufb01nancial risks, including commodity price risk, foreign currency risk, interest rate risk, inflation risk, liquidity risk, counterparty risk and credit risk. The Group\u2019s overall risk management programme focuses on the unpredictability of commodity and \ufb01nancial markets and seeks to manage potential adverse effects on the Group\u2019s \ufb01nancial performance . The Group uses derivative \ufb01nancial instruments to hedge certain risk exposures. Risk management is overseen by the Risk management committees as explained in the Principal Risks and uncertainties section (page 77) which identify, evaluate and hedge \ufb01nancial risks in close co-ordination with the Group\u2019s trading and treasury functions under policies approved by the Board of directors. 7.2.1 Commodity price risk The Group is exposed to the effect of fluctuations in commodity prices, particularly the price of power, gas, biomass pellets and \ufb01bre, other fuels and the price of carbon emissions allowances. Price variations and market cycles have historically influenced the \ufb01nancial results of the Group and are expected to continue to do so. Commodity price sensitivity The sensitivity analysis below has been determined based on the exposure to commodity prices and the impact on pro\ufb01t after tax and other components of equity of reasonably possible increases or decreases in commodity prices. The analysis assumes all other variables were held constant. Financial and commodity markets have become increasingly volatile in 2022, in part due to the conflict in Ukraine. This volatility has impacted economies and markets around the world, including the UK energy market, which has in part contributed to rising inflation. The geopolitical environment and concerns over the macro-economic outlook have also contributed to a weakening in sterling during 2022. See the Principal risks and uncertainties section on page 77 for further details on both the conflict in Ukraine and energy market conditions. As a result of these factors, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, were subject to signi\ufb01cant fluctuations during 2022. Sensitivities for a 10% change in prices have been included in the current year. The impact of smaller and larger price changes can be interpolated and extrapolated from the below table as changes in prices have a relatively linear relationship with the impact on pro\ufb01t after tax and on the hedge reserve. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% decrease \u00a3m 10% increase \u00a3m 10% decrease \u00a3m 10% increase \u00a3m As at 31 December 2022 Power \u2013 \u2013 33.8 (33.8) Carbon 2.5 (2.5) (0.8) 0.8 Gas 0.8 (0.8) \u2013 \u2013 Oil (10.6) 10.6 \u2013 \u2013 Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% decrease \u00a3m 10% increase \u00a3m 10% decrease \u00a3m 10% increase \u00a3m As at 31 December 2021 Power \u2013 \u2013 27.8 (27.8) Carbon \u2013 \u2013 (0.2) 0.2 Gas (7.4) 7.4 \u2013 \u2013 Oil (9.8) 9.8 \u2013 \u2013 Pro\ufb01t after tax is sensitive to increases or decreases in commodity prices as a result of the impact on the fair value of derivative \ufb01nancial instruments not designated as hedging instruments under cash flow hedge accounting. The Group designates certain derivatives as hedging instruments under cash flow hedge accounting. As such other components of equity are sensitive to increases or decreases in commodity price risk and the impact on the hedge reserve resulting from these movements. Commodity risk management The Group has a policy of securing forward power sales and purchases of fuel when it is pro\ufb01table to do so and is in line with speci\ufb01ed limits under approved policies. Forward power sales can be secured up to 100% of forecast availability two years ahead. All commitments to sell power under \ufb01xed price contracts are designated as cash flow hedges as they reduce the Group\u2019s cash flow exposure resulting from fluctuations in the price of power. The Group purchases biomass pellets and other fuels under either a \ufb01xed or variable priced contract with different maturities principally from a number of international sources. The Group considers all such contracts to be economic hedges. If these contracts are within the scope of IFRS 9, the Group, where possible, either applies the own-use exemption or hedge accounting in accordance with IFRS 9. If the own-use exemption or hedge accounting are not applicable then the contracts are recognised at FVTPL. Where forward power curves are less liquid, the Group uses \ufb01nancially settled gas sales as a proxy for power to mitigate the risk of power price fluctuations. The Group also purchases gas under \ufb01xed-price contracts to meet the demand of the Customers business and for its Daldowie fuel plant. To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Group, within the Customers business. The Group purchases carbon emissions allowances under \ufb01xed price contracts to cover the Group\u2019s purchase requirements under the UK Emissions Trading Scheme (UK ETS) in relation to the Group\u2019s carbon emissions. These are designated as cash flow hedges as they reduce the Group\u2019s cash flow exposure resulting from fluctuations in the price of carbon emissions allowances. Carbon emissions allowances are also purchased as part of proxy power hedges in the same way as \ufb01nancial gas described above. These proxy hedges are not designated as cash flow hedges. Hedge accounting The Group has cash flow hedges relating to commodity contracts, principally commitments to sell power and purchase carbon. Amounts are recognised in the hedge reserve as the designated contracts are marked-to-market at each reporting date for the effective portion of the hedge, which is generally 100% of the relevant contract. Amounts held within the hedge reserve are then released to the Consolidated income statement as the related contract matures. For power sales contracts, this is at the point that the underlying power is delivered. Included in amounts released from equity are gains and losses on \ufb01nancial instruments that matured in a previous period, released to the Consolidated income statement in the period the hedged transaction has occurred. No ineffectiveness was recognised in the Consolidated income statement on continuing commodity or \ufb01nancial hedges in the year (2021: \u00a3nil). Due to the use of \u2018all-in-one\u2019 hedges, this results in the movement in fair value for the hedged items and hedging instruments being identical. The only source of ineffectiveness regarding the \u2018all-in-one\u2019 hedges would be if delivery of the commodities was no longer expected to occur, which would result in hedge accounting being discontinued. The main sources of ineffectiveness regarding \ufb01nancial contracts would be as a result of timing differences and credit risk. The Group had a number of forward sale contracts for power relating to forecast generation from the CCGT assets that were designated as cash flow hedges. All subsequent fair value movements on hedges that had been discontinued were recognised in the Consolidated income statement. By January 2021 the Group had closed out all derivative positions in relation to the CCGT assets. As such, from this point, no further gains or losses occurred in relation to these trades. The remaining CCGT trades matured in the first half of 2022. Prior year amounts relating to these trades are included within discontinued operations, and no further gains or losses were recognised in the current period. The reconciliation of the reserves and time period when the hedge will affect the Consolidated income statement are disclosed in note 7.3. The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented in the table below. The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s commodity and \ufb01nancial contracts that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s total portfolio of commodity and \ufb01nancial contracts that are used to protect the value of future cash flows. 31 December 2022 Exposure Notional value of contracts (MWh, allowances) Average \ufb01xed price \u00a3 Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Commodity contracts Sale of power 2,135, 9 0 9 218.00 (534.4) 549.9 (803.3) (19 0 .1) \u2013 Purchase of carbon emissions allowances 148,000 77.5 (4.2) \u2013 (1.0) (0.8) (1.9) 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging losses recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Commodity contracts Sale of power 534.4 (534.4) \u2013 Revenue \u2013 459.8 \u2013 Revenue Purchase of carbon emissions allowances 4.2 ( 4.2) \u2013 Cost of sales \u2013 0 .1 \u2013 Cost of sales 31 December 2021 Exposure Notional value of contracts (MWh, allowances) Average \ufb01xed price \u00a3 Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Commodity contracts Sale of power 2 ,5 85 ,113 72.83 (181.0) 8 74 .1 (1,052.0) (138.6) \u2013 Purchase of carbon emissions allowances 161,000 57.7 9 17.7 3.4 (2.8) 0.4 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging (losses)/gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the reclassi\ufb01cation/ transfer Commodity contracts Sale of power 181.0 (181.0) \u2013 Revenue \u2013 6.3 \u2013 Revenue Purchase of carbon emissions allowances (17.7) 17.7 \u2013 Cost of sales \u2013 (17. 2) \u2013 Cost of sales 7.2.2 Foreign currency risk The Group is exposed to fluctuations in foreign currency rates as a result of committed and forecast transactions in foreign currencies, principally in relation to purchases of fuel for use in the Generation business and principal and interest payments relating to foreign currency denominated debt. These fuel purchases are typically denominated in US dollars (USD), Canadian dollars (CAD) or euros (EUR), and the foreign currency debt is denominated in USD, CAD and EUR (see note 4.2 for further details on the Group\u2019s borrowings). The Group also has an exposure to translation risk in relation to its net investment in its US and Canadian subsidiaries within the Pellet Production business. Foreign currency sensitivity The analysis below shows the impact on pro\ufb01t after tax and other components of equity of reasonably possible strengthening or weakening of currencies against GBP. The analysis assumes all other variables were held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% strengthening \u00a3m 10% weakening \u00a3m 10% strengthening \u00a3m 10% weakening \u00a3m As at 31 December 2022 USD 41.7 (59.0) 137.1 (112.2) EUR 12.2 (20.5) 23.6 (14.6) CAD 24.4 (15.1) 7.8 (13.0) Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% strengthening \u00a3m 10% weakening \u00a3m 10% strengthening \u00a3m 10% weakening \u00a3m As at 31 December 2021 USD 104.2 (140.8) 173.4 (141.9) EUR 19.24 (47.7) 26.9 (1.5) CAD 63.7 (11.3) 22.9 (24.7) Pro\ufb01t after tax is sensitive to the strengthening or weakening of other currencies as a result of the impact on the fair value of foreign currency derivatives not designated as hedging instruments under cash flow hedge accounting. The Group designates certain foreign currency derivatives as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to the strengthening or weakening of other currencies in relation to the impact on the hedge reserve of these movements. Prior year foreign currency sensitivities have been restated to fully reflect the impact of option contracts and relevant strike prices, which limit the impact of fluctuations in underlying exchange rates. Foreign currency risk management It is the Group\u2019s policy to hedge material transactional exposures using a variety of derivatives to protect the sterling values of foreign currency cash flows, except where there is an economic hedge inherent in the transaction. The Group enters into derivative contracts in line with the currency risk management policy, including forwards and options, to manage the risks associated with its anticipated foreign currency requirements over a rolling \ufb01ve-year period, covering contracted exposures and a proportion of highly probable forecast transactions. In addition, in order to optimise the cost of funding, the Group has issued foreign currency denominated debt in USD, CAD and EUR (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps, to manage exchange risk on foreign currency debt with the exception of CAD denominated debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Foreign currency exchange contracts that are designated as hedges are transferred from equity to inventories for hedges of fuel purchases when the Group takes ownership of the fuel. Cross-currency interest rate swap gains and losses that are effective at hedging the foreign exchange risk on the interest payments are released to interest payable and similar charges. Gains and losses that are effective at hedging the foreign exchange risk on the USD or EUR principal are released to foreign exchange gains/(losses) to offset gains and losses on retranslating the USD and EUR denominated hedged borrowings. The Group has taken out \ufb01xed-to-\ufb01xed cross-currency interest rate swaps to hedge the future cash flows associated with the $500 million and \u20ac250 million 2025 \ufb01xed rate loan notes, effectively converting them to sterling \ufb01xed rate cash flows. The Group has taken out a combination of \ufb01xed-to-\ufb01xed and floating-to-\ufb01xed cross-currency interest rate swaps in order to \ufb01x the sterling cash flows payable on the \u20ac126.5 million facilities agreed as part of the 2020 Infrastructure private placement facilities (see note 4.2 for further details on borrowings). The main sources of ineffectiveness relating to foreign currency exchange contracts are timing differences and credit risk. The main sources of ineffectiveness relating to cross-currency interest rate swaps are differences in the critical terms, differences in repricing dates and credit risk. A reconciliation of reserves and the time period when the hedge will affect the Consolidated income statement or will be removed from equity and included in the initial cost of the non-\ufb01nancial item, are disclosed in notes 7.3 and 7.4. A summary of amounts relating to the hedging instruments, and any related ineffectiveness in the period, is presented in the table below. Ineffectiveness on foreign currency exchange contracts is recognised in cost of sales if it relates to hedges of fuel purchases. Ineffectiveness on cross-currency interest rate swaps that are hedging principal and interest payments is recognised in foreign exchange gains/(losses) if it relates to the principal repayment, and interest payable and similar charges if the ineffectiveness relates to interest payments. There are \u20ac95 million of floating-to-\ufb01xed cross-currency interest rate swaps that are hedging both foreign currency risk and interest rate risk. These swaps have been separated into synthetic floating-to-floating cross-currency interest rate swaps, that are hedging foreign currency risk, and synthetic floating-to-\ufb01xed GBP interest rate swaps, that are hedging interest rate risk. The synthetic floating-to floating cross-currency interest rate swaps are disclosed in this section, and the synthetic floating-to-\ufb01xed GBP interest rate swaps are disclosed in note 7.2.3 relating to interest rate risk. The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s foreign currency hedging instruments that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s total portfolio of derivatives that are used to protect the sterling value of future cash flows. 31 December 2022 Exposure Notional value of contracts ($m \u20acm, C$m) Average \ufb01xed/variable rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Foreign currency purchase contracts Purchases in foreign currency \u2013 USD 1,586.4 $1.38 187.2 149.3 \u2013 75.6 \u2013 Purchases in foreign currency \u2013 EUR 135.0 \u20ac 1.16 17.9 3.3 (0.3) 3.3 \u2013 Purchases in foreign currency \u2013 CAD 4 0 6 .1 C$1.73 0.4 13.9 (0.1) 5.6 \u2013 Foreign currency denominated debt Interest and principal repayments \u2013 USD 500.0 4.9% 47. 5 12.3 (6.2) 0.8 \u2013 Interest and principal repayments \u2013 EUR 376.5 4.55%/ 3M SONIA + 137. 2bp s (3.1) 4.2 (8.1) (1.6) \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign currency \u2013 USD (187.2) 187.2 \u2013 Cost of sales (34.2) \u2013 \u2013 Inventories Purchases in foreign currency \u2013 EUR (17.9) 17.9 \u2013 Cost of sales 5.9 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 CAD (0.4) 0.4 \u2013 Cost of sales 9.2 \u2013 \u2013 Inventories Foreign currency denominated debt Interest and principal repayments \u2013 USD (47.5) 47. 5 \u2013 Interest payable and similar charges \u2013 (9.2) \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 (44.7) \u2013 Foreign exchange gains/ (losses) Interest and principal repayments \u2013 EUR 3.1 (3.1) \u2013 Interest payable and similar charges \u2013 2.6 \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 (17.3) \u2013 Foreign exchange gains/ (losses) 31 December 2021 Exposure Notional value of contracts ($m, \u20acm, C$m) Average \ufb01xed/variable rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Foreign currency purchase contracts Purchases in foreign currency \u2013 USD 2,231.4 $1.38 16.3 50.9 (11.7) (40.5) \u2013 Purchases in foreign currency \u2013 EUR 320.0 \u20ac1.11 (19.4) \u2013 (17.0) (15.0) \u2013 Purchases in foreign currency \u2013 CAD 4 47.6 C$1.76 4.2 6.0 (0.6) (1.6) \u2013 Foreign currency denominated debt Interest and principal repayments \u2013 USD 500.0 4.9% 7.6 \u2013 (39.0) 5.8 \u2013 Interest and principal repayments \u2013 EUR 376.5 3.32%/ 3M LIBOR + 125.3bps (10.4) \u2013 (9.4) 12.0 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains/(losses) recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign currency \u2013 USD (16.3) 16.3 \u2013 Cost of sales 32.9 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 EUR 19.4 (19.4) \u2013 Cost of sales 0.3 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 CAD (4.2) 4.2 \u2013 Cost of sales \u2013 \u2013 \u2013 Inventories Foreign currency denominated debt Interest and principal repayments \u2013 USD (7.6) 7.6 \u2013 Interest payable and similar charges \u2013 (6.2) \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 1.7 \u2013 Foreign exchange gains/ (losses) Interest and principal repayments \u2013 EUR 10.4 (10.4) \u2013 Interest payable and similar charges \u2013 2.6 \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 24.3 \u2013 Foreign exchange gains/ (losses) 7.2.3 Interest rate risk The Group has exposure to interest rate risk, principally in relation to variable rate debt, cash and cash equivalents and the RCF, should it be drawn. The Group has Sterling Overnight Index Average (SONIA) floating-to-\ufb01xed interest rate swaps to \ufb01x the interest payments on the \u00a3375 million private placement issued in 2019. For the 2020 Infrastructure private placement facilities, the Group has \ufb01xed the interest rate payable on the \u00a398 million of GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group had a number of GBP London Interbank Offered Rate (LIBOR)-linked derivative and non-derivative \ufb01nancial instruments with maturity dates beyond 31 December 2021, the date LIBOR ceased publication. As such, during the prior year the Group\u2019s IBOR programme transitioned these \ufb01nancial instruments away from GBP LIBOR to SONIA. The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated 2020 Infrastructure private placement debt through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in section 7.2.2 above, the floating-to-\ufb01xed cross-currency interest rate swaps are hedging both interest rate risk and foreign currency risk, and as such the disclosures relating to interest rate risk are included in this section. See note 7.2.2 for the foreign currency risk disclosures relating to the floating-to-\ufb01xed cross-currency interest rate swaps. At 31 December 2022, the Group has \ufb01xed interest rate payments in GBP on all of its debt instruments through the use of swaps, with the exception of the Group\u2019s CAD denominated debt, which is the only outstanding debt that remains variable and does not have \ufb01xed interest rate payments. The returns generated on the Group\u2019s cash balance, or payable on amounts drawn on the RCF, are exposed to movements in short-term interest rates. The Group actively manages cash balances to protect against adverse changes in interest rates whilst retaining liquidity. Further information about the Group\u2019s instruments that are exposed to interest rate risk and their repayment schedules is provided in note 4.2. Interest rate sensitivity The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative \ufb01nancial instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the reporting date was outstanding for the whole year. The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase or decrease in interest rates. The analysis assumes all other variables are held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 100 basis points increase \u00a3m 100 basis points decrease \u00a3m 100 basis points increase \u00a3m 100 basis points decrease \u00a3m As at 31 December 2022 Variable rate debt \u2013 unhedged (1.4) 1.4 \u2013 \u2013 Variable rate debt \u2013 hedged (4.2) 4.2 \u2013 \u2013 Interest rate swaps 4.2 (4.2) 10.1 (10.1) Net impact (1.4) 1.4 10.1 (10 .1) As at 31 December 2021 Variable rate debt \u2013 unhedged (1.4) 1.4 \u2013 \u2013 Variable rate debt \u2013 hedged (4.0) 0.7 \u2013 \u2013 Interest rate swaps 4.0 (0.7) 14.6 (11.3) Net impact (1.4) 1.4 14.6 (11.3) An increase or decrease in interest rates would affect pro\ufb01t after tax as a result of the impact on the interest payable in the period on any variable rate debt. The Group has reduced its exposure to interest rate risk on variable rate debt through the use of floating-to-\ufb01xed interest rate swaps and therefore a change in interest rates would not have a signi\ufb01cant effect on pro\ufb01t after tax. The Group designates certain floating-to-\ufb01xed interest rate swaps as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to an increase or decrease in interest rates in relation to the impact on the hedge reserve of these movements. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a floor of 0% for the benchmark interest rate. As a result of very low or negative benchmark interest rates in 2021, a 100 basis point increase had a larger impact on pro\ufb01t after tax and other components of equity, than a 100 basis points decrease. Given the increase in interest rates during the year a larger decrease in interest rates would be needed to reach the 0% floor and therefore in the sensitivities above for the current year an increase and a decrease in interest rates have a more comparable impact. The Group also has CAD denominated debt that has a variable rate based on Canadian Dollar Offered Rate (CDOR). At 31 December 2022 no swaps were in place to hedge the CAD denominated debt. Therefore in relation to this debt a change in interest rates has an impact on pro\ufb01t after tax but not on other components of equity. Interest rate risk management The Group has a risk management policy in place relating to interest rate risk. The Group policy permits, but does not require, the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast interest rate exposure. Hedge accounting The Group designates its floating-to-\ufb01xed SONIA interest rate swaps and the floating-to-\ufb01xed cross-currency interest rate swaps as hedging instruments against interest rate risk. The SONIA interest rate swaps are hedges of the interest payments relating to the \u00a3375 million private placement (2019) and the \u00a398 million GBP facility part of the 2020 Infrastructure private placement. The cross- currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million facility part of the 2020 Infrastructure private placement. As such this has been separated into synthetic floating-to-floating cross- currency interest rate swaps and synthetic floating-to-\ufb01xed GBP interest rate swaps. The synthetic floating-to-floating cross-currency interest rate swaps swap the \u20ac95 million variable rate EURIBOR linked debt to variable rate SONIA linked GBP debt with a principal of \u00a385.8 million. The synthetic floating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the floating-to-\ufb01xed SONIA interest rate swaps are included in the disclosures below. Gains and losses on the interest payments on interest rate swaps are released to interest payable and similar charges at the same time as the interest is expensed on the hedged borrowings. The main sources of ineffectiveness relating to interest rate risk hedges are differences in the critical terms, differences in repricing dates and credit risk. A summary of the amounts relating to the sterling interest rate hedging instruments and any related ineffectiveness in the period is presented in the table below. 31 December 2022 Exposure Notional value of contracts \u00a3m Average % \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Interest rate Variable rate GBP debt 558.8 1.06% 39.9 37.5 \u2013 31.7 \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Interest rate Variable rate GBP debt (39.9) 39.9 \u2013 Interest payable and similar charges \u2013 (3.1) \u2013 Interest payable and similar charges 31 December 2021 Exposure Notional value of contracts \u00a3m Average % \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Interest rate Variable rate GBP debt 558.8 1.06% 19.3 4.6 \u2013 4.2 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Interest rate Variable rate GBP debt (21.0) 19.3 \u2013 Interest payable and similar charges \u2013 3.3 \u2013 Interest payable and similar charges 7.2.4 Inflation risk The Group is exposed to inflation risk on elements of its revenues and cost base. The Group\u2019s ROC revenue is linked to UK RPI and its CfD income is linked to UK CPI (see note 2.2 for further information on ROC and CfD income). In addition, a proportion of the Group\u2019s fuel costs are linked to either US or Canadian CPI. The Group has UK CPI and RPI swaps to hedge certain revenues linked to inflation. Inflation risk sensitivity The sensitivity analysis below has been determined based on the exposure to inflation rates on inflation linked derivatives at the reporting date. The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase/decrease in inflation rates. The analysis assumes all other variables are held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 200 basis points increase \u00a3m 200 basis points decrease \u00a3m 200 basis points increase \u00a3m 200 basis points decrease \u00a3m As at 31 December 2022 UK CPI in\ufb02ation swaps \u2013 \u2013 (34.8) 29.2 UK RPI in\ufb02ation swaps (0.7) 1.1 (52.8) 50.9 Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 200 basis points increase \u00a3m 200 basis points decrease \u00a3m 200 basis points increase \u00a3m 200 basis points decrease \u00a3m As at 31 December 2021 UK CPI in\ufb02ation swaps \u2013 \u2013 (6.0) 6.0 UK RPI in\ufb02ation swaps and swaptions (38.9) 3 7. 2 (48.5) 46.6 The Group designates the UK CPI and RPI inflation swaps as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to the impact on inflation linked derivatives recognised in the hedge reserve of an increase or decrease in UK inflation rates. Pro\ufb01t after tax is sensitive to an increase or decrease in UK inflation rates due to the impact these rate changes would have on the over-hedged portion of the inflation swaps, with this impact being recognised directly in the Consolidated income statement. Pro\ufb01t after tax in 2021 was sensitive to the impact on inflation linked derivatives of an increase or decrease in UK inflation rates due to the impact this would have on the fair value of the unhedged UK RPI inflation swaptions. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits, but does not require, the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast inflation exposure. Hedge accounting The Group has contracts for which the revenue is contractually linked to UK CPI inflation. The Group has designated this risk component as a hedged item. UK CPI and UK RPI inflation swaps are utilised as the hedging instruments for these inflation risks. Gains and losses on the inflation swaps are held in the hedge reserve and reclassi\ufb01ed to revenue in the Consolidated income statement at the same time the revenue with inflation linked contracts impacts on the Consolidated income statement or if the hedged item is on longer expected to occur. The main sources of ineffectiveness relating to the inflation swaps are the basis point difference between the RPI swaps and the CPI-linked revenues they are hedging, calculation differences, and the hedged item no longer being expected to occur. Calculation differences occur due to differences between the reference months used to calculate the inflationary increase per the swaps and the reference months used to calculate the inflationary increase for the CPI-linked revenues. During the current year, as a result of a decrease in the forecast CfD generation, the Group has recycled \u00a339.5 million of losses on hedge accounted inflation linked derivative contracts to the Consolidated income statement, due to the hedged item no longer being expected to occur. The Group has also recognised \u00a318.5 million of ineffectiveness due to the basis difference between the RPI hedging instruments and the CPI exposure. The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented in the table below. 31 December 2022 Exposure Notional value of contracts \u00a3m Average \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 30.3 CPI \u2013 2.72% (13.3) \u2013 (23.8) (18 .1) 14.6 440.0 RPI \u2013 3.45% (144.0) \u2013 (283.5) ( 71.1) \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 13.3 (13.3) \u2013 Revenue \u2013 (2.0) (3.5) Revenue 125.5 (125.5) (18.5) Revenue \u2013 7. 2 43.0 Revenue 31 December 2021 Exposure Notional value of contracts \u00a3m Average \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 30.3 CPI \u2013 2.72% (15.7) 1.3 (11.5) (10.9) 22.0 495.0 RPI \u2013 3.42% (19.5) \u2013 (82.2) (15.2) \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging losses recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 15.7 (15.7) \u2013 Revenue \u2013 (2.2) \u2013 Revenue 21.7 (19.5) \u2013 Revenue \u2013 \u2013 \u2013 Revenue 7.2.5 Liquidity risk The Treasury function is responsible for liquidity, funding and settlement management under policies approved by the Board. Liquidity needs are monitored using regular forecasting of operational cash flows and \ufb01nancing commitments. The Group maintains a mixture of cash and cash equivalents, committed facilities and uncommitted facilities in order to ensure suf\ufb01cient funding for business requirements. In managing liquidity risk, the Group has the ability to accelerate the cash flows associated with certain working capital items, principally those related to ROC sales and Customers\u2019 power sales. In each case this is undertaken on a non-recourse basis and, accordingly, the ROC assets and other items are derecognised from the Consolidated balance sheet at the point of sale. The Group also utilises standard purchasing facilities to extend the working capital cycle, whilst still paying suppliers on time. The impact on the Group\u2019s cash flows is described in note 4.3. The following tables set out details of the expected contractual maturity of non-derivative \ufb01nancial liabilities. The tables include both interest and principal cash flows. To the extent that interest payments or receipts are floating rate, the undiscounted amount is derived from interest rate curves at the reporting date. As at 31 December 2022 Within 3 months \u00a3m 3 months\u2013 1 year \u00a3m 1\u20132 years \u00a3m 2\u20135 years \u00a3m >5 years \u00a3m Total \u00a3m Term loans, gross value 10.5 32.4 353.3 338.5 144.9 879.6 Loan notes, gross value \u2013 33.3 33.3 663.6 \u2013 730.2 Borrowings, contractual maturity 10.5 65.7 386.6 1,0 02 .1 144.9 1,609.8 Trade and other payables 920.0 143.3 2.0 0.6 \u2013 1,065.9 Lease liabilities 8.3 22.0 26.7 64.3 72.0 193.3 938.8 231.0 415.3 1,0 67. 0 216.9 2,869.0 Trade and other payables of \u00a31,065.9 million (2021: \u00a3869.5 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to deliver ROCs. As at 31 December 2021 Within 3 months \u00a3m 3 months\u2013 1 year \u00a3m 1\u20132 years \u00a3m 2\u20135 years \u00a3m >5 years \u00a3m Total \u00a3m Term loans, gross value 46.4 14.7 17.5 650.9 138.7 868.2 Loan notes, gross value \u2013 30.0 30.0 639.6 \u2013 699.6 Borrowings, contractual maturity 46.4 44.7 47.5 1,290.5 138.7 1,567.8 Trade and other payables 826.9 4 0 .1 0.6 0.7 1.2 869.5 Lease liabilities 5.5 15.7 18.9 46.4 78.4 164.9 878.8 100.5 67.0 1,337.6 218.3 2,602.2 Interest payments are calculated based on forward interest rates estimated at the reporting date using publicly available information. The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%). The following tables set out details of the expected contractual maturity of derivative \ufb01nancial liabilities which are marked-to-market. Where the amount payable is not \ufb01xed, the amount disclosed has been determined by reference to projected commodity prices, foreign currency exchange rates, inflation rates or interest rates, as illustrated by the yield or other forward curves existing at the reporting date. Where derivatives are expected to be gross settled, the gross cash flows have been presented. Commodity contracts and vanilla foreign currency exchange contracts are expected to be gross settled. Where derivatives are expected to be net settled, the undiscounted net cash flows expected to occur based on the current fair value have been disclosed. Financial contracts and other foreign exchange contracts (excluding forwards and swaps) are expected to be net settled. Interest rate contracts and inflation rate contracts are presented based on net settlement of the interest rate and inflation rate differentials. Gross settlement of both the interest and principal on cross-currency interest rate swaps is expected and as such this element of the swap is presented gross. As at 31 December 2022 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Commodity contracts 1,006.0 12.1 3.6 1,021.7 Financial contracts 322.8 161.7 1.0 485.5 Foreign currency exchange contracts 921.4 45.4 47.8 1,014.6 Interest rate and cross-currency contracts 8.2 0 .1 0.2 8.5 In\ufb02ation contracts 67.3 83.1 203.8 354.2 2,325.7 302.4 256.4 2,884.5 As at 31 December 2021 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Commodity contracts 175.9 27.4 2.1 205.4 Financial contracts 45.1 55.8 1.5 102.4 Foreign currency exchange contracts 2,306.9 148.7 705.3 3,16 0.9 Interest rate and cross-currency contracts 3.1 43.9 1.0 48.0 In\ufb02ation contracts 52.0 10.1 78.2 140.3 2,583.0 285.9 78 8 .1 3,657. 0 7.2.6 Credit risk The Group\u2019s gross exposure to credit risk for \ufb01nancial instruments is limited to the carrying amount of \ufb01nancial assets recognised at the reporting date, as summarised below: As at 31 December 2022 \u00a3m 2021 \u00a3m Financial assets: Cash and cash equivalents (note 4.1) 238.0 317.4 Trade and other receivables (note 3.5) 1,167.8 599.7 Derivative \ufb01nancial instruments (note 7.1) 1,218.0 1, 24 6 .1 2,623.8 2,163 . 2 Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a360.9 million (2021: \u00a346.6 million), expected credit losses on accrued income of \u00a37.6 million (2021: \u00a38.6 million) and contingent consideration of \u00a327. 4 million (2021: \u00a327.7 million). The balance excludes non-\ufb01nancial receivables such as prepayments. The Group\u2018s three reportable segments (Pellet Production, Generation and Customers) are exposed to different levels and concentrations of credit risk, largely reflecting the number, size and nature of their respective customers. The Pellet Production segment sells biomass pellets both intra-group and to external parties. Credit risk for the Group relates to the sales made to external parties. The majority of the Pellet Production segment\u2019s external sales are with large utility customers in Europe and Asia. The Pellet Production segment manages its credit risk by reviewing individual sales contracts, considering the length of the contract and assessing the credit quality of counterparties prior to signing contracts and throughout the duration of contracts. For the Generation segment, the risk arises from treasury, trading and energy procurement activities, as well as the sale of by-products from generation activities. Wholesale counterparty credit exposures are monitored by individual counterparty and by category of credit rating. Counterparty credit exposures are subject to approved limits. The Group uses master netting agreements to reduce credit risk and net settles payments with counterparties where net settlement provisions exist. In addition, the Group employs a variety of other methods to mitigate credit risk: margining, various forms of Parent Company guarantee, deeds of charge, cash collateral, letters of credit and surety bonds. The majority of the Generation business\u2019s credit risk is with counterparties in related energy industries or with \ufb01nancial institutions. In addition, where deemed appropriate, the Group has historically purchased credit default swaps. The highest credit risk exposure is in the Customers segment, with a large number of customers of varying sizes operating in a variety of markets. In particular, its SME customers carry lower concentrations but higher levels of credit risk, owing to a customer base comprised of smaller retail and commercial entities. Credit risk is managed by checking a company\u2019s creditworthiness and \ufb01nancial strength both before commencing trade and during the business relationship. Credit risk is monitored and managed by business sector. Further details on the impact of credit risk on trade and other receivables is disclosed in note 3.5. The investment of surplus cash is undertaken with the objective of ensuring that there is suf\ufb01cient liquidity at all times, so that funds are available to meet liabilities as they fall due, whilst securing a return from invested funds and preserving the capital value of those funds within Board-approved policies. These policies manage credit risk exposure by setting out minimum rating requirements and maximum investments with any one counterparty based on their rating and the maturity pro\ufb01le. Whilst cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identi\ufb01ed impairment loss was immaterial. The Group is exposed to credit risk on derivative contracts, to which the impairment requirements of IFRS 9 are not applied as the fair value requirements of IFRS 13 are applicable. The carrying amount of these \ufb01nancial assets, disclosed above, represents the Group\u2019s maximum credit risk exposure. Counterparty risk As the Group relies on third-party suppliers and counterparties for the delivery of currency, biomass pellets and other goods and services, it is exposed to the risk of non-performance by these third-party suppliers. For \ufb01nancial instruments this risk is limited to the credit risk, as discussed above. The Group is also exposed to counterparty risk on non-\ufb01nancial instruments, such as the purchases of biomass and capital expenditure. If a large supplier were to fall into \ufb01nancial dif\ufb01culty and/or fail to deliver against its contract with the Group, there would be additional costs associated with securing the lost goods or services from other suppliers. The Group enters into purchase and sale contracts for a wider variety of goods and services, for example the sale of power to a number of counterparties. The failure of one or more of these counterparties to perform under their contractual obligations may cause the Group \ufb01nancial distress or increase the risk pro\ufb01le of the Group. The Group has acceptance procedures in place to ensure the counterparties the Group contracts with are appropriate. The Group also has limits in place, and actively monitors its exposures to individual counterparties to minimise this risk. Capital management The Group is disciplined in its management of capital to ensure it is able to continue as a going concern; maintain a strong credit rating underpinned by robust \ufb01nancial metrics; invest in its core business and pay a sustainable and growing dividend whilst maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of shareholders\u2019 equity (excluding the hedge and cost of hedging reserves), plus Net debt. Net debt is comprised of borrowings, cash and cash equivalents attributable to owners of the Parent Company and is inclusive of the impact of associated hedging instruments as disclosed in note 2.7. See note 4.2 for details of loan covenants, and the Viability statement on page 75 for details of scenario analysis performed on covenant restrictions of the Group\u2019s \ufb01nancing facilities. As at 31 December 2022 \u00a3m 2021 \u00a3m Borrowings (note 4.2) 1,440.9 1,361.0 Cash and cash equivalents (note 4.1) (238.0) (317.4) Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries 0.7 \u2013 Impact of hedging instruments 2.4 64.4 Net debt (note 2.7) 1,206.0 1,10 8 .0 Total shareholders\u2019 equity attributable to the owners of the Parent Company, excluding hedge and cost of hedging reserves 1,422.7 1,384.2 In 2022, the Group has updated its de\ufb01nition of Net debt. The above table has been re-presented to reflect this updated de\ufb01nition. See the Net debt section in the Basis of preparation for further details on this change in de\ufb01nition. 7.3 Hedge reserve The Group designates certain hedging instruments that are used to address commodity price risk, foreign exchange risk, interest rate risk and inflation rate risk as cash flow hedges. At the inception of the hedge, the relationship between the hedging instrument and hedged item is documented, along with its risk management objectives. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instruments used in hedging transactions are effective in offsetting changes in cash flows of the hedged items. Changes in fair value of contracts designated into such hedging relationships are recognised within the hedge reserve to the extent they are effective. The table below details the gains and (losses) recognised in the current and prior year on hedging instruments, the amounts reclassi\ufb01ed from equity due to the hedged item affecting the Consolidated income statement, and the amounts reclassi\ufb01ed due to the hedged future cash flows no longer being expected to occur. See section 7.2 for further details on these amounts. Hedge reserve Commodity price risk \u00a3m Foreign currency exchange risk \u00a3m Interest rate risk \u00a3m In\ufb02ation rate risk \u00a3m Total \u00a3m At 1 January 2021 (3.4) (84.8) (13.8) 26.0 (76.0) Gains/(losses) recognised: \u2013 Change in fair value of hedging instrument recognised in OCI (163.3) (1.7) 19.3 (35.2) (180.9) Reclassi\ufb01ed from equity as the hedged item has affected pro\ufb01t or loss: \u2013 Reclassi\ufb01ed to cost of inventory \u2013 33.2 \u2013 \u2013 33.2 \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in cost of sales (17.2) \u2013 \u2013 \u2013 (17. 2) \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in revenue 6.3 \u2013 \u2013 (2.2) 4.1 \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in interest payable and similar charges \u2013 (3.6) 3.3 \u2013 (0.3) \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in foreign exchange gains/(losses) \u2013 26.0 \u2013 \u2013 26.0 Related deferred tax, net (note 2.6) 39.4 (8.4) (4.6) 7.3 33.7 At 1 January 2022 (138.2) (39.3) 4.2 (4.1) (177.4) Gains/(losses) recognised: \u2013 Change in fair value of hedging instrument recognised in OCI (538.6) 249.9 39.9 (138.8) (3 87.6) Reclassi\ufb01ed from equity as the hedged item has affected pro\ufb01t or loss: \u2013 Reclassi\ufb01ed to cost of inventories \u2013 (19.1) \u2013 \u2013 (19.1 ) \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in cost of sales 0.1 \u2013 \u2013 \u2013 0.1 \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in revenue 459.8 \u2013 \u2013 5.2 465.0 \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in interest payable and similar charges \u2013 (6.6) (3.1) \u2013 (9.7) \u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included in foreign exchange gains/(losses) \u2013 (62.0) \u2013 \u2013 (62.0) \u2013 Reclassi\ufb01ed to Revenue as hedged item no longer expected to occur \u2013 \u2013 \u2013 39.5 39.5 Related deferred tax, net (note 2.6) 24.1 (39.2) (9.3) 23.6 (0.8) At 31 December 2022 (192.8) 83.7 31.7 (74.6) (152.0) The expected release pro\ufb01le from equity of post-tax hedging gains and (losses) is as follows: As at 31 December 2022 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Commodity risk (167.4) (22.3) ( 3.1) (192.8) Foreign currency exchange risk 49.6 23.3 10.8 83.7 Interest rate risk 11.2 11.9 8.6 31.7 In\ufb02ation risk (3.3) (17.1) (54.2) (74.6) (109.9) (4.2) (37.9) (152.0) As at 31 December 2021 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Commodity risk (20.9) (110.2) ( 7.1) (138.2) Foreign currency exchange risk (28.0) (9.0) (2.3) (39.3) Interest rate risk (0.6) 1.2 3.6 4.2 In\ufb02ation risk (0.5) (0.4) (3.2) (4.1) (50.0) (118.4) (9.0) (17 7.4) 7.4 Cost of hedging reserve The Group allocates unrealised gains and losses on the forward rate of hedge accounted foreign currency derivative contracts to a cost of hedging reserve in accordance with IFRS 9. A large proportion of the derivative contracts held relate to foreign currency exchange contracts, including forward contracts, options and swaps. Consistent with prior periods, for foreign currency exchange contracts to which the Group has applied hedge accounting, the Group has continued to designate the change in the spot rate as the hedged risk in the Group\u2019s cash flow hedge relationships. The Group designates the cost of hedging \u2013 being the change in fair value associated with forward points including currency basis \u2013 to equity. All amounts within the cost of hedging reserve relate to foreign currency exchange risk. The table below details the cost of hedging gains or (losses) recognised in the year on hedging instruments and the amounts reclassi\ufb01ed from equity due to the hedged item affecting the Consolidated income statement: Cost of hedging 2022 \u00a3m 2021 \u00a3m At 1 January 78.5 87.2 (Losses)/gains recognised: \u2013 Change in fair value of hedging instrument recognised in the Consolidated statement of comprehensive income (19.0) 17.3 Reclassi\ufb01ed from equity as the hedged item has affected pro\ufb01t or loss: \u2013 Reclassi\ufb01ed to cost of inventories (28.8) (23.7) Related deferred tax, net (note 2.6) 9.4 (2.3) At 31 December 40 .1 78.5 The expected release pro\ufb01le from equity of post-tax cost of hedging gains and (losses) is as follows: As at 31 December 2022 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Foreign currency exchange risk 21.7 13.0 5.4 40.1 As at 31 December 2021 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Foreign currency exchange risk 25.5 28.3 24.7 78.5 7.5 Offsetting \ufb01nancial assets and \ufb01nancial liabilities Financial assets and liabilities are offset and the net amount is reported in the Consolidated balance sheet where the Group has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Group also has \ufb01nancial assets and liabilities with certain counterparties that are subject to master netting agreements. Some \ufb01nancial assets and liabilities do not meet the criteria for offsetting at the reporting date but are subject to an enforceable master netting agreement that in certain circumstances, such as a bankruptcy, would allow for the amounts to be offset and a single net amount payable. The table below shows the impact if the carrying amounts that are subject to these master netting agreements were offset: As at 31 December 2022 As at 31 December 2021 Gross amounts of \ufb01nancial instruments in the balance sheet \u00a3m Related \ufb01nancial instruments that are not offset \u00a3m Cash collateral assets/(liabilities) \u00a3m Net amount \u00a3m Gross amounts of \ufb01nancial instruments in the balance sheet \u00a3m Related \ufb01nancial instruments that are not offset \u00a3m Cash collateral assets/(liabilities) \u00a3m Net amount \u00a3m Financial assets Derivative \ufb01nancial instruments 1,218.0 (1,278.6) 234.0 173.4 1,24 6 .1 (1,008.3) (183.0) 54.8 Financial liabilities Derivative \ufb01nancial instruments (1,724.8) 1,278.6 \u2013 (446.2) (1,504.5) 1,008.3 10.2 (486.0) The aforementioned collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3. 7.6 Contingent assets and liabilities Contingent assets are potential future inflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any receipt is uncertain and cannot be measured reliably. Contingent liabilities are potential future outflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any payment is uncertain and cannot be measured reliably. Guarantees In addition to the amounts drawn down against the bank loans, certain members of the Group guarantee the obligations of a number of banks in respect of letters of credit issued by those banks to counterparties of the Group. As at 31 December 2022, the Group\u2019s contingent liability in respect of letters of credit issued amounted to \u00a385.9 million (2021: \u00a374.4 million), of which \u00a346.0 million (2021: \u00a374.4 million) was issued under the RCF. The Group also guarantees obligations in the form of surety bonds with a number of insurers amounting to \u00a3202.0 million (2021: \u00a3142.1 million). Collateral is sometimes required to be provided in relation to the Group\u2019s commodity and treasury trading activities. When derivative positions are out of the money for the Group, collateral may be required to be provided to the counterparty. These positions reverse when contracts are settled, and the collateral is returned. The Group has access to certain facilities to enable it to cover collateral requirements to counterparties through letters of credit or surety bonds. The letters of credit and surety bond \ufb01gures above include amounts utilised to cover commodity trading collateral requirements of \u00a354.5 million (2021: \u00a342.5 million) and \u00a3165.0 million (2 0 21: \u00a3107.1 million) respectively. See note 4.1 for details on net cash collateral the Group has paid to or received from counterparties. Contingent liabilities Smart meter targets In late February 2023, the Group received notice from Ofgem that its failure to fully achieve installation targets for Smart Meter installations in the Opus Energy business during 2022 had been referred to Ofgem\u2019s Enforcement team. They will consider this matter in due course and make a decision on any future action. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the early stage of the process and the uncertainty in future outcome. Contingent assets Billing system Drax Energy Solutions Limited has lodged a claim against a supplier for damages caused by the supplier\u2019s misrepresentation and failure to perform under a contract for delivery of a new billing system. The directors have considered the potential legal outcomes of the claim with external professional advisors and believe that a favourable outcome is probable. However, a contingent asset is disclosed rather than a receivable recognised at 31 December 2022, as receipt of the amount is dependent on the outcome of the claim and therefore it is not virtually certain to be received. 7.7 Commitments The Group has a number of \ufb01nancial commitments (i.e. a contractual requirement to make a cash payment in the future) that are not recorded in the Consolidated balance sheet as the contract is not yet due for delivery. Such commitments include contracts for the future purchase of sustainable biomass, contracts for the construction of assets and contracts for the provision of services. As at 31 December 2022 \u00a3m 2021 \u00a3m Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013 Property, plant and equipment 267.9 28.6 Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013 Intangible assets 0.2 \u2013 Future support and service contracts not provided in the Consolidated \ufb01nancial statements 60 .1 51.2 Future commitments to purchase ROCs 331.9 200.5 Future commitments to purchase biomass under \ufb01xed and variable priced contracts 3,250.0 3,466.9 Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts 242.5 356.8 Commitments for future capital expenditure of property, plant and equipment have increased predominantly due to the construction of the OCGT plants. The contractual maturities of the future commitments to purchase biomass are as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Within one year 829.5 828.4 Within one to \ufb01ve years 1,12 3. 4 2,623.7 After \ufb01ve years 1, 2 97.1 14.8 3,250.0 3,466.9 Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily for the delivery of sustainable biomass pellets for use in electricity generation at Drax Power Station. To the extent these contracts relate to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements owing as they are not within the scope of IFRS 9, and are therefore not required to be measured at fair value. See the Critical accounting judgements section in the Basis of preparation for further details on this judgement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-664": { "value": "7.1 Financial instruments and their fair values The Group holds a variety of derivative and non-derivative \ufb01nancial instruments, including cash and cash equivalents, borrowings, payables and receivables arising from operations. Accounting classi\ufb01cations and fair values IFRS 13 requires categorisation of the Group\u2019s \ufb01nancial instruments in accordance with the following hierarchy in order to explain the basis on which their fair values have been determined: \u2022 Level 1 \u2013 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2022 Level 2 \u2013 Fair value measurements are those derived from inputs, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2022 Level 3 \u2013 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Categorisation within this fair value measurement hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability. The table below shows the carrying amounts and fair values of \ufb01nancial assets and liabilities, including their levels in the fair value hierarchy as de\ufb01ned by IFRS 13. It does not include fair value information for leases or for \ufb01nancial assets and \ufb01nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Cash and cash equivalents (note 4.1), trade and other receivables (note 3.5) and trade and other payables (note 3.7) generally have a short time to maturity. For this reason, their carrying values, on the historical cost basis, are approximate to their fair values. The Group\u2019s borrowings relate principally to the publicly traded high-yield loan notes and amounts drawn against term loans (note 4.2). These \ufb01nancial liabilities are measured at amortised cost. Carrying amount Fair value As at 31 December 2022 \u00a3m Fair value- hedging instruments Mandatorily at FVTPL- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Tot al Financial assets measured at fair value Commodity contracts 549.9 84.2 \u2013 \u2013 \u2013 63 4.1 \u2013 63 4.1 \u2013 634.1 Financial contracts \u2013 232.8 \u2013 \u2013 \u2013 232.8 \u2013 232.8 \u2013 232.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 297.1 Interest rate and cross- currency contracts 54.0 \u2013 \u2013 \u2013 \u2013 54.0 \u2013 54.0 \u2013 54.0 Contingent consideration \u2013 27.4 \u2013 \u2013 \u2013 27.4 \u2013 \u2013 27.4 27. 4 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 1,071.9 \u2013 1,071.9 Cash and cash equivalents \u2013 \u2013 \u2013 238.0 \u2013 238.0 Financial liabilities measured at fair value Commodity contracts (804.3) (62.5) \u2013 \u2013 \u2013 (866.8) \u2013 (866.8) \u2013 (866.8) Financial contracts \u2013 (467.0) \u2013 \u2013 \u2013 (467.0) \u2013 (467.0) \u2013 (467.0) Foreign currency exchange contracts (0.4) (69.0) \u2013 \u2013 \u2013 (69.4) \u2013 (69.4) \u2013 (69.4) Interest rate and cross- currency contracts (14.3) \u2013 \u2013 \u2013 \u2013 (14.3) \u2013 (14.3) \u2013 (14.3) In\ufb02ation rate contracts (307.3) \u2013 \u2013 \u2013 \u2013 (307.3) \u2013 ( 307.3) (1) \u2013 ( 3 07.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (764.0) (764.0) \u2013 (759.9) \u2013 (759.9) Unsecured bank loans \u2013 \u2013 \u2013 \u2013 (44.3) (44.3) \u2013 (44.3) \u2013 (44.3) Secured loan notes \u2013 \u2013 \u2013 \u2013 (632.6) (632.6) (593.9) \u2013 \u2013 (593.9) Lease liabilities \u2013 \u2013 \u2013 \u2013 (153.1) (153.1) Trade and other payables \u2013 \u2013 \u2013 \u2013 (1,065.9) (1,065.9 ) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value valuation techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a323.8 million of derivative liabilities relating to the UK CPI inflation rate contracts. Carrying amount Fair value As at 31 December 2021 \u00a3m Fair value- hedging instruments Mandatorily a t F V TP L- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Commodity contracts 877.5 121.3 \u2013 \u2013 \u2013 998.8 \u2013 998.8 \u2013 998.8 Financial contracts \u2013 143.9 \u2013 \u2013 \u2013 143.9 \u2013 143.9 \u2013 143.9 Foreign currency exchange contracts 56.9 40.6 \u2013 \u2013 \u2013 97.5 \u2013 97.5 \u2013 97.5 Interest rate and cross- currency contracts 4.6 \u2013 \u2013 \u2013 \u2013 4.6 \u2013 4.6 \u2013 4.6 In\ufb02ation rate contracts 1.3 \u2013 \u2013 \u2013 \u2013 1.3 \u2013 1.3 (1) \u2013 1.3 Contingent consideration \u2013 27.7 \u2013 \u2013 \u2013 27.7 \u2013 \u2013 27.7 27.7 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 516.8 \u2013 516.8 Cash and cash equivalents \u2013 \u2013 \u2013 317.4 \u2013 317.4 Financial liabilities measured at fair value Commodity contracts (1,054.8) (33.1) \u2013 \u2013 \u2013 (1,0 87.9) \u2013 (1,0 87.9) \u2013 (1,0 87.9) Financial contracts \u2013 (90.2) \u2013 \u2013 \u2013 (90.2) \u2013 (90.2) \u2013 (90.2) Foreign currency exchange contracts (29.3) (108.4) \u2013 \u2013 \u2013 (137.7) \u2013 (137.7) \u2013 (137.7) Interest rate and cross- currency contracts (48.4) \u2013 \u2013 \u2013 \u2013 (48.4) \u2013 (48.4) \u2013 (48.4) In\ufb02ation rate contracts (93.7) (46.6) \u2013 \u2013 \u2013 (140.3) \u2013 (140.3) (1) \u2013 (140.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (786.8) (786.8) \u2013 (805.9) \u2013 (805.9) Secured bond issues \u2013 \u2013 \u2013 \u2013 (574.2) (574.2) (598.3) \u2013 \u2013 (598.3) Lease liabilities \u2013 \u2013 \u2013 \u2013 (125.9) (125.9) Trade and other payables \u2013 \u2013 \u2013 \u2013 (869.5) (869.5) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a31.3 million of derivative assets and \u00a311.5 million of derivative liabilities relating to the UK CPI inflation rate contracts. The derivative \ufb01nancial instruments used by the Group and not subject to the own-use exemption have been categorised as follows: \u2022 Commodity contracts \u2013 forward contracts for the sale or purchase of a physical commodity which is expected to be settled through delivery of the commodity. \u2022 Financial contracts \u2013 weather-related contracts, as well as contracts for commodities that are not expected to be settled through physical delivery of the commodity. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, vanilla options and structured option products. \u2022 Interest rate and cross-currency contracts \u2013 contracts which swap one interest rate for another in a single currency, including floating-to-\ufb01xed interest rate swaps, and contracts which swap interest and principal cash flows in one currency for another currency, including \ufb01xed-to-\ufb01xed and floating-to- \ufb01xed cross-currency interest rate swaps. \u2022 Inflation rate contracts \u2013 swap contracts, such as floating-to-\ufb01xed, which are linked to an inflation index such as RPI or CPI, and inflation swaptions. Fair value measurement \u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated by reference to forward market prices at the reporting date. \u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward currency exchange market rates at the reporting date. \u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting date for the relevant interest index. \u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market rates and interest index for floating-to-\ufb01xed swaps. \u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting date for the relevant inflation index. Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts. The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent within the instrument. Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value. The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the host contract. The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore, these contracts are categorised as Level 2. There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs. The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required with each valuation. Level 3 fair values The fair value of the UK CPI inflation swaps comprises an RPI and CPI component. Whilst the RPI component is based on observable market rates, CPI is based on unobservable rates and therefore deemed to be Level 3 in the fair value hierarchy. However, this component is not material to the overall valuation and therefore the instruments as a whole have been classi\ufb01ed as Level 2. The valuation technique used for non-listed equity investments comprises unobservable inputs and these are therefore classi\ufb01ed as Level 3. However, given the valuation as a whole for Level 3 equity investments are immaterial, it is not deemed necessary to include all Level 3 disclosures in these Consolidated \ufb01nancial statements. The consideration receivable by the Group for the sale of the CCGT generation portfolio in 2021 includes \u00a329.0 million that is contingent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of these assets. The fair value measurement for the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used. Valuation approach Signi\ufb01cant unobservable inputs and range of inputs (probability weighted) Relationship between signi\ufb01cant unobservable input and fair value measurement Contingent consideration The fair value of the contingent consideration is determined using a discounted cash flow model. The valuation approach is based on a calculation of the probability of the option to develop the Damhead Creek land being exercised. This probability is calculated using a range of forecasts for future Capacity Market auctions and the assumption that the option to develop the land would be exercised if the Capacity Market price were to clear above a certain level, providing suf\ufb01cient certainty on the economics of the development. Forecasted future Capacity Market clearing prices: \u00a37.00/kW \u2013 \u00a364.64/kW (\u00a335.91/kW) (2021: \u00a34.81/kW \u2013 \u00a364.13/kW) (2021: (\u00a318.70/kW)) Estimated bid price at which Damhead Creek 2 is to be entered into the Capacity Market auction: \u00a340.00/kW (2021: \u00a320.00/kW) The fair value measurement would increase/(decrease) with: \u2013 higher/(lower) forecasted Capacity Market clearing prices causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. \u2013 higher/(lower) estimated bid price required for the Damhead Creek 2 development to proceed causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. A reconciliation of the contingent consideration is detailed below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Balance at 1 January 27.7 \u2013 Contingent consideration receivable recognised on the sale of the CCGT generation portfolio \u2013 27.7 Net change in fair value (unrealised) (0.3) \u2013 Balance at 31 December 27.4 27.7 Sensitivities are disclosed below for reasonably possible changes to the unobservable inputs that would have a signi\ufb01cant impact on the fair value measurement: Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2022 Forecasted future Capacity Market clearing prices (25%) (3.7) 0.7 Estimated bid price (25%) 1.0 (3.2) Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2021 Forecasted future Capacity Market clearing prices (25%) (2.9) 1.1 Estimated bid price (25%) 1.1 (2.2) Accounting for derivatives Derivatives (subject to certain exemptions described below) must be measured at fair value, which represents the difference between the price the Group has secured in the contract, and the price the Group could achieve in the market at the reporting date. Changes in fair value are recognised either within the Consolidated income statement or the hedge reserve and cost of hedging reserve, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). Where applicable the Group applies the own-use exemption which allows qualifying contracts to be excluded from fair value mark-to- market accounting. This applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. Contracts for non-\ufb01nancial assets which do not qualify for the own-use exemption (principally power, gas, \ufb01nancial oil and carbon emissions allowances) are accounted for as derivatives in accordance with IFRS 9 and are recorded in the Consolidated balance sheet at fair value. Changes in fair value are reflected through the hedge reserve (note 7.3) to the extent that the contracts are designated as effective hedges in accordance with IFRS 9, or the Consolidated income statement where the hedge accounting requirements are not met, or the hedges are ineffective. To ensure these derivatives are not reflected in the underlying performance of the Group, they are excluded from the Adjusted results in the Consolidated income statement until the contract matures (see note 2.7 for further details). The Group\u2019s biomass risk management policy permits some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain, limited circumstances. As such, the own-use exemption would likely not apply to these biomass contracts. However, the nature of these contracts means they cannot be readily net settled in cash or other \ufb01nancial instruments and, as a result, they remain outside of the scope of IFRS 9 and are excluded from fair value mark-to-market accounting. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are: As at 31 December 2022 \u00a3m 2021 \u00a3m Non-current derivative \ufb01nancial instrument assets 421.7 357.5 Current derivative \ufb01nancial instrument assets 796.3 888.6 Total derivative \ufb01nancial instrument assets 1,218.0 1,24 6 .1 Non-current derivative \ufb01nancial instrument liabilities (735.4) (541.8) Current derivative \ufb01nancial instrument liabilities (989.4) (962.7) Total derivative \ufb01nancial instrument liabilities (1,724.8) (1,504.5) Total net derivative \ufb01nancial instruments (506.8) (258.4) The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at FVTPL are detailed below. The Group had no \ufb01nancial assets or \ufb01nancial liabilities voluntarily designated at FVTPL. In addition to the amounts disclosed below, gains and losses relating to derivatives qualifying for hedge accounting are disclosed in notes 7.2 to 7.4. Gains or losses recognised 2022 \u00a3m 2021 \u00a3m Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in revenue (441.4) ( 7 7.0) Gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in cost of sales 32.6 36.6 Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest payable and similar charges (0.4) (0.3) Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in foreign exchange gains/(losses) (3.8) ( 5.1) Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting (413.0) (45.8) Rebasing is explained in the glossary. When the Group rebases derivative contracts, the Group retains the contractual rights to the cash flows, the risks and rewards, and control of the derivative asset. The Group does not assume any obligation to pay the cash flows to another recipient. Accordingly, the derivative asset is not derecognised. The cash flows received at the point of rebasing reduce the cash flows to be received on maturity of the trade, and as such the cash flows over the life of the instrument are the same whether a trade is rebased or not, minus fees. At the point of rebasing, the Group recognises a reduction in the fair value of the derivative asset, equivalent to the fair value difference between the original rate per the contract and the rebased rate. The Group also recognises the cash received, or due, as a result of the rebasing. Any difference between the reduction in the fair value of the derivative asset, and the cash received, is recognised as a fee charged for rebasing and is recognised within operating and administrative expenses. The total gain or loss recognised in the period on the derivative contract, including rebased amounts, is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. The total gain or loss on the derivative contract, including the amount rebased, is recognised in Adjusted results on the contractual maturity date of the contract. If a rebased trade is hedge accounted, the rebased amount is deferred or released from the hedge reserve in line with the hedge accounting requirements of IFRS 9. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-626": { "value": "7.1 Financial instruments and their fair values The Group holds a variety of derivative and non-derivative \ufb01nancial instruments, including cash and cash equivalents, borrowings, payables and receivables arising from operations. Accounting classi\ufb01cations and fair values IFRS 13 requires categorisation of the Group\u2019s \ufb01nancial instruments in accordance with the following hierarchy in order to explain the basis on which their fair values have been determined: \u2022 Level 1 \u2013 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2022 Level 2 \u2013 Fair value measurements are those derived from inputs, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2022 Level 3 \u2013 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Categorisation within this fair value measurement hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability. The table below shows the carrying amounts and fair values of \ufb01nancial assets and liabilities, including their levels in the fair value hierarchy as de\ufb01ned by IFRS 13. It does not include fair value information for leases or for \ufb01nancial assets and \ufb01nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Cash and cash equivalents (note 4.1), trade and other receivables (note 3.5) and trade and other payables (note 3.7) generally have a short time to maturity. For this reason, their carrying values, on the historical cost basis, are approximate to their fair values. The Group\u2019s borrowings relate principally to the publicly traded high-yield loan notes and amounts drawn against term loans (note 4.2). These \ufb01nancial liabilities are measured at amortised cost. Carrying amount Fair value As at 31 December 2022 \u00a3m Fair value- hedging instruments Mandatorily at FVTPL- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Tot al Financial assets measured at fair value Commodity contracts 549.9 84.2 \u2013 \u2013 \u2013 63 4.1 \u2013 63 4.1 \u2013 634.1 Financial contracts \u2013 232.8 \u2013 \u2013 \u2013 232.8 \u2013 232.8 \u2013 232.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 297.1 Interest rate and cross- currency contracts 54.0 \u2013 \u2013 \u2013 \u2013 54.0 \u2013 54.0 \u2013 54.0 Contingent consideration \u2013 27.4 \u2013 \u2013 \u2013 27.4 \u2013 \u2013 27.4 27. 4 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 1,071.9 \u2013 1,071.9 Cash and cash equivalents \u2013 \u2013 \u2013 238.0 \u2013 238.0 Financial liabilities measured at fair value Commodity contracts (804.3) (62.5) \u2013 \u2013 \u2013 (866.8) \u2013 (866.8) \u2013 (866.8) Financial contracts \u2013 (467.0) \u2013 \u2013 \u2013 (467.0) \u2013 (467.0) \u2013 (467.0) Foreign currency exchange contracts (0.4) (69.0) \u2013 \u2013 \u2013 (69.4) \u2013 (69.4) \u2013 (69.4) Interest rate and cross- currency contracts (14.3) \u2013 \u2013 \u2013 \u2013 (14.3) \u2013 (14.3) \u2013 (14.3) In\ufb02ation rate contracts (307.3) \u2013 \u2013 \u2013 \u2013 (307.3) \u2013 ( 307.3) (1) \u2013 ( 3 07.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (764.0) (764.0) \u2013 (759.9) \u2013 (759.9) Unsecured bank loans \u2013 \u2013 \u2013 \u2013 (44.3) (44.3) \u2013 (44.3) \u2013 (44.3) Secured loan notes \u2013 \u2013 \u2013 \u2013 (632.6) (632.6) (593.9) \u2013 \u2013 (593.9) Lease liabilities \u2013 \u2013 \u2013 \u2013 (153.1) (153.1) Trade and other payables \u2013 \u2013 \u2013 \u2013 (1,065.9) (1,065.9 ) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value valuation techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a323.8 million of derivative liabilities relating to the UK CPI inflation rate contracts. Carrying amount Fair value As at 31 December 2021 \u00a3m Fair value- hedging instruments Mandatorily a t F V TP L- others FVOCI- equity instruments Financial assets at amortised cost Other \ufb01nancial liabilities Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Commodity contracts 877.5 121.3 \u2013 \u2013 \u2013 998.8 \u2013 998.8 \u2013 998.8 Financial contracts \u2013 143.9 \u2013 \u2013 \u2013 143.9 \u2013 143.9 \u2013 143.9 Foreign currency exchange contracts 56.9 40.6 \u2013 \u2013 \u2013 97.5 \u2013 97.5 \u2013 97.5 Interest rate and cross- currency contracts 4.6 \u2013 \u2013 \u2013 \u2013 4.6 \u2013 4.6 \u2013 4.6 In\ufb02ation rate contracts 1.3 \u2013 \u2013 \u2013 \u2013 1.3 \u2013 1.3 (1) \u2013 1.3 Contingent consideration \u2013 27.7 \u2013 \u2013 \u2013 27.7 \u2013 \u2013 27.7 27.7 Equity investments \u2013 \u2013 1.5 \u2013 \u2013 1.5 \u2013 \u2013 1.5 1.5 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 516.8 \u2013 516.8 Cash and cash equivalents \u2013 \u2013 \u2013 317.4 \u2013 317.4 Financial liabilities measured at fair value Commodity contracts (1,054.8) (33.1) \u2013 \u2013 \u2013 (1,0 87.9) \u2013 (1,0 87.9) \u2013 (1,0 87.9) Financial contracts \u2013 (90.2) \u2013 \u2013 \u2013 (90.2) \u2013 (90.2) \u2013 (90.2) Foreign currency exchange contracts (29.3) (108.4) \u2013 \u2013 \u2013 (137.7) \u2013 (137.7) \u2013 (137.7) Interest rate and cross- currency contracts (48.4) \u2013 \u2013 \u2013 \u2013 (48.4) \u2013 (48.4) \u2013 (48.4) In\ufb02ation rate contracts (93.7) (46.6) \u2013 \u2013 \u2013 (140.3) \u2013 (140.3) (1) \u2013 (140.3) Financial liabilities not measured at fair value Secured bank loans \u2013 \u2013 \u2013 \u2013 (786.8) (786.8) \u2013 (805.9) \u2013 (805.9) Secured bond issues \u2013 \u2013 \u2013 \u2013 (574.2) (574.2) (598.3) \u2013 \u2013 (598.3) Lease liabilities \u2013 \u2013 \u2013 \u2013 (125.9) (125.9) Trade and other payables \u2013 \u2013 \u2013 \u2013 (869.5) (869.5) Note: (1) The UK CPI inflation rate contracts contain unobservable inputs in their fair value techniques. However, these unobservable inputs are not material to the valuation and therefore they have been categorised as Level 2 in the fair value hierarchy in line with IFRS 13. Inflation rate contracts contain \u00a31.3 million of derivative assets and \u00a311.5 million of derivative liabilities relating to the UK CPI inflation rate contracts. The derivative \ufb01nancial instruments used by the Group and not subject to the own-use exemption have been categorised as follows: \u2022 Commodity contracts \u2013 forward contracts for the sale or purchase of a physical commodity which is expected to be settled through delivery of the commodity. \u2022 Financial contracts \u2013 weather-related contracts, as well as contracts for commodities that are not expected to be settled through physical delivery of the commodity. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, vanilla options and structured option products. \u2022 Interest rate and cross-currency contracts \u2013 contracts which swap one interest rate for another in a single currency, including floating-to-\ufb01xed interest rate swaps, and contracts which swap interest and principal cash flows in one currency for another currency, including \ufb01xed-to-\ufb01xed and floating-to- \ufb01xed cross-currency interest rate swaps. \u2022 Inflation rate contracts \u2013 swap contracts, such as floating-to-\ufb01xed, which are linked to an inflation index such as RPI or CPI, and inflation swaptions. Fair value measurement \u2022 Commodity contracts \u2013 The fair value of open commodity contracts that do not qualify for the own-use exemption is calculated by reference to forward market prices at the reporting date. \u2022 Financial contracts \u2013 The fair value of \ufb01nancial contracts is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 The fair value of forward foreign currency exchange contracts is determined using forward currency exchange market rates at the reporting date. \u2022 Interest rate contracts \u2013 The fair value of interest rate swaps is calculated by reference to forward market curves at the reporting date for the relevant interest index. \u2022 Cross-currency interest rate swap contracts \u2013 The fair value of cross-currency interest rate swaps is calculated using the relevant forward currency exchange market rates for \ufb01xed-to-\ufb01xed swaps and by using the relevant forward currency exchange market rates and interest index for floating-to-\ufb01xed swaps. \u2022 Inflation rate contracts \u2013 The fair value of inflation rate swaps is calculated by reference to forward market curves at the reporting date for the relevant inflation index. Given the maturity pro\ufb01le of all these contracts, liquid forward market price curves are available for the duration of the contracts. The fair values of all derivative \ufb01nancial instruments are discounted to reflect both the time value of money and credit risk inherent within the instrument. Derivative \ufb01nancial instruments have been considered to be a key source of estimation uncertainty in 2022. The increased volatility and higher prices in markets during the year has resulted in the fair value of derivative contracts fluctuating signi\ufb01cantly. The assessment of fair value is derived in part by reference to a market price for the instrument in question. The Group bases its assessment of market prices upon forward curves that are largely derived from readily obtainable quotations and published prices from third-party sources. However, any forward curve is based at least in part upon assumptions about future transactions and market movements. Due to the increased volatility in the valuations of derivative \ufb01nancial instruments, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but materially different, estimates of fair values to those recognised by the Group. There may be choices to be made of which methodology or data source to use in the calculation of fair value. Assumptions may also need to be made where forward curves are not an exact match for the Group\u2019s derivative contracts (e.g. due to quoted product types, maturity dates or time periods not exactly matching the terms of the Group\u2019s derivative contracts). Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value. The Group has reviewed all signi\ufb01cant contracts for the presence of embedded derivatives. The 2025 USD loan notes, the 2025 EUR loan notes, and the 2020 Infrastructure private placement facilities all contain early repayment options that meet the de\ufb01nition of embedded derivatives. However, in all cases, these do not require separate valuation as they are deemed to be closely related to the host contract. The fair value of commodity contracts, \ufb01nancial contracts, foreign currency exchange contracts, interest rate, cross-currency contracts and inflation swaps are largely determined by comparison between forward market prices and the swap price; therefore, these contracts are categorised as Level 2. There have been no transfers during the current or prior year between Level 1, 2 or 3 category inputs. The Group is responsible for determining the policies and approach to valuations required for \ufb01nancial reporting purposes, including Level 3 fair values. Internal or external specialists are utilised where necessary. Valuation policies, approaches and the results are discussed with and approved by the CFO and the Audit Committee as required, based on the size, complexity and judgement required with each valuation. Level 3 fair values The fair value of the UK CPI inflation swaps comprises an RPI and CPI component. Whilst the RPI component is based on observable market rates, CPI is based on unobservable rates and therefore deemed to be Level 3 in the fair value hierarchy. However, this component is not material to the overall valuation and therefore the instruments as a whole have been classi\ufb01ed as Level 2. The valuation technique used for non-listed equity investments comprises unobservable inputs and these are therefore classi\ufb01ed as Level 3. However, given the valuation as a whole for Level 3 equity investments are immaterial, it is not deemed necessary to include all Level 3 disclosures in these Consolidated \ufb01nancial statements. The consideration receivable by the Group for the sale of the CCGT generation portfolio in 2021 includes \u00a329.0 million that is contingent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of these assets. The fair value measurement for the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used. Valuation approach Signi\ufb01cant unobservable inputs and range of inputs (probability weighted) Relationship between signi\ufb01cant unobservable input and fair value measurement Contingent consideration The fair value of the contingent consideration is determined using a discounted cash flow model. The valuation approach is based on a calculation of the probability of the option to develop the Damhead Creek land being exercised. This probability is calculated using a range of forecasts for future Capacity Market auctions and the assumption that the option to develop the land would be exercised if the Capacity Market price were to clear above a certain level, providing suf\ufb01cient certainty on the economics of the development. Forecasted future Capacity Market clearing prices: \u00a37.00/kW \u2013 \u00a364.64/kW (\u00a335.91/kW) (2021: \u00a34.81/kW \u2013 \u00a364.13/kW) (2021: (\u00a318.70/kW)) Estimated bid price at which Damhead Creek 2 is to be entered into the Capacity Market auction: \u00a340.00/kW (2021: \u00a320.00/kW) The fair value measurement would increase/(decrease) with: \u2013 higher/(lower) forecasted Capacity Market clearing prices causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. \u2013 higher/(lower) estimated bid price required for the Damhead Creek 2 development to proceed causing a higher/(lower) probability of the option over the Damhead Creek 2 land being exercised. A reconciliation of the contingent consideration is detailed below: Year ended 31 December 2022 \u00a3m 2021 \u00a3m Balance at 1 January 27.7 \u2013 Contingent consideration receivable recognised on the sale of the CCGT generation portfolio \u2013 27.7 Net change in fair value (unrealised) (0.3) \u2013 Balance at 31 December 27.4 27.7 Sensitivities are disclosed below for reasonably possible changes to the unobservable inputs that would have a signi\ufb01cant impact on the fair value measurement: Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2022 Forecasted future Capacity Market clearing prices (25%) (3.7) 0.7 Estimated bid price (25%) 1.0 (3.2) Impact on pro\ufb01t before tax Decrease \u00a3m Increase \u00a3m As at 31 December 2021 Forecasted future Capacity Market clearing prices (25%) (2.9) 1.1 Estimated bid price (25%) 1.1 (2.2) Accounting for derivatives Derivatives (subject to certain exemptions described below) must be measured at fair value, which represents the difference between the price the Group has secured in the contract, and the price the Group could achieve in the market at the reporting date. Changes in fair value are recognised either within the Consolidated income statement or the hedge reserve and cost of hedging reserve, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). Where applicable the Group applies the own-use exemption which allows qualifying contracts to be excluded from fair value mark-to- market accounting. This applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. Contracts for non-\ufb01nancial assets which do not qualify for the own-use exemption (principally power, gas, \ufb01nancial oil and carbon emissions allowances) are accounted for as derivatives in accordance with IFRS 9 and are recorded in the Consolidated balance sheet at fair value. Changes in fair value are reflected through the hedge reserve (note 7.3) to the extent that the contracts are designated as effective hedges in accordance with IFRS 9, or the Consolidated income statement where the hedge accounting requirements are not met, or the hedges are ineffective. To ensure these derivatives are not reflected in the underlying performance of the Group, they are excluded from the Adjusted results in the Consolidated income statement until the contract matures (see note 2.7 for further details). The Group\u2019s biomass risk management policy permits some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain, limited circumstances. As such, the own-use exemption would likely not apply to these biomass contracts. However, the nature of these contracts means they cannot be readily net settled in cash or other \ufb01nancial instruments and, as a result, they remain outside of the scope of IFRS 9 and are excluded from fair value mark-to-market accounting. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are: As at 31 December 2022 \u00a3m 2021 \u00a3m Non-current derivative \ufb01nancial instrument assets 421.7 357.5 Current derivative \ufb01nancial instrument assets 796.3 888.6 Total derivative \ufb01nancial instrument assets 1,218.0 1,24 6 .1 Non-current derivative \ufb01nancial instrument liabilities (735.4) (541.8) Current derivative \ufb01nancial instrument liabilities (989.4) (962.7) Total derivative \ufb01nancial instrument liabilities (1,724.8) (1,504.5) Total net derivative \ufb01nancial instruments (506.8) (258.4) The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at FVTPL are detailed below. The Group had no \ufb01nancial assets or \ufb01nancial liabilities voluntarily designated at FVTPL. In addition to the amounts disclosed below, gains and losses relating to derivatives qualifying for hedge accounting are disclosed in notes 7.2 to 7.4. Gains or losses recognised 2022 \u00a3m 2021 \u00a3m Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in revenue (441.4) ( 7 7.0) Gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in cost of sales 32.6 36.6 Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest payable and similar charges (0.4) (0.3) Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in foreign exchange gains/(losses) (3.8) ( 5.1) Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting (413.0) (45.8) Rebasing is explained in the glossary. When the Group rebases derivative contracts, the Group retains the contractual rights to the cash flows, the risks and rewards, and control of the derivative asset. The Group does not assume any obligation to pay the cash flows to another recipient. Accordingly, the derivative asset is not derecognised. The cash flows received at the point of rebasing reduce the cash flows to be received on maturity of the trade, and as such the cash flows over the life of the instrument are the same whether a trade is rebased or not, minus fees. At the point of rebasing, the Group recognises a reduction in the fair value of the derivative asset, equivalent to the fair value difference between the original rate per the contract and the rebased rate. The Group also recognises the cash received, or due, as a result of the rebasing. Any difference between the reduction in the fair value of the derivative asset, and the cash received, is recognised as a fee charged for rebasing and is recognised within operating and administrative expenses. The total gain or loss recognised in the period on the derivative contract, including rebased amounts, is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. The total gain or loss on the derivative contract, including the amount rebased, is recognised in Adjusted results on the contractual maturity date of the contract. If a rebased trade is hedge accounted, the rebased amount is deferred or released from the hedge reserve in line with the hedge accounting requirements of IFRS 9. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-698": { "value": "Accounting classi\ufb01cations and fair values IFRS 13 requires categorisation of the Group\u2019s \ufb01nancial instruments in accordance with the following hierarchy in order to explain the basis on which their fair values have been determined: \u2022 Level 1 \u2013 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; \u2022 Level 2 \u2013 Fair value measurements are those derived from inputs, other than quoted prices, included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and \u2022 Level 3 \u2013 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Categorisation within this fair value measurement hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset or liability. The table below shows the carrying amounts and fair values of \ufb01nancial assets and liabilities, including their levels in the fair value hierarchy as de\ufb01ned by IFRS 13. It does not include fair value information for leases or for \ufb01nancial assets and \ufb01nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Cash and cash equivalents (note 4.1), trade and other receivables (note 3.5) and trade and other payables (note 3.7) generally have a short time to maturity. For this reason, their carrying values, on the historical cost basis, are approximate to their fair values. The Group\u2019s borrowings relate principally to the publicly traded high-yield loan notes and amounts drawn against term loans (note 4.2). These \ufb01nancial liabilities are measured at amortised cost. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-687": { "value": "Accounting for derivatives Derivatives (subject to certain exemptions described below) must be measured at fair value, which represents the difference between the price the Group has secured in the contract, and the price the Group could achieve in the market at the reporting date. Changes in fair value are recognised either within the Consolidated income statement or the hedge reserve and cost of hedging reserve, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). Where applicable the Group applies the own-use exemption which allows qualifying contracts to be excluded from fair value mark-to- market accounting. This applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. Contracts for non-\ufb01nancial assets which do not qualify for the own-use exemption (principally power, gas, \ufb01nancial oil and carbon emissions allowances) are accounted for as derivatives in accordance with IFRS 9 and are recorded in the Consolidated balance sheet at fair value. Changes in fair value are reflected through the hedge reserve (note 7.3) to the extent that the contracts are designated as effective hedges in accordance with IFRS 9, or the Consolidated income statement where the hedge accounting requirements are not met, or the hedges are ineffective. To ensure these derivatives are not reflected in the underlying performance of the Group, they are excluded from the Adjusted results in the Consolidated income statement until the contract matures (see note 2.7 for further details). The Group\u2019s biomass risk management policy permits some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain, limited circumstances. As such, the own-use exemption would likely not apply to these biomass contracts. However, the nature of these contracts means they cannot be readily net settled in cash or other \ufb01nancial instruments and, as a result, they remain outside of the scope of IFRS 9 and are excluded from fair value mark-to-market accounting. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are: As at 31 December 2022 \u00a3m 2021 \u00a3m Non-current derivative \ufb01nancial instrument assets 421.7 357.5 Current derivative \ufb01nancial instrument assets 796.3 888.6 Total derivative \ufb01nancial instrument assets 1,218.0 1,24 6 .1 Non-current derivative \ufb01nancial instrument liabilities (735.4) (541.8) Current derivative \ufb01nancial instrument liabilities (989.4) (962.7) Total derivative \ufb01nancial instrument liabilities (1,724.8) (1,504.5) Total net derivative \ufb01nancial instruments (506.8) (258.4) The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at FVTPL are detailed below. The Group had no \ufb01nancial assets or \ufb01nancial liabilities voluntarily designated at FVTPL. In addition to the amounts disclosed below, gains and losses relating to derivatives qualifying for hedge accounting are disclosed in notes 7.2 to 7.4. Gains or losses recognised 2022 \u00a3m 2021 \u00a3m Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in revenue (441.4) ( 7 7.0) Gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in cost of sales 32.6 36.6 Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest payable and similar charges (0.4) (0.3) Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in foreign exchange gains/(losses) (3.8) ( 5.1) Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting (413.0) (45.8) Rebasing is explained in the glossary. When the Group rebases derivative contracts, the Group retains the contractual rights to the cash flows, the risks and rewards, and control of the derivative asset. The Group does not assume any obligation to pay the cash flows to another recipient. Accordingly, the derivative asset is not derecognised. The cash flows received at the point of rebasing reduce the cash flows to be received on maturity of the trade, and as such the cash flows over the life of the instrument are the same whether a trade is rebased or not, minus fees. At the point of rebasing, the Group recognises a reduction in the fair value of the derivative asset, equivalent to the fair value difference between the original rate per the contract and the rebased rate. The Group also recognises the cash received, or due, as a result of the rebasing. Any difference between the reduction in the fair value of the derivative asset, and the cash received, is recognised as a fee charged for rebasing and is recognised within operating and administrative expenses. The total gain or loss recognised in the period on the derivative contract, including rebased amounts, is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. The total gain or loss on the derivative contract, including the amount rebased, is recognised in Adjusted results on the contractual maturity date of the contract. If a rebased trade is hedge accounted, the rebased amount is deferred or released from the hedge reserve in line with the hedge accounting requirements of IFRS 9. As at 31 December 2022 As at 31 December 2021 Gross amounts of \ufb01nancial instruments in the balance sheet \u00a3m Related \ufb01nancial instruments that are not offset \u00a3m Cash collateral assets/(liabilities) \u00a3m Net amount \u00a3m Gross amounts of \ufb01nancial instruments in the balance sheet \u00a3m Related \ufb01nancial instruments that are not offset \u00a3m Cash collateral assets/(liabilities) \u00a3m Net amount \u00a3m Financial assets Derivative \ufb01nancial instruments 1,218.0 (1,278.6) 234.0 173.4 1,24 6 .1 (1,008.3) (183.0) 54.8 Financial liabilities Derivative \ufb01nancial instruments (1,724.8) 1,278.6 \u2013 (446.2) (1,504.5) 1,008.3 10.2 (486.0) ", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-711": { "value": "Accounting for derivatives Derivatives (subject to certain exemptions described below) must be measured at fair value, which represents the difference between the price the Group has secured in the contract, and the price the Group could achieve in the market at the reporting date. Changes in fair value are recognised either within the Consolidated income statement or the hedge reserve and cost of hedging reserve, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). Where applicable the Group applies the own-use exemption which allows qualifying contracts to be excluded from fair value mark-to- market accounting. This applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. Contracts for non-\ufb01nancial assets which do not qualify for the own-use exemption (principally power, gas, \ufb01nancial oil and carbon emissions allowances) are accounted for as derivatives in accordance with IFRS 9 and are recorded in the Consolidated balance sheet at fair value. Changes in fair value are reflected through the hedge reserve (note 7.3) to the extent that the contracts are designated as effective hedges in accordance with IFRS 9, or the Consolidated income statement where the hedge accounting requirements are not met, or the hedges are ineffective. To ensure these derivatives are not reflected in the underlying performance of the Group, they are excluded from the Adjusted results in the Consolidated income statement until the contract matures (see note 2.7 for further details). The Group\u2019s biomass risk management policy permits some flexibility in trading activity to optimise the overall portfolio position and potentially release value in certain, limited circumstances. As such, the own-use exemption would likely not apply to these biomass contracts. However, the nature of these contracts means they cannot be readily net settled in cash or other \ufb01nancial instruments and, as a result, they remain outside of the scope of IFRS 9 and are excluded from fair value mark-to-market accounting. Rebasing is explained in the glossary. When the Group rebases derivative contracts, the Group retains the contractual rights to the cash flows, the risks and rewards, and control of the derivative asset. The Group does not assume any obligation to pay the cash flows to another recipient. Accordingly, the derivative asset is not derecognised. The cash flows received at the point of rebasing reduce the cash flows to be received on maturity of the trade, and as such the cash flows over the life of the instrument are the same whether a trade is rebased or not, minus fees. At the point of rebasing, the Group recognises a reduction in the fair value of the derivative asset, equivalent to the fair value difference between the original rate per the contract and the rebased rate. The Group also recognises the cash received, or due, as a result of the rebasing. Any difference between the reduction in the fair value of the derivative asset, and the cash received, is recognised as a fee charged for rebasing and is recognised within operating and administrative expenses. The total gain or loss recognised in the period on the derivative contract, including rebased amounts, is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. The total gain or loss on the derivative contract, including the amount rebased, is recognised in Adjusted results on the contractual maturity date of the contract. If a rebased trade is hedge accounted, the rebased amount is deferred or released from the hedge reserve in line with the hedge accounting requirements of IFRS 9. The Group\u2019s activities expose it to a variety of \ufb01nancial risks, including commodity price risk, foreign currency risk, interest rate risk, inflation risk, liquidity risk, counterparty risk and credit risk. The Group\u2019s overall risk management programme focuses on the unpredictability of commodity and \ufb01nancial markets and seeks to manage potential adverse effects on the Group\u2019s \ufb01nancial performance . The Group uses derivative \ufb01nancial instruments to hedge certain risk exposures. Risk management is overseen by the Risk management committees as explained in the Principal Risks and uncertainties section (page 77) which identify, evaluate and hedge \ufb01nancial risks in close co-ordination with the Group\u2019s trading and treasury functions under policies approved by the Board of directors. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-699": { "value": "Gains or losses recognised 2022 \u00a3m 2021 \u00a3m Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in revenue (441.4) ( 7 7.0) Gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in cost of sales 32.6 36.6 Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest payable and similar charges (0.4) (0.3) Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in foreign exchange gains/(losses) (3.8) ( 5.1) Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting (413.0) (45.8) ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-627": { "value": "7.2.1 Commodity price risk The Group is exposed to the effect of fluctuations in commodity prices, particularly the price of power, gas, biomass pellets and \ufb01bre, other fuels and the price of carbon emissions allowances. Price variations and market cycles have historically influenced the \ufb01nancial results of the Group and are expected to continue to do so. Commodity price sensitivity The sensitivity analysis below has been determined based on the exposure to commodity prices and the impact on pro\ufb01t after tax and other components of equity of reasonably possible increases or decreases in commodity prices. The analysis assumes all other variables were held constant. Financial and commodity markets have become increasingly volatile in 2022, in part due to the conflict in Ukraine. This volatility has impacted economies and markets around the world, including the UK energy market, which has in part contributed to rising inflation. The geopolitical environment and concerns over the macro-economic outlook have also contributed to a weakening in sterling during 2022. See the Principal risks and uncertainties section on page 77 for further details on both the conflict in Ukraine and energy market conditions. As a result of these factors, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, were subject to signi\ufb01cant fluctuations during 2022. Sensitivities for a 10% change in prices have been included in the current year. The impact of smaller and larger price changes can be interpolated and extrapolated from the below table as changes in prices have a relatively linear relationship with the impact on pro\ufb01t after tax and on the hedge reserve. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% decrease \u00a3m 10% increase \u00a3m 10% decrease \u00a3m 10% increase \u00a3m As at 31 December 2022 Power \u2013 \u2013 33.8 (33.8) Carbon 2.5 (2.5) (0.8) 0.8 Gas 0.8 (0.8) \u2013 \u2013 Oil (10.6) 10.6 \u2013 \u2013 Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% decrease \u00a3m 10% increase \u00a3m 10% decrease \u00a3m 10% increase \u00a3m As at 31 December 2021 Power \u2013 \u2013 27.8 (27.8) Carbon \u2013 \u2013 (0.2) 0.2 Gas (7.4) 7.4 \u2013 \u2013 Oil (9.8) 9.8 \u2013 \u2013 Pro\ufb01t after tax is sensitive to increases or decreases in commodity prices as a result of the impact on the fair value of derivative \ufb01nancial instruments not designated as hedging instruments under cash flow hedge accounting. The Group designates certain derivatives as hedging instruments under cash flow hedge accounting. As such other components of equity are sensitive to increases or decreases in commodity price risk and the impact on the hedge reserve resulting from these movements. Commodity risk management The Group has a policy of securing forward power sales and purchases of fuel when it is pro\ufb01table to do so and is in line with speci\ufb01ed limits under approved policies. Forward power sales can be secured up to 100% of forecast availability two years ahead. All commitments to sell power under \ufb01xed price contracts are designated as cash flow hedges as they reduce the Group\u2019s cash flow exposure resulting from fluctuations in the price of power. The Group purchases biomass pellets and other fuels under either a \ufb01xed or variable priced contract with different maturities principally from a number of international sources. The Group considers all such contracts to be economic hedges. If these contracts are within the scope of IFRS 9, the Group, where possible, either applies the own-use exemption or hedge accounting in accordance with IFRS 9. If the own-use exemption or hedge accounting are not applicable then the contracts are recognised at FVTPL. Where forward power curves are less liquid, the Group uses \ufb01nancially settled gas sales as a proxy for power to mitigate the risk of power price fluctuations. The Group also purchases gas under \ufb01xed-price contracts to meet the demand of the Customers business and for its Daldowie fuel plant. To support the Group\u2019s ambition to be carbon negative by 2030, a decision was made in January 2023 to phase out the Group\u2019s gas supply contracts in the Opus Energy part of the Group, within the Customers business. The Group purchases carbon emissions allowances under \ufb01xed price contracts to cover the Group\u2019s purchase requirements under the UK Emissions Trading Scheme (UK ETS) in relation to the Group\u2019s carbon emissions. These are designated as cash flow hedges as they reduce the Group\u2019s cash flow exposure resulting from fluctuations in the price of carbon emissions allowances. Carbon emissions allowances are also purchased as part of proxy power hedges in the same way as \ufb01nancial gas described above. These proxy hedges are not designated as cash flow hedges. Hedge accounting The Group has cash flow hedges relating to commodity contracts, principally commitments to sell power and purchase carbon. Amounts are recognised in the hedge reserve as the designated contracts are marked-to-market at each reporting date for the effective portion of the hedge, which is generally 100% of the relevant contract. Amounts held within the hedge reserve are then released to the Consolidated income statement as the related contract matures. For power sales contracts, this is at the point that the underlying power is delivered. Included in amounts released from equity are gains and losses on \ufb01nancial instruments that matured in a previous period, released to the Consolidated income statement in the period the hedged transaction has occurred. No ineffectiveness was recognised in the Consolidated income statement on continuing commodity or \ufb01nancial hedges in the year (2021: \u00a3nil). Due to the use of \u2018all-in-one\u2019 hedges, this results in the movement in fair value for the hedged items and hedging instruments being identical. The only source of ineffectiveness regarding the \u2018all-in-one\u2019 hedges would be if delivery of the commodities was no longer expected to occur, which would result in hedge accounting being discontinued. The main sources of ineffectiveness regarding \ufb01nancial contracts would be as a result of timing differences and credit risk. The Group had a number of forward sale contracts for power relating to forecast generation from the CCGT assets that were designated as cash flow hedges. All subsequent fair value movements on hedges that had been discontinued were recognised in the Consolidated income statement. By January 2021 the Group had closed out all derivative positions in relation to the CCGT assets. As such, from this point, no further gains or losses occurred in relation to these trades. The remaining CCGT trades matured in the first half of 2022. Prior year amounts relating to these trades are included within discontinued operations, and no further gains or losses were recognised in the current period. The reconciliation of the reserves and time period when the hedge will affect the Consolidated income statement are disclosed in note 7.3. The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented in the table below. The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s commodity and \ufb01nancial contracts that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s total portfolio of commodity and \ufb01nancial contracts that are used to protect the value of future cash flows. 31 December 2022 Exposure Notional value of contracts (MWh, allowances) Average \ufb01xed price \u00a3 Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Commodity contracts Sale of power 2,135, 9 0 9 218.00 (534.4) 549.9 (803.3) (19 0 .1) \u2013 Purchase of carbon emissions allowances 148,000 77.5 (4.2) \u2013 (1.0) (0.8) (1.9) 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging losses recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Commodity contracts Sale of power 534.4 (534.4) \u2013 Revenue \u2013 459.8 \u2013 Revenue Purchase of carbon emissions allowances 4.2 ( 4.2) \u2013 Cost of sales \u2013 0 .1 \u2013 Cost of sales 31 December 2021 Exposure Notional value of contracts (MWh, allowances) Average \ufb01xed price \u00a3 Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Commodity contracts Sale of power 2 ,5 85 ,113 72.83 (181.0) 8 74 .1 (1,052.0) (138.6) \u2013 Purchase of carbon emissions allowances 161,000 57.7 9 17.7 3.4 (2.8) 0.4 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging (losses)/gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the reclassi\ufb01cation/ transfer Commodity contracts Sale of power 181.0 (181.0) \u2013 Revenue \u2013 6.3 \u2013 Revenue Purchase of carbon emissions allowances (17.7) 17.7 \u2013 Cost of sales \u2013 (17. 2) \u2013 Cost of sales 7.2.2 Foreign currency risk The Group is exposed to fluctuations in foreign currency rates as a result of committed and forecast transactions in foreign currencies, principally in relation to purchases of fuel for use in the Generation business and principal and interest payments relating to foreign currency denominated debt. These fuel purchases are typically denominated in US dollars (USD), Canadian dollars (CAD) or euros (EUR), and the foreign currency debt is denominated in USD, CAD and EUR (see note 4.2 for further details on the Group\u2019s borrowings). The Group also has an exposure to translation risk in relation to its net investment in its US and Canadian subsidiaries within the Pellet Production business. Foreign currency sensitivity The analysis below shows the impact on pro\ufb01t after tax and other components of equity of reasonably possible strengthening or weakening of currencies against GBP. The analysis assumes all other variables were held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% strengthening \u00a3m 10% weakening \u00a3m 10% strengthening \u00a3m 10% weakening \u00a3m As at 31 December 2022 USD 41.7 (59.0) 137.1 (112.2) EUR 12.2 (20.5) 23.6 (14.6) CAD 24.4 (15.1) 7.8 (13.0) Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 10% strengthening \u00a3m 10% weakening \u00a3m 10% strengthening \u00a3m 10% weakening \u00a3m As at 31 December 2021 USD 104.2 (140.8) 173.4 (141.9) EUR 19.24 (47.7) 26.9 (1.5) CAD 63.7 (11.3) 22.9 (24.7) Pro\ufb01t after tax is sensitive to the strengthening or weakening of other currencies as a result of the impact on the fair value of foreign currency derivatives not designated as hedging instruments under cash flow hedge accounting. The Group designates certain foreign currency derivatives as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to the strengthening or weakening of other currencies in relation to the impact on the hedge reserve of these movements. Prior year foreign currency sensitivities have been restated to fully reflect the impact of option contracts and relevant strike prices, which limit the impact of fluctuations in underlying exchange rates. Foreign currency risk management It is the Group\u2019s policy to hedge material transactional exposures using a variety of derivatives to protect the sterling values of foreign currency cash flows, except where there is an economic hedge inherent in the transaction. The Group enters into derivative contracts in line with the currency risk management policy, including forwards and options, to manage the risks associated with its anticipated foreign currency requirements over a rolling \ufb01ve-year period, covering contracted exposures and a proportion of highly probable forecast transactions. In addition, in order to optimise the cost of funding, the Group has issued foreign currency denominated debt in USD, CAD and EUR (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps, to manage exchange risk on foreign currency debt with the exception of CAD denominated debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Foreign currency exchange contracts that are designated as hedges are transferred from equity to inventories for hedges of fuel purchases when the Group takes ownership of the fuel. Cross-currency interest rate swap gains and losses that are effective at hedging the foreign exchange risk on the interest payments are released to interest payable and similar charges. Gains and losses that are effective at hedging the foreign exchange risk on the USD or EUR principal are released to foreign exchange gains/(losses) to offset gains and losses on retranslating the USD and EUR denominated hedged borrowings. The Group has taken out \ufb01xed-to-\ufb01xed cross-currency interest rate swaps to hedge the future cash flows associated with the $500 million and \u20ac250 million 2025 \ufb01xed rate loan notes, effectively converting them to sterling \ufb01xed rate cash flows. The Group has taken out a combination of \ufb01xed-to-\ufb01xed and floating-to-\ufb01xed cross-currency interest rate swaps in order to \ufb01x the sterling cash flows payable on the \u20ac126.5 million facilities agreed as part of the 2020 Infrastructure private placement facilities (see note 4.2 for further details on borrowings). The main sources of ineffectiveness relating to foreign currency exchange contracts are timing differences and credit risk. The main sources of ineffectiveness relating to cross-currency interest rate swaps are differences in the critical terms, differences in repricing dates and credit risk. A reconciliation of reserves and the time period when the hedge will affect the Consolidated income statement or will be removed from equity and included in the initial cost of the non-\ufb01nancial item, are disclosed in notes 7.3 and 7.4. A summary of amounts relating to the hedging instruments, and any related ineffectiveness in the period, is presented in the table below. Ineffectiveness on foreign currency exchange contracts is recognised in cost of sales if it relates to hedges of fuel purchases. Ineffectiveness on cross-currency interest rate swaps that are hedging principal and interest payments is recognised in foreign exchange gains/(losses) if it relates to the principal repayment, and interest payable and similar charges if the ineffectiveness relates to interest payments. There are \u20ac95 million of floating-to-\ufb01xed cross-currency interest rate swaps that are hedging both foreign currency risk and interest rate risk. These swaps have been separated into synthetic floating-to-floating cross-currency interest rate swaps, that are hedging foreign currency risk, and synthetic floating-to-\ufb01xed GBP interest rate swaps, that are hedging interest rate risk. The synthetic floating-to floating cross-currency interest rate swaps are disclosed in this section, and the synthetic floating-to-\ufb01xed GBP interest rate swaps are disclosed in note 7.2.3 relating to interest rate risk. The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s foreign currency hedging instruments that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s total portfolio of derivatives that are used to protect the sterling value of future cash flows. 31 December 2022 Exposure Notional value of contracts ($m \u20acm, C$m) Average \ufb01xed/variable rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Foreign currency purchase contracts Purchases in foreign currency \u2013 USD 1,586.4 $1.38 187.2 149.3 \u2013 75.6 \u2013 Purchases in foreign currency \u2013 EUR 135.0 \u20ac 1.16 17.9 3.3 (0.3) 3.3 \u2013 Purchases in foreign currency \u2013 CAD 4 0 6 .1 C$1.73 0.4 13.9 (0.1) 5.6 \u2013 Foreign currency denominated debt Interest and principal repayments \u2013 USD 500.0 4.9% 47. 5 12.3 (6.2) 0.8 \u2013 Interest and principal repayments \u2013 EUR 376.5 4.55%/ 3M SONIA + 137. 2bp s (3.1) 4.2 (8.1) (1.6) \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign currency \u2013 USD (187.2) 187.2 \u2013 Cost of sales (34.2) \u2013 \u2013 Inventories Purchases in foreign currency \u2013 EUR (17.9) 17.9 \u2013 Cost of sales 5.9 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 CAD (0.4) 0.4 \u2013 Cost of sales 9.2 \u2013 \u2013 Inventories Foreign currency denominated debt Interest and principal repayments \u2013 USD (47.5) 47. 5 \u2013 Interest payable and similar charges \u2013 (9.2) \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 (44.7) \u2013 Foreign exchange gains/ (losses) Interest and principal repayments \u2013 EUR 3.1 (3.1) \u2013 Interest payable and similar charges \u2013 2.6 \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 (17.3) \u2013 Foreign exchange gains/ (losses) 31 December 2021 Exposure Notional value of contracts ($m, \u20acm, C$m) Average \ufb01xed/variable rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Foreign currency purchase contracts Purchases in foreign currency \u2013 USD 2,231.4 $1.38 16.3 50.9 (11.7) (40.5) \u2013 Purchases in foreign currency \u2013 EUR 320.0 \u20ac1.11 (19.4) \u2013 (17.0) (15.0) \u2013 Purchases in foreign currency \u2013 CAD 4 47.6 C$1.76 4.2 6.0 (0.6) (1.6) \u2013 Foreign currency denominated debt Interest and principal repayments \u2013 USD 500.0 4.9% 7.6 \u2013 (39.0) 5.8 \u2013 Interest and principal repayments \u2013 EUR 376.5 3.32%/ 3M LIBOR + 125.3bps (10.4) \u2013 (9.4) 12.0 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains/(losses) recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign currency \u2013 USD (16.3) 16.3 \u2013 Cost of sales 32.9 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 EUR 19.4 (19.4) \u2013 Cost of sales 0.3 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 CAD (4.2) 4.2 \u2013 Cost of sales \u2013 \u2013 \u2013 Inventories Foreign currency denominated debt Interest and principal repayments \u2013 USD (7.6) 7.6 \u2013 Interest payable and similar charges \u2013 (6.2) \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 1.7 \u2013 Foreign exchange gains/ (losses) Interest and principal repayments \u2013 EUR 10.4 (10.4) \u2013 Interest payable and similar charges \u2013 2.6 \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 24.3 \u2013 Foreign exchange gains/ (losses) 7.2.3 Interest rate risk The Group has exposure to interest rate risk, principally in relation to variable rate debt, cash and cash equivalents and the RCF, should it be drawn. The Group has Sterling Overnight Index Average (SONIA) floating-to-\ufb01xed interest rate swaps to \ufb01x the interest payments on the \u00a3375 million private placement issued in 2019. For the 2020 Infrastructure private placement facilities, the Group has \ufb01xed the interest rate payable on the \u00a398 million of GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group had a number of GBP London Interbank Offered Rate (LIBOR)-linked derivative and non-derivative \ufb01nancial instruments with maturity dates beyond 31 December 2021, the date LIBOR ceased publication. As such, during the prior year the Group\u2019s IBOR programme transitioned these \ufb01nancial instruments away from GBP LIBOR to SONIA. The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated 2020 Infrastructure private placement debt through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in section 7.2.2 above, the floating-to-\ufb01xed cross-currency interest rate swaps are hedging both interest rate risk and foreign currency risk, and as such the disclosures relating to interest rate risk are included in this section. See note 7.2.2 for the foreign currency risk disclosures relating to the floating-to-\ufb01xed cross-currency interest rate swaps. At 31 December 2022, the Group has \ufb01xed interest rate payments in GBP on all of its debt instruments through the use of swaps, with the exception of the Group\u2019s CAD denominated debt, which is the only outstanding debt that remains variable and does not have \ufb01xed interest rate payments. The returns generated on the Group\u2019s cash balance, or payable on amounts drawn on the RCF, are exposed to movements in short-term interest rates. The Group actively manages cash balances to protect against adverse changes in interest rates whilst retaining liquidity. Further information about the Group\u2019s instruments that are exposed to interest rate risk and their repayment schedules is provided in note 4.2. Interest rate sensitivity The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative \ufb01nancial instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the reporting date was outstanding for the whole year. The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase or decrease in interest rates. The analysis assumes all other variables are held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 100 basis points increase \u00a3m 100 basis points decrease \u00a3m 100 basis points increase \u00a3m 100 basis points decrease \u00a3m As at 31 December 2022 Variable rate debt \u2013 unhedged (1.4) 1.4 \u2013 \u2013 Variable rate debt \u2013 hedged (4.2) 4.2 \u2013 \u2013 Interest rate swaps 4.2 (4.2) 10.1 (10.1) Net impact (1.4) 1.4 10.1 (10 .1) As at 31 December 2021 Variable rate debt \u2013 unhedged (1.4) 1.4 \u2013 \u2013 Variable rate debt \u2013 hedged (4.0) 0.7 \u2013 \u2013 Interest rate swaps 4.0 (0.7) 14.6 (11.3) Net impact (1.4) 1.4 14.6 (11.3) An increase or decrease in interest rates would affect pro\ufb01t after tax as a result of the impact on the interest payable in the period on any variable rate debt. The Group has reduced its exposure to interest rate risk on variable rate debt through the use of floating-to-\ufb01xed interest rate swaps and therefore a change in interest rates would not have a signi\ufb01cant effect on pro\ufb01t after tax. The Group designates certain floating-to-\ufb01xed interest rate swaps as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to an increase or decrease in interest rates in relation to the impact on the hedge reserve of these movements. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a floor of 0% for the benchmark interest rate. As a result of very low or negative benchmark interest rates in 2021, a 100 basis point increase had a larger impact on pro\ufb01t after tax and other components of equity, than a 100 basis points decrease. Given the increase in interest rates during the year a larger decrease in interest rates would be needed to reach the 0% floor and therefore in the sensitivities above for the current year an increase and a decrease in interest rates have a more comparable impact. The Group also has CAD denominated debt that has a variable rate based on Canadian Dollar Offered Rate (CDOR). At 31 December 2022 no swaps were in place to hedge the CAD denominated debt. Therefore in relation to this debt a change in interest rates has an impact on pro\ufb01t after tax but not on other components of equity. Interest rate risk management The Group has a risk management policy in place relating to interest rate risk. The Group policy permits, but does not require, the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast interest rate exposure. Hedge accounting The Group designates its floating-to-\ufb01xed SONIA interest rate swaps and the floating-to-\ufb01xed cross-currency interest rate swaps as hedging instruments against interest rate risk. The SONIA interest rate swaps are hedges of the interest payments relating to the \u00a3375 million private placement (2019) and the \u00a398 million GBP facility part of the 2020 Infrastructure private placement. The cross- currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million facility part of the 2020 Infrastructure private placement. As such this has been separated into synthetic floating-to-floating cross- currency interest rate swaps and synthetic floating-to-\ufb01xed GBP interest rate swaps. The synthetic floating-to-floating cross-currency interest rate swaps swap the \u20ac95 million variable rate EURIBOR linked debt to variable rate SONIA linked GBP debt with a principal of \u00a385.8 million. The synthetic floating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the floating-to-\ufb01xed SONIA interest rate swaps are included in the disclosures below. Gains and losses on the interest payments on interest rate swaps are released to interest payable and similar charges at the same time as the interest is expensed on the hedged borrowings. The main sources of ineffectiveness relating to interest rate risk hedges are differences in the critical terms, differences in repricing dates and credit risk. A summary of the amounts relating to the sterling interest rate hedging instruments and any related ineffectiveness in the period is presented in the table below. 31 December 2022 Exposure Notional value of contracts \u00a3m Average % \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Interest rate Variable rate GBP debt 558.8 1.06% 39.9 37.5 \u2013 31.7 \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Interest rate Variable rate GBP debt (39.9) 39.9 \u2013 Interest payable and similar charges \u2013 (3.1) \u2013 Interest payable and similar charges 31 December 2021 Exposure Notional value of contracts \u00a3m Average % \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Interest rate Variable rate GBP debt 558.8 1.06% 19.3 4.6 \u2013 4.2 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Interest rate Variable rate GBP debt (21.0) 19.3 \u2013 Interest payable and similar charges \u2013 3.3 \u2013 Interest payable and similar charges 7.2.4 Inflation risk The Group is exposed to inflation risk on elements of its revenues and cost base. The Group\u2019s ROC revenue is linked to UK RPI and its CfD income is linked to UK CPI (see note 2.2 for further information on ROC and CfD income). In addition, a proportion of the Group\u2019s fuel costs are linked to either US or Canadian CPI. The Group has UK CPI and RPI swaps to hedge certain revenues linked to inflation. Inflation risk sensitivity The sensitivity analysis below has been determined based on the exposure to inflation rates on inflation linked derivatives at the reporting date. The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase/decrease in inflation rates. The analysis assumes all other variables are held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 200 basis points increase \u00a3m 200 basis points decrease \u00a3m 200 basis points increase \u00a3m 200 basis points decrease \u00a3m As at 31 December 2022 UK CPI in\ufb02ation swaps \u2013 \u2013 (34.8) 29.2 UK RPI in\ufb02ation swaps (0.7) 1.1 (52.8) 50.9 Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 200 basis points increase \u00a3m 200 basis points decrease \u00a3m 200 basis points increase \u00a3m 200 basis points decrease \u00a3m As at 31 December 2021 UK CPI in\ufb02ation swaps \u2013 \u2013 (6.0) 6.0 UK RPI in\ufb02ation swaps and swaptions (38.9) 3 7. 2 (48.5) 46.6 The Group designates the UK CPI and RPI inflation swaps as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to the impact on inflation linked derivatives recognised in the hedge reserve of an increase or decrease in UK inflation rates. Pro\ufb01t after tax is sensitive to an increase or decrease in UK inflation rates due to the impact these rate changes would have on the over-hedged portion of the inflation swaps, with this impact being recognised directly in the Consolidated income statement. Pro\ufb01t after tax in 2021 was sensitive to the impact on inflation linked derivatives of an increase or decrease in UK inflation rates due to the impact this would have on the fair value of the unhedged UK RPI inflation swaptions. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits, but does not require, the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast inflation exposure. Hedge accounting The Group has contracts for which the revenue is contractually linked to UK CPI inflation. The Group has designated this risk component as a hedged item. UK CPI and UK RPI inflation swaps are utilised as the hedging instruments for these inflation risks. Gains and losses on the inflation swaps are held in the hedge reserve and reclassi\ufb01ed to revenue in the Consolidated income statement at the same time the revenue with inflation linked contracts impacts on the Consolidated income statement or if the hedged item is on longer expected to occur. The main sources of ineffectiveness relating to the inflation swaps are the basis point difference between the RPI swaps and the CPI-linked revenues they are hedging, calculation differences, and the hedged item no longer being expected to occur. Calculation differences occur due to differences between the reference months used to calculate the inflationary increase per the swaps and the reference months used to calculate the inflationary increase for the CPI-linked revenues. During the current year, as a result of a decrease in the forecast CfD generation, the Group has recycled \u00a339.5 million of losses on hedge accounted inflation linked derivative contracts to the Consolidated income statement, due to the hedged item no longer being expected to occur. The Group has also recognised \u00a318.5 million of ineffectiveness due to the basis difference between the RPI hedging instruments and the CPI exposure. The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented in the table below. 31 December 2022 Exposure Notional value of contracts \u00a3m Average \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 30.3 CPI \u2013 2.72% (13.3) \u2013 (23.8) (18 .1) 14.6 440.0 RPI \u2013 3.45% (144.0) \u2013 (283.5) ( 71.1) \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 13.3 (13.3) \u2013 Revenue \u2013 (2.0) (3.5) Revenue 125.5 (125.5) (18.5) Revenue \u2013 7. 2 43.0 Revenue 31 December 2021 Exposure Notional value of contracts \u00a3m Average \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 30.3 CPI \u2013 2.72% (15.7) 1.3 (11.5) (10.9) 22.0 495.0 RPI \u2013 3.42% (19.5) \u2013 (82.2) (15.2) \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging losses recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 15.7 (15.7) \u2013 Revenue \u2013 (2.2) \u2013 Revenue 21.7 (19.5) \u2013 Revenue \u2013 \u2013 \u2013 Revenue ", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-726": { "value": "Hedge accounting The Group has cash flow hedges relating to commodity contracts, principally commitments to sell power and purchase carbon. Amounts are recognised in the hedge reserve as the designated contracts are marked-to-market at each reporting date for the effective portion of the hedge, which is generally 100% of the relevant contract. Amounts held within the hedge reserve are then released to the Consolidated income statement as the related contract matures. For power sales contracts, this is at the point that the underlying power is delivered. Included in amounts released from equity are gains and losses on \ufb01nancial instruments that matured in a previous period, released to the Consolidated income statement in the period the hedged transaction has occurred. No ineffectiveness was recognised in the Consolidated income statement on continuing commodity or \ufb01nancial hedges in the year (2021: \u00a3nil). Due to the use of \u2018all-in-one\u2019 hedges, this results in the movement in fair value for the hedged items and hedging instruments being identical. The only source of ineffectiveness regarding the \u2018all-in-one\u2019 hedges would be if delivery of the commodities was no longer expected to occur, which would result in hedge accounting being discontinued. The main sources of ineffectiveness regarding \ufb01nancial contracts would be as a result of timing differences and credit risk. The Group had a number of forward sale contracts for power relating to forecast generation from the CCGT assets that were designated as cash flow hedges. All subsequent fair value movements on hedges that had been discontinued were recognised in the Consolidated income statement. By January 2021 the Group had closed out all derivative positions in relation to the CCGT assets. As such, from this point, no further gains or losses occurred in relation to these trades. The remaining CCGT trades matured in the first half of 2022. Prior year amounts relating to these trades are included within discontinued operations, and no further gains or losses were recognised in the current period. The reconciliation of the reserves and time period when the hedge will affect the Consolidated income statement are disclosed in note 7.3. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Foreign currency exchange contracts that are designated as hedges are transferred from equity to inventories for hedges of fuel purchases when the Group takes ownership of the fuel. Cross-currency interest rate swap gains and losses that are effective at hedging the foreign exchange risk on the interest payments are released to interest payable and similar charges. Gains and losses that are effective at hedging the foreign exchange risk on the USD or EUR principal are released to foreign exchange gains/(losses) to offset gains and losses on retranslating the USD and EUR denominated hedged borrowings. The Group has taken out \ufb01xed-to-\ufb01xed cross-currency interest rate swaps to hedge the future cash flows associated with the $500 million and \u20ac250 million 2025 \ufb01xed rate loan notes, effectively converting them to sterling \ufb01xed rate cash flows. The Group has taken out a combination of \ufb01xed-to-\ufb01xed and floating-to-\ufb01xed cross-currency interest rate swaps in order to \ufb01x the sterling cash flows payable on the \u20ac126.5 million facilities agreed as part of the 2020 Infrastructure private placement facilities (see note 4.2 for further details on borrowings). The main sources of ineffectiveness relating to foreign currency exchange contracts are timing differences and credit risk. The main sources of ineffectiveness relating to cross-currency interest rate swaps are differences in the critical terms, differences in repricing dates and credit risk. A reconciliation of reserves and the time period when the hedge will affect the Consolidated income statement or will be removed from equity and included in the initial cost of the non-\ufb01nancial item, are disclosed in notes 7.3 and 7.4. A summary of amounts relating to the hedging instruments, and any related ineffectiveness in the period, is presented in the table below. Ineffectiveness on foreign currency exchange contracts is recognised in cost of sales if it relates to hedges of fuel purchases. Ineffectiveness on cross-currency interest rate swaps that are hedging principal and interest payments is recognised in foreign exchange gains/(losses) if it relates to the principal repayment, and interest payable and similar charges if the ineffectiveness relates to interest payments. There are \u20ac95 million of floating-to-\ufb01xed cross-currency interest rate swaps that are hedging both foreign currency risk and interest rate risk. These swaps have been separated into synthetic floating-to-floating cross-currency interest rate swaps, that are hedging foreign currency risk, and synthetic floating-to-\ufb01xed GBP interest rate swaps, that are hedging interest rate risk. The synthetic floating-to floating cross-currency interest rate swaps are disclosed in this section, and the synthetic floating-to-\ufb01xed GBP interest rate swaps are disclosed in note 7.2.3 relating to interest rate risk. The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s foreign currency hedging instruments that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s total portfolio of derivatives that are used to protect the sterling value of future cash flows. The Group designates its floating-to-\ufb01xed SONIA interest rate swaps and the floating-to-\ufb01xed cross-currency interest rate swaps as hedging instruments against interest rate risk. The SONIA interest rate swaps are hedges of the interest payments relating to the \u00a3375 million private placement (2019) and the \u00a398 million GBP facility part of the 2020 Infrastructure private placement. The cross- currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million facility part of the 2020 Infrastructure private placement. As such this has been separated into synthetic floating-to-floating cross- currency interest rate swaps and synthetic floating-to-\ufb01xed GBP interest rate swaps. The synthetic floating-to-floating cross-currency interest rate swaps swap the \u20ac95 million variable rate EURIBOR linked debt to variable rate SONIA linked GBP debt with a principal of \u00a385.8 million. The synthetic floating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the floating-to-\ufb01xed SONIA interest rate swaps are included in the disclosures below. Gains and losses on the interest payments on interest rate swaps are released to interest payable and similar charges at the same time as the interest is expensed on the hedged borrowings. The main sources of ineffectiveness relating to interest rate risk hedges are differences in the critical terms, differences in repricing dates and credit risk. A summary of the amounts relating to the sterling interest rate hedging instruments and any related ineffectiveness in the period is presented in the table below. The Group has contracts for which the revenue is contractually linked to UK CPI inflation. The Group has designated this risk component as a hedged item. UK CPI and UK RPI inflation swaps are utilised as the hedging instruments for these inflation risks. Gains and losses on the inflation swaps are held in the hedge reserve and reclassi\ufb01ed to revenue in the Consolidated income statement at the same time the revenue with inflation linked contracts impacts on the Consolidated income statement or if the hedged item is on longer expected to occur. The main sources of ineffectiveness relating to the inflation swaps are the basis point difference between the RPI swaps and the CPI-linked revenues they are hedging, calculation differences, and the hedged item no longer being expected to occur. Calculation differences occur due to differences between the reference months used to calculate the inflationary increase per the swaps and the reference months used to calculate the inflationary increase for the CPI-linked revenues. During the current year, as a result of a decrease in the forecast CfD generation, the Group has recycled \u00a339.5 million of losses on hedge accounted inflation linked derivative contracts to the Consolidated income statement, due to the hedged item no longer being expected to occur. The Group has also recognised \u00a318.5 million of ineffectiveness due to the basis difference between the RPI hedging instruments and the CPI exposure. The Group designates certain hedging instruments that are used to address commodity price risk, foreign exchange risk, interest rate risk and inflation rate risk as cash flow hedges. At the inception of the hedge, the relationship between the hedging instrument and hedged item is documented, along with its risk management objectives. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instruments used in hedging transactions are effective in offsetting changes in cash flows of the hedged items. Changes in fair value of contracts designated into such hedging relationships are recognised within the hedge reserve to the extent they are effective. The Group allocates unrealised gains and losses on the forward rate of hedge accounted foreign currency derivative contracts to a cost of hedging reserve in accordance with IFRS 9. A large proportion of the derivative contracts held relate to foreign currency exchange contracts, including forward contracts, options and swaps. Consistent with prior periods, for foreign currency exchange contracts to which the Group has applied hedge accounting, the Group has continued to designate the change in the spot rate as the hedged risk in the Group\u2019s cash flow hedge relationships. The Group designates the cost of hedging \u2013 being the change in fair value associated with forward points including currency basis \u2013 to equity. All amounts within the cost of hedging reserve relate to foreign currency exchange risk. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-732": { "value": "The Group has cash flow hedges relating to commodity contracts, principally commitments to sell power and purchase carbon. Amounts are recognised in the hedge reserve as the designated contracts are marked-to-market at each reporting date for the effective portion of the hedge, which is generally 100% of the relevant contract. Amounts held within the hedge reserve are then released to the Consolidated income statement as the related contract matures. For power sales contracts, this is at the point that the underlying power is delivered. Included in amounts released from equity are gains and losses on \ufb01nancial instruments that matured in a previous period, released to the Consolidated income statement in the period the hedged transaction has occurred. No ineffectiveness was recognised in the Consolidated income statement on continuing commodity or \ufb01nancial hedges in the year (2021: \u00a3nil). Due to the use of \u2018all-in-one\u2019 hedges, this results in the movement in fair value for the hedged items and hedging instruments being identical. The only source of ineffectiveness regarding the \u2018all-in-one\u2019 hedges would be if delivery of the commodities was no longer expected to occur, which would result in hedge accounting being discontinued. The main sources of ineffectiveness regarding \ufb01nancial contracts would be as a result of timing differences and credit risk. Foreign currency risk management It is the Group\u2019s policy to hedge material transactional exposures using a variety of derivatives to protect the sterling values of foreign currency cash flows, except where there is an economic hedge inherent in the transaction. The Group enters into derivative contracts in line with the currency risk management policy, including forwards and options, to manage the risks associated with its anticipated foreign currency requirements over a rolling \ufb01ve-year period, covering contracted exposures and a proportion of highly probable forecast transactions. In addition, in order to optimise the cost of funding, the Group has issued foreign currency denominated debt in USD, CAD and EUR (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps, to manage exchange risk on foreign currency debt with the exception of CAD denominated debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Foreign currency exchange contracts that are designated as hedges are transferred from equity to inventories for hedges of fuel purchases when the Group takes ownership of the fuel. Cross-currency interest rate swap gains and losses that are effective at hedging the foreign exchange risk on the interest payments are released to interest payable and similar charges. Gains and losses that are effective at hedging the foreign exchange risk on the USD or EUR principal are released to foreign exchange gains/(losses) to offset gains and losses on retranslating the USD and EUR denominated hedged borrowings. The Group has taken out \ufb01xed-to-\ufb01xed cross-currency interest rate swaps to hedge the future cash flows associated with the $500 million and \u20ac250 million 2025 \ufb01xed rate loan notes, effectively converting them to sterling \ufb01xed rate cash flows. The Group has taken out a combination of \ufb01xed-to-\ufb01xed and floating-to-\ufb01xed cross-currency interest rate swaps in order to \ufb01x the sterling cash flows payable on the \u20ac126.5 million facilities agreed as part of the 2020 Infrastructure private placement facilities (see note 4.2 for further details on borrowings). The main sources of ineffectiveness relating to foreign currency exchange contracts are timing differences and credit risk. The main sources of ineffectiveness relating to cross-currency interest rate swaps are differences in the critical terms, differences in repricing dates and credit risk. A reconciliation of reserves and the time period when the hedge will affect the Consolidated income statement or will be removed from equity and included in the initial cost of the non-\ufb01nancial item, are disclosed in notes 7.3 and 7.4. A summary of amounts relating to the hedging instruments, and any related ineffectiveness in the period, is presented in the table below. Ineffectiveness on foreign currency exchange contracts is recognised in cost of sales if it relates to hedges of fuel purchases. Ineffectiveness on cross-currency interest rate swaps that are hedging principal and interest payments is recognised in foreign exchange gains/(losses) if it relates to the principal repayment, and interest payable and similar charges if the ineffectiveness relates to interest payments. There are \u20ac95 million of floating-to-\ufb01xed cross-currency interest rate swaps that are hedging both foreign currency risk and interest rate risk. These swaps have been separated into synthetic floating-to-floating cross-currency interest rate swaps, that are hedging foreign currency risk, and synthetic floating-to-\ufb01xed GBP interest rate swaps, that are hedging interest rate risk. The synthetic floating-to floating cross-currency interest rate swaps are disclosed in this section, and the synthetic floating-to-\ufb01xed GBP interest rate swaps are disclosed in note 7.2.3 relating to interest rate risk. The average forward rates quoted below only reflect the rates applicable to the portion of the Group\u2019s foreign currency hedging instruments that qualify for hedge accounting in accordance with IFRS 9. The rates do not reflect the overall average rate of the Group\u2019s total portfolio of derivatives that are used to protect the sterling value of future cash flows. The Group has contracts for which the revenue is contractually linked to UK CPI inflation. The Group has designated this risk component as a hedged item. UK CPI and UK RPI inflation swaps are utilised as the hedging instruments for these inflation risks. Gains and losses on the inflation swaps are held in the hedge reserve and reclassi\ufb01ed to revenue in the Consolidated income statement at the same time the revenue with inflation linked contracts impacts on the Consolidated income statement or if the hedged item is on longer expected to occur. The main sources of ineffectiveness relating to the inflation swaps are the basis point difference between the RPI swaps and the CPI-linked revenues they are hedging, calculation differences, and the hedged item no longer being expected to occur. Calculation differences occur due to differences between the reference months used to calculate the inflationary increase per the swaps and the reference months used to calculate the inflationary increase for the CPI-linked revenues. The Group allocates unrealised gains and losses on the forward rate of hedge accounted foreign currency derivative contracts to a cost of hedging reserve in accordance with IFRS 9. A large proportion of the derivative contracts held relate to foreign currency exchange contracts, including forward contracts, options and swaps. Consistent with prior periods, for foreign currency exchange contracts to which the Group has applied hedge accounting, the Group has continued to designate the change in the spot rate as the hedged risk in the Group\u2019s cash flow hedge relationships. The Group designates the cost of hedging \u2013 being the change in fair value associated with forward points including currency basis \u2013 to equity. All amounts within the cost of hedging reserve relate to foreign currency exchange risk. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-712": { "value": "The Group has cash flow hedges relating to commodity contracts, principally commitments to sell power and purchase carbon. Amounts are recognised in the hedge reserve as the designated contracts are marked-to-market at each reporting date for the effective portion of the hedge, which is generally 100% of the relevant contract. Amounts held within the hedge reserve are then released to the Consolidated income statement as the related contract matures. For power sales contracts, this is at the point that the underlying power is delivered. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-713": { "value": "31 December 2022 Exposure Notional value of contracts ($m \u20acm, C$m) Average \ufb01xed/variable rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Foreign currency purchase contracts Purchases in foreign currency \u2013 USD 1,586.4 $1.38 187.2 149.3 \u2013 75.6 \u2013 Purchases in foreign currency \u2013 EUR 135.0 \u20ac 1.16 17.9 3.3 (0.3) 3.3 \u2013 Purchases in foreign currency \u2013 CAD 4 0 6 .1 C$1.73 0.4 13.9 (0.1) 5.6 \u2013 Foreign currency denominated debt Interest and principal repayments \u2013 USD 500.0 4.9% 47. 5 12.3 (6.2) 0.8 \u2013 Interest and principal repayments \u2013 EUR 376.5 4.55%/ 3M SONIA + 137. 2bp s (3.1) 4.2 (8.1) (1.6) \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign currency \u2013 USD (187.2) 187.2 \u2013 Cost of sales (34.2) \u2013 \u2013 Inventories Purchases in foreign currency \u2013 EUR (17.9) 17.9 \u2013 Cost of sales 5.9 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 CAD (0.4) 0.4 \u2013 Cost of sales 9.2 \u2013 \u2013 Inventories Foreign currency denominated debt Interest and principal repayments \u2013 USD (47.5) 47. 5 \u2013 Interest payable and similar charges \u2013 (9.2) \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 (44.7) \u2013 Foreign exchange gains/ (losses) Interest and principal repayments \u2013 EUR 3.1 (3.1) \u2013 Interest payable and similar charges \u2013 2.6 \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 (17.3) \u2013 Foreign exchange gains/ (losses) 31 December 2021 Exposure Notional value of contracts ($m, \u20acm, C$m) Average \ufb01xed/variable rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m Foreign currency purchase contracts Purchases in foreign currency \u2013 USD 2,231.4 $1.38 16.3 50.9 (11.7) (40.5) \u2013 Purchases in foreign currency \u2013 EUR 320.0 \u20ac1.11 (19.4) \u2013 (17.0) (15.0) \u2013 Purchases in foreign currency \u2013 CAD 4 47.6 C$1.76 4.2 6.0 (0.6) (1.6) \u2013 Foreign currency denominated debt Interest and principal repayments \u2013 USD 500.0 4.9% 7.6 \u2013 (39.0) 5.8 \u2013 Interest and principal repayments \u2013 EUR 376.5 3.32%/ 3M LIBOR + 125.3bps (10.4) \u2013 (9.4) 12.0 \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains/(losses) recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non- \ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign currency \u2013 USD (16.3) 16.3 \u2013 Cost of sales 32.9 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 EUR 19.4 (19.4) \u2013 Cost of sales 0.3 \u2013 \u2013 Inventories Purchases in foreign currency \u2013 CAD (4.2) 4.2 \u2013 Cost of sales \u2013 \u2013 \u2013 Inventories Foreign currency denominated debt Interest and principal repayments \u2013 USD (7.6) 7.6 \u2013 Interest payable and similar charges \u2013 (6.2) \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 1.7 \u2013 Foreign exchange gains/ (losses) Interest and principal repayments \u2013 EUR 10.4 (10.4) \u2013 Interest payable and similar charges \u2013 2.6 \u2013 Interest payable and similar charges \u2013 Foreign exchange gains/ (losses) \u2013 24.3 \u2013 Foreign exchange gains/ (losses) ", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-665": { "value": "7.2.4 Inflation risk The Group is exposed to inflation risk on elements of its revenues and cost base. The Group\u2019s ROC revenue is linked to UK RPI and its CfD income is linked to UK CPI (see note 2.2 for further information on ROC and CfD income). In addition, a proportion of the Group\u2019s fuel costs are linked to either US or Canadian CPI. The Group has UK CPI and RPI swaps to hedge certain revenues linked to inflation. Inflation risk sensitivity The sensitivity analysis below has been determined based on the exposure to inflation rates on inflation linked derivatives at the reporting date. The analysis below shows the impact on pro\ufb01t after tax and other components of equity of a reasonably possible increase/decrease in inflation rates. The analysis assumes all other variables are held constant. Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 200 basis points increase \u00a3m 200 basis points decrease \u00a3m 200 basis points increase \u00a3m 200 basis points decrease \u00a3m As at 31 December 2022 UK CPI in\ufb02ation swaps \u2013 \u2013 (34.8) 29.2 UK RPI in\ufb02ation swaps (0.7) 1.1 (52.8) 50.9 Impact on pro\ufb01t after tax Impact on other components of equity, net of tax 200 basis points increase \u00a3m 200 basis points decrease \u00a3m 200 basis points increase \u00a3m 200 basis points decrease \u00a3m As at 31 December 2021 UK CPI in\ufb02ation swaps \u2013 \u2013 (6.0) 6.0 UK RPI in\ufb02ation swaps and swaptions (38.9) 3 7. 2 (48.5) 46.6 The Group designates the UK CPI and RPI inflation swaps as hedging instruments under cash flow hedge accounting. As such, other components of equity are sensitive to the impact on inflation linked derivatives recognised in the hedge reserve of an increase or decrease in UK inflation rates. Pro\ufb01t after tax is sensitive to an increase or decrease in UK inflation rates due to the impact these rate changes would have on the over-hedged portion of the inflation swaps, with this impact being recognised directly in the Consolidated income statement. Pro\ufb01t after tax in 2021 was sensitive to the impact on inflation linked derivatives of an increase or decrease in UK inflation rates due to the impact this would have on the fair value of the unhedged UK RPI inflation swaptions. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits, but does not require, the use of hedging instruments in order to hedge up to 100% of the Group\u2019s current and forecast inflation exposure. Hedge accounting The Group has contracts for which the revenue is contractually linked to UK CPI inflation. The Group has designated this risk component as a hedged item. UK CPI and UK RPI inflation swaps are utilised as the hedging instruments for these inflation risks. Gains and losses on the inflation swaps are held in the hedge reserve and reclassi\ufb01ed to revenue in the Consolidated income statement at the same time the revenue with inflation linked contracts impacts on the Consolidated income statement or if the hedged item is on longer expected to occur. The main sources of ineffectiveness relating to the inflation swaps are the basis point difference between the RPI swaps and the CPI-linked revenues they are hedging, calculation differences, and the hedged item no longer being expected to occur. Calculation differences occur due to differences between the reference months used to calculate the inflationary increase per the swaps and the reference months used to calculate the inflationary increase for the CPI-linked revenues. During the current year, as a result of a decrease in the forecast CfD generation, the Group has recycled \u00a339.5 million of losses on hedge accounted inflation linked derivative contracts to the Consolidated income statement, due to the hedged item no longer being expected to occur. The Group has also recognised \u00a318.5 million of ineffectiveness due to the basis difference between the RPI hedging instruments and the CPI exposure. The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented in the table below. 31 December 2022 Exposure Notional value of contracts \u00a3m Average \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 30.3 CPI \u2013 2.72% (13.3) \u2013 (23.8) (18 .1) 14.6 440.0 RPI \u2013 3.45% (144.0) \u2013 (283.5) ( 71.1) \u2013 31 December 2022 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging gains recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 13.3 (13.3) \u2013 Revenue \u2013 (2.0) (3.5) Revenue 125.5 (125.5) (18.5) Revenue \u2013 7. 2 43.0 Revenue 31 December 2021 Exposure Notional value of contracts \u00a3m Average \ufb01xed rate Change in fair value of hedging instrument during the reporting period used for measuring ineffectiveness \u00a3m Fair value recognised in balance sheet (assets) \u00a3m Fair value recognised in balance sheet (liabilities) \u00a3m Balance in the hedge reserve for continuing hedges net of deferred tax \u00a3m Balance in the hedge reserve for hedging relationships for which hedge accounting is no longer applied net of deferred tax \u00a3m In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 30.3 CPI \u2013 2.72% (15.7) 1.3 (11.5) (10.9) 22.0 495.0 RPI \u2013 3.42% (19.5) \u2013 (82.2) (15.2) \u2013 31 December 2021 Exposure Change in fair value of hedged item during the reporting period used for measuring ineffectiveness \u00a3m Hedging losses recognised in OCI in the period \u00a3m Hedge ineffectiveness recognised in the income statement in the period \u00a3m Line item in the income statement that includes hedge ineffectiveness Amount transferred to the cost or carrying value of a non-\ufb01nancial asset/liability \u00a3m Amount reclassi\ufb01ed due to the hedged item affecting pro\ufb01t or loss \u00a3m Amount reclassi\ufb01ed due to the hedged future cash \ufb02ows being no longer expected to occur \u00a3m Line item in the income statement/ balance sheet affected by the transfer/ reclassi\ufb01cation In\ufb02ation In\ufb02ation linked sales contracts \u2013 CPI 15.7 (15.7) \u2013 Revenue \u2013 (2.2) \u2013 Revenue 21.7 (19.5) \u2013 Revenue \u2013 \u2013 \u2013 Revenue ", "dimensions": { "concept": "draxgroupplc:DisclosureOfInflationRisk", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-628": { "value": "7.2.5 Liquidity risk The Treasury function is responsible for liquidity, funding and settlement management under policies approved by the Board. Liquidity needs are monitored using regular forecasting of operational cash flows and \ufb01nancing commitments. The Group maintains a mixture of cash and cash equivalents, committed facilities and uncommitted facilities in order to ensure suf\ufb01cient funding for business requirements. In managing liquidity risk, the Group has the ability to accelerate the cash flows associated with certain working capital items, principally those related to ROC sales and Customers\u2019 power sales. In each case this is undertaken on a non-recourse basis and, accordingly, the ROC assets and other items are derecognised from the Consolidated balance sheet at the point of sale. The Group also utilises standard purchasing facilities to extend the working capital cycle, whilst still paying suppliers on time. The impact on the Group\u2019s cash flows is described in note 4.3. The following tables set out details of the expected contractual maturity of non-derivative \ufb01nancial liabilities. The tables include both interest and principal cash flows. To the extent that interest payments or receipts are floating rate, the undiscounted amount is derived from interest rate curves at the reporting date. As at 31 December 2022 Within 3 months \u00a3m 3 months\u2013 1 year \u00a3m 1\u20132 years \u00a3m 2\u20135 years \u00a3m >5 years \u00a3m Total \u00a3m Term loans, gross value 10.5 32.4 353.3 338.5 144.9 879.6 Loan notes, gross value \u2013 33.3 33.3 663.6 \u2013 730.2 Borrowings, contractual maturity 10.5 65.7 386.6 1,0 02 .1 144.9 1,609.8 Trade and other payables 920.0 143.3 2.0 0.6 \u2013 1,065.9 Lease liabilities 8.3 22.0 26.7 64.3 72.0 193.3 938.8 231.0 415.3 1,0 67. 0 216.9 2,869.0 Trade and other payables of \u00a31,065.9 million (2021: \u00a3869.5 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to deliver ROCs. As at 31 December 2021 Within 3 months \u00a3m 3 months\u2013 1 year \u00a3m 1\u20132 years \u00a3m 2\u20135 years \u00a3m >5 years \u00a3m Total \u00a3m Term loans, gross value 46.4 14.7 17.5 650.9 138.7 868.2 Loan notes, gross value \u2013 30.0 30.0 639.6 \u2013 699.6 Borrowings, contractual maturity 46.4 44.7 47.5 1,290.5 138.7 1,567.8 Trade and other payables 826.9 4 0 .1 0.6 0.7 1.2 869.5 Lease liabilities 5.5 15.7 18.9 46.4 78.4 164.9 878.8 100.5 67.0 1,337.6 218.3 2,602.2 Interest payments are calculated based on forward interest rates estimated at the reporting date using publicly available information. The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.14% (2021: 3.49%). The following tables set out details of the expected contractual maturity of derivative \ufb01nancial liabilities which are marked-to-market. Where the amount payable is not \ufb01xed, the amount disclosed has been determined by reference to projected commodity prices, foreign currency exchange rates, inflation rates or interest rates, as illustrated by the yield or other forward curves existing at the reporting date. Where derivatives are expected to be gross settled, the gross cash flows have been presented. Commodity contracts and vanilla foreign currency exchange contracts are expected to be gross settled. Where derivatives are expected to be net settled, the undiscounted net cash flows expected to occur based on the current fair value have been disclosed. Financial contracts and other foreign exchange contracts (excluding forwards and swaps) are expected to be net settled. Interest rate contracts and inflation rate contracts are presented based on net settlement of the interest rate and inflation rate differentials. Gross settlement of both the interest and principal on cross-currency interest rate swaps is expected and as such this element of the swap is presented gross. As at 31 December 2022 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Commodity contracts 1,006.0 12.1 3.6 1,021.7 Financial contracts 322.8 161.7 1.0 485.5 Foreign currency exchange contracts 921.4 45.4 47.8 1,014.6 Interest rate and cross-currency contracts 8.2 0 .1 0.2 8.5 In\ufb02ation contracts 67.3 83.1 203.8 354.2 2,325.7 302.4 256.4 2,884.5 As at 31 December 2021 Within 1 year \u00a3m 1\u20132 years \u00a3m >2 years \u00a3m Total \u00a3m Commodity contracts 175.9 27.4 2.1 205.4 Financial contracts 45.1 55.8 1.5 102.4 Foreign currency exchange contracts 2,306.9 148.7 705.3 3,16 0.9 Interest rate and cross-currency contracts 3.1 43.9 1.0 48.0 In\ufb02ation contracts 52.0 10.1 78.2 140.3 2,583.0 285.9 78 8 .1 3,657. 0 ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-629": { "value": "7.2.6 Credit risk The Group\u2019s gross exposure to credit risk for \ufb01nancial instruments is limited to the carrying amount of \ufb01nancial assets recognised at the reporting date, as summarised below: As at 31 December 2022 \u00a3m 2021 \u00a3m Financial assets: Cash and cash equivalents (note 4.1) 238.0 317.4 Trade and other receivables (note 3.5) 1,167.8 599.7 Derivative \ufb01nancial instruments (note 7.1) 1,218.0 1, 24 6 .1 2,623.8 2,163 . 2 Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a360.9 million (2021: \u00a346.6 million), expected credit losses on accrued income of \u00a37.6 million (2021: \u00a38.6 million) and contingent consideration of \u00a327. 4 million (2021: \u00a327.7 million). The balance excludes non-\ufb01nancial receivables such as prepayments. The Group\u2018s three reportable segments (Pellet Production, Generation and Customers) are exposed to different levels and concentrations of credit risk, largely reflecting the number, size and nature of their respective customers. The Pellet Production segment sells biomass pellets both intra-group and to external parties. Credit risk for the Group relates to the sales made to external parties. The majority of the Pellet Production segment\u2019s external sales are with large utility customers in Europe and Asia. The Pellet Production segment manages its credit risk by reviewing individual sales contracts, considering the length of the contract and assessing the credit quality of counterparties prior to signing contracts and throughout the duration of contracts. For the Generation segment, the risk arises from treasury, trading and energy procurement activities, as well as the sale of by-products from generation activities. Wholesale counterparty credit exposures are monitored by individual counterparty and by category of credit rating. Counterparty credit exposures are subject to approved limits. The Group uses master netting agreements to reduce credit risk and net settles payments with counterparties where net settlement provisions exist. In addition, the Group employs a variety of other methods to mitigate credit risk: margining, various forms of Parent Company guarantee, deeds of charge, cash collateral, letters of credit and surety bonds. The majority of the Generation business\u2019s credit risk is with counterparties in related energy industries or with \ufb01nancial institutions. In addition, where deemed appropriate, the Group has historically purchased credit default swaps. The highest credit risk exposure is in the Customers segment, with a large number of customers of varying sizes operating in a variety of markets. In particular, its SME customers carry lower concentrations but higher levels of credit risk, owing to a customer base comprised of smaller retail and commercial entities. Credit risk is managed by checking a company\u2019s creditworthiness and \ufb01nancial strength both before commencing trade and during the business relationship. Credit risk is monitored and managed by business sector. Further details on the impact of credit risk on trade and other receivables is disclosed in note 3.5. The investment of surplus cash is undertaken with the objective of ensuring that there is suf\ufb01cient liquidity at all times, so that funds are available to meet liabilities as they fall due, whilst securing a return from invested funds and preserving the capital value of those funds within Board-approved policies. These policies manage credit risk exposure by setting out minimum rating requirements and maximum investments with any one counterparty based on their rating and the maturity pro\ufb01le. Whilst cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identi\ufb01ed impairment loss was immaterial. The Group is exposed to credit risk on derivative contracts, to which the impairment requirements of IFRS 9 are not applied as the fair value requirements of IFRS 13 are applicable. The carrying amount of these \ufb01nancial assets, disclosed above, represents the Group\u2019s maximum credit risk exposure. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-630": { "value": "Counterparty risk As the Group relies on third-party suppliers and counterparties for the delivery of currency, biomass pellets and other goods and services, it is exposed to the risk of non-performance by these third-party suppliers. For \ufb01nancial instruments this risk is limited to the credit risk, as discussed above. The Group is also exposed to counterparty risk on non-\ufb01nancial instruments, such as the purchases of biomass and capital expenditure. If a large supplier were to fall into \ufb01nancial dif\ufb01culty and/or fail to deliver against its contract with the Group, there would be additional costs associated with securing the lost goods or services from other suppliers. The Group enters into purchase and sale contracts for a wider variety of goods and services, for example the sale of power to a number of counterparties. The failure of one or more of these counterparties to perform under their contractual obligations may cause the Group \ufb01nancial distress or increase the risk pro\ufb01le of the Group. The Group has acceptance procedures in place to ensure the counterparties the Group contracts with are appropriate. The Group also has limits in place, and actively monitors its exposures to individual counterparties to minimise this risk. Capital management The Group is disciplined in its management of capital to ensure it is able to continue as a going concern; maintain a strong credit rating underpinned by robust \ufb01nancial metrics; invest in its core business and pay a sustainable and growing dividend whilst maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of shareholders\u2019 equity (excluding the hedge and cost of hedging reserves), plus Net debt. Net debt is comprised of borrowings, cash and cash equivalents attributable to owners of the Parent Company and is inclusive of the impact of associated hedging instruments as disclosed in note 2.7. See note 4.2 for details of loan covenants, and the Viability statement on page 75 for details of scenario analysis performed on covenant restrictions of the Group\u2019s \ufb01nancing facilities. As at 31 December 2022 \u00a3m 2021 \u00a3m Borrowings (note 4.2) 1,440.9 1,361.0 Cash and cash equivalents (note 4.1) (238.0) (317.4) Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries 0.7 \u2013 Impact of hedging instruments 2.4 64.4 Net debt (note 2.7) 1,206.0 1,10 8 .0 Total shareholders\u2019 equity attributable to the owners of the Parent Company, excluding hedge and cost of hedging reserves 1,422.7 1,384.2 In 2022, the Group has updated its de\ufb01nition of Net debt. The above table has been re-presented to reflect this updated de\ufb01nition. See the Net debt section in the Basis of preparation for further details on this change in de\ufb01nition. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfCounterpartyRisk", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-631": { "value": "7.5 Offsetting \ufb01nancial assets and \ufb01nancial liabilities Financial assets and liabilities are offset and the net amount is reported in the Consolidated balance sheet where the Group has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Group also has \ufb01nancial assets and liabilities with certain counterparties that are subject to master netting agreements. Some \ufb01nancial assets and liabilities do not meet the criteria for offsetting at the reporting date but are subject to an enforceable master netting agreement that in certain circumstances, such as a bankruptcy, would allow for the amounts to be offset and a single net amount payable. The table below shows the impact if the carrying amounts that are subject to these master netting agreements were offset: As at 31 December 2022 As at 31 December 2021 Gross amounts of \ufb01nancial instruments in the balance sheet \u00a3m Related \ufb01nancial instruments that are not offset \u00a3m Cash collateral assets/(liabilities) \u00a3m Net amount \u00a3m Gross amounts of \ufb01nancial instruments in the balance sheet \u00a3m Related \ufb01nancial instruments that are not offset \u00a3m Cash collateral assets/(liabilities) \u00a3m Net amount \u00a3m Financial assets Derivative \ufb01nancial instruments 1,218.0 (1,278.6) 234.0 173.4 1,24 6 .1 (1,008.3) (183.0) 54.8 Financial liabilities Derivative \ufb01nancial instruments (1,724.8) 1,278.6 \u2013 (446.2) (1,504.5) 1,008.3 10.2 (486.0) The aforementioned collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOffsettingOfFinancialAssetsAndFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-714": { "value": "Financial assets and liabilities are offset and the net amount is reported in the Consolidated balance sheet where the Group has a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Group also has \ufb01nancial assets and liabilities with certain counterparties that are subject to master netting agreements. Some \ufb01nancial assets and liabilities do not meet the criteria for offsetting at the reporting date but are subject to an enforceable master netting agreement that in certain circumstances, such as a bankruptcy, would allow for the amounts to be offset and a single net amount payable. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-688": { "value": "7.6 Contingent assets and liabilities Contingent assets are potential future inflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any receipt is uncertain and cannot be measured reliably. Contingent liabilities are potential future outflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any payment is uncertain and cannot be measured reliably. Guarantees In addition to the amounts drawn down against the bank loans, certain members of the Group guarantee the obligations of a number of banks in respect of letters of credit issued by those banks to counterparties of the Group. As at 31 December 2022, the Group\u2019s contingent liability in respect of letters of credit issued amounted to \u00a385.9 million (2021: \u00a374.4 million), of which \u00a346.0 million (2021: \u00a374.4 million) was issued under the RCF. The Group also guarantees obligations in the form of surety bonds with a number of insurers amounting to \u00a3202.0 million (2021: \u00a3142.1 million). Collateral is sometimes required to be provided in relation to the Group\u2019s commodity and treasury trading activities. When derivative positions are out of the money for the Group, collateral may be required to be provided to the counterparty. These positions reverse when contracts are settled, and the collateral is returned. The Group has access to certain facilities to enable it to cover collateral requirements to counterparties through letters of credit or surety bonds. The letters of credit and surety bond \ufb01gures above include amounts utilised to cover commodity trading collateral requirements of \u00a354.5 million (2021: \u00a342.5 million) and \u00a3165.0 million (2 0 21: \u00a3107.1 million) respectively. See note 4.1 for details on net cash collateral the Group has paid to or received from counterparties. Contingent liabilities Smart meter targets In late February 2023, the Group received notice from Ofgem that its failure to fully achieve installation targets for Smart Meter installations in the Opus Energy business during 2022 had been referred to Ofgem\u2019s Enforcement team. They will consider this matter in due course and make a decision on any future action. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the early stage of the process and the uncertainty in future outcome. Contingent assets Billing system Drax Energy Solutions Limited has lodged a claim against a supplier for damages caused by the supplier\u2019s misrepresentation and failure to perform under a contract for delivery of a new billing system. The directors have considered the potential legal outcomes of the claim with external professional advisors and believe that a favourable outcome is probable. However, a contingent asset is disclosed rather than a receivable recognised at 31 December 2022, as receipt of the amount is dependent on the outcome of the claim and therefore it is not virtually certain to be received. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-700": { "value": "7.6 Contingent assets and liabilities Contingent assets are potential future inflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any receipt is uncertain and cannot be measured reliably. Contingent liabilities are potential future outflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any payment is uncertain and cannot be measured reliably. Guarantees In addition to the amounts drawn down against the bank loans, certain members of the Group guarantee the obligations of a number of banks in respect of letters of credit issued by those banks to counterparties of the Group. As at 31 December 2022, the Group\u2019s contingent liability in respect of letters of credit issued amounted to \u00a385.9 million (2021: \u00a374.4 million), of which \u00a346.0 million (2021: \u00a374.4 million) was issued under the RCF. The Group also guarantees obligations in the form of surety bonds with a number of insurers amounting to \u00a3202.0 million (2021: \u00a3142.1 million). Collateral is sometimes required to be provided in relation to the Group\u2019s commodity and treasury trading activities. When derivative positions are out of the money for the Group, collateral may be required to be provided to the counterparty. These positions reverse when contracts are settled, and the collateral is returned. The Group has access to certain facilities to enable it to cover collateral requirements to counterparties through letters of credit or surety bonds. The letters of credit and surety bond \ufb01gures above include amounts utilised to cover commodity trading collateral requirements of \u00a354.5 million (2021: \u00a342.5 million) and \u00a3165.0 million (2 0 21: \u00a3107.1 million) respectively. See note 4.1 for details on net cash collateral the Group has paid to or received from counterparties. Contingent liabilities Smart meter targets In late February 2023, the Group received notice from Ofgem that its failure to fully achieve installation targets for Smart Meter installations in the Opus Energy business during 2022 had been referred to Ofgem\u2019s Enforcement team. They will consider this matter in due course and make a decision on any future action. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the early stage of the process and the uncertainty in future outcome. Contingent assets Billing system Drax Energy Solutions Limited has lodged a claim against a supplier for damages caused by the supplier\u2019s misrepresentation and failure to perform under a contract for delivery of a new billing system. The directors have considered the potential legal outcomes of the claim with external professional advisors and believe that a favourable outcome is probable. However, a contingent asset is disclosed rather than a receivable recognised at 31 December 2022, as receipt of the amount is dependent on the outcome of the claim and therefore it is not virtually certain to be received. ", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-632": { "value": "7.6 Contingent assets and liabilities Contingent assets are potential future inflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any receipt is uncertain and cannot be measured reliably. Contingent liabilities are potential future outflows of cash that are dependent on a future event that is outside of the control of the Group. The amount or timing of any payment is uncertain and cannot be measured reliably. Guarantees In addition to the amounts drawn down against the bank loans, certain members of the Group guarantee the obligations of a number of banks in respect of letters of credit issued by those banks to counterparties of the Group. As at 31 December 2022, the Group\u2019s contingent liability in respect of letters of credit issued amounted to \u00a385.9 million (2021: \u00a374.4 million), of which \u00a346.0 million (2021: \u00a374.4 million) was issued under the RCF. The Group also guarantees obligations in the form of surety bonds with a number of insurers amounting to \u00a3202.0 million (2021: \u00a3142.1 million). Collateral is sometimes required to be provided in relation to the Group\u2019s commodity and treasury trading activities. When derivative positions are out of the money for the Group, collateral may be required to be provided to the counterparty. These positions reverse when contracts are settled, and the collateral is returned. The Group has access to certain facilities to enable it to cover collateral requirements to counterparties through letters of credit or surety bonds. The letters of credit and surety bond \ufb01gures above include amounts utilised to cover commodity trading collateral requirements of \u00a354.5 million (2021: \u00a342.5 million) and \u00a3165.0 million (2 0 21: \u00a3107.1 million) respectively. See note 4.1 for details on net cash collateral the Group has paid to or received from counterparties. Contingent liabilities Smart meter targets In late February 2023, the Group received notice from Ofgem that its failure to fully achieve installation targets for Smart Meter installations in the Opus Energy business during 2022 had been referred to Ofgem\u2019s Enforcement team. They will consider this matter in due course and make a decision on any future action. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the early stage of the process and the uncertainty in future outcome. Contingent assets Billing system Drax Energy Solutions Limited has lodged a claim against a supplier for damages caused by the supplier\u2019s misrepresentation and failure to perform under a contract for delivery of a new billing system. The directors have considered the potential legal outcomes of the claim with external professional advisors and believe that a favourable outcome is probable. However, a contingent asset is disclosed rather than a receivable recognised at 31 December 2022, as receipt of the amount is dependent on the outcome of the claim and therefore it is not virtually certain to be received. 7.7 Commitments The Group has a number of \ufb01nancial commitments (i.e. a contractual requirement to make a cash payment in the future) that are not recorded in the Consolidated balance sheet as the contract is not yet due for delivery. Such commitments include contracts for the future purchase of sustainable biomass, contracts for the construction of assets and contracts for the provision of services. As at 31 December 2022 \u00a3m 2021 \u00a3m Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013 Property, plant and equipment 267.9 28.6 Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013 Intangible assets 0.2 \u2013 Future support and service contracts not provided in the Consolidated \ufb01nancial statements 60 .1 51.2 Future commitments to purchase ROCs 331.9 200.5 Future commitments to purchase biomass under \ufb01xed and variable priced contracts 3,250.0 3,466.9 Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts 242.5 356.8 Commitments for future capital expenditure of property, plant and equipment have increased predominantly due to the construction of the OCGT plants. The contractual maturities of the future commitments to purchase biomass are as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Within one year 829.5 828.4 Within one to \ufb01ve years 1,12 3. 4 2,623.7 After \ufb01ve years 1, 2 97.1 14.8 3,250.0 3,466.9 Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily for the delivery of sustainable biomass pellets for use in electricity generation at Drax Power Station. To the extent these contracts relate to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements owing as they are not within the scope of IFRS 9, and are therefore not required to be measured at fair value. See the Critical accounting judgements section in the Basis of preparation for further details on this judgement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-666": { "value": "7.7 Commitments The Group has a number of \ufb01nancial commitments (i.e. a contractual requirement to make a cash payment in the future) that are not recorded in the Consolidated balance sheet as the contract is not yet due for delivery. Such commitments include contracts for the future purchase of sustainable biomass, contracts for the construction of assets and contracts for the provision of services. As at 31 December 2022 \u00a3m 2021 \u00a3m Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013 Property, plant and equipment 267.9 28.6 Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013 Intangible assets 0.2 \u2013 Future support and service contracts not provided in the Consolidated \ufb01nancial statements 60 .1 51.2 Future commitments to purchase ROCs 331.9 200.5 Future commitments to purchase biomass under \ufb01xed and variable priced contracts 3,250.0 3,466.9 Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts 242.5 356.8 Commitments for future capital expenditure of property, plant and equipment have increased predominantly due to the construction of the OCGT plants. The contractual maturities of the future commitments to purchase biomass are as follows: As at 31 December 2022 \u00a3m 2021 \u00a3m Within one year 829.5 828.4 Within one to \ufb01ve years 1,12 3. 4 2,623.7 After \ufb01ve years 1, 2 97.1 14.8 3,250.0 3,466.9 Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily for the delivery of sustainable biomass pellets for use in electricity generation at Drax Power Station. To the extent these contracts relate to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements owing as they are not within the scope of IFRS 9, and are therefore not required to be measured at fair value. See the Critical accounting judgements section in the Basis of preparation for further details on this judgement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-594": { "value": "Section 8: Reference information This section details reference information relevant to the compiling of the Consolidated \ufb01nancial statements and provides general information about the Group (e.g. operations and registered of\ufb01ce). This section also sets out the basis of preparation of the accounts and general accounting policies that are not speci\ufb01c to any one note. 8.1 General information Drax Group plc (the Company) is incorporated in England and Wales under the Companies Act 2006. The Company and its subsidiaries (together, the Group) have three principal activities: \u2022 Production and subsequent sale of biomass pellets for use in electricity production; \u2022 Electricity generation; and \u2022 Electricity and gas supply to business customers. The Group\u2019s activities are principally based within the UK and North America. The address of the Company\u2019s registered of\ufb01ce and principal establishment is Drax Power Station, Selby, North Yorkshire, YO8 8PH, United Kingdom . A full list of operating companies of the Group is disclosed in note 5 to the Company\u2019s separate \ufb01nancial statements, which follow these Consolidated \ufb01nancial statements. 8.2 Adoption of new and revised accounting standards The following amendments became effective for the \ufb01rst time in 2022. The Group adopted the following from 1 January 2022: \u2022 Annual Improvements 2018-2020 Cycle \u2013 effective from 1 January 2022. \u2022 IAS 37 (amended) \u2013 Onerous Contracts: Cost of Ful\ufb01lling a Contract \u2013 effective from 1 January 2022. \u2022 IAS 16 (amended) \u2013 Property, Plant and Equipment \u2013 Proceeds before Intended Use \u2013 effective from 1 January 2022. \u2022 IFRS 3 (amended) \u2013 Reference to the Conceptual Framework \u2013 effective from 1 January 2022. The adoption of these amendments in the current year has not had a material impact on the Consolidated \ufb01nancial statements. At the date of approval of this report, the following new or amended standards and relevant interpretations, which have not been applied in these Consolidated \ufb01nancial statements, were in issue but not yet effective. \u2022 IFRS 10 (amended) \u2013 Consolidated Financial Statements \u2013 effective date deferred inde\ufb01nitely.* \u2022 IAS 28 (amended) \u2013 Investments in Associates and Joint Ventures (2011) \u2013 effective date deferred inde\ufb01nitely.* \u2022 IFRS 16 (amended) \u2013 Lease Liability in a Sale and Leaseback \u2013 effective from 1 January 2024.* \u2022 IFRS 17 Insurance Contracts \u2013 effective from 1 January 2023. \u2022 IAS 1 (amended) \u2013 Classi\ufb01cation of Liabilities as Current or Non-Current \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Non-current Liabilities with Covenants \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Disclosure of Accounting Policies \u2013 effective from 1 January 2023. \u2022 IAS 8 (amended) \u2013 De\ufb01nition of Accounting Estimates \u2013 effective from 1 January 2023. \u2022 IAS 12 (amended) \u2013 Deferred Tax related to Assets and Liabilities arising from a single Transaction \u2013 effective from 1 January 2023. * Pending endorsement by the UK Endorsement Board (UKEB). Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the Consolidated \ufb01nancial statements of the Group. The Group will continue to monitor the developments of these new or amended standards as and when they are endorsed for use in the United Kingdom. 8.3 Related party transactions A related party is either an individual or entity with control or signi\ufb01cant influence over the Group, or a company that is linked to the Group by investment (such as an associated company or joint venture). The Group\u2019s related parties are primarily its associate and its key management personnel. Amounts below are the total amount of transactions that have been entered into with any related parties in the year . Houston Pellet Limited Partnership (HPLP) HPLP is owned 30% by the Group and 70% by non-related third parties. The Group purchases biomass pellets from HPLP. The Group manages and administers the business affairs of HPLP and charges a management fee. These transactions are at negotiated amounts between the Group and the non-related third parties. The transactions in the period and the balances at the reporting date with the related party are summarised below: Transactions in the period to 31 December 2022 Balances as at 31 December 2022 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.1 18.2 1.7 0.4 Transactions in the period to 31 December 2021(2 ) Balances as at 31 December 2021 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.2 10.3 1.4 0.6 (1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing. (2) The transactions in the period to 31 December 2021 represent the transactions from the acquisition date of 13 April 2021 to the reporting date. Remuneration of key management personnel The remuneration of the Directors and Executive management, who are considered to be the key management personnel of the Group, is set out below in aggregate for each of the categories speci\ufb01ed in IAS 24. Further information about the remuneration of individual directors, together with the directors\u2019 interests in the share capital of the Company, is provided in the audited part of the Remuneration Committee report. Year ended 31 December 2022 \u00a3000 2021 \u00a3000 Short-term employee bene\ufb01ts 7,531 6,755 Share-based payments 3,964 2,826 Post-employment bene\ufb01ts 489 635 Total remuneration 11,984 10,216 Compensation of the Group\u2019s key management personnel includes short-term employee bene\ufb01ts, which includes salaries, other short-term bene\ufb01ts, and contributions to post-employment money purchase pension schemes. Share-based payments compensation represents the amounts receivable under share-based incentive schemes as disclosed in note 6.2. Amounts included in the table above reflect the remuneration of the 17 (2021: 17) members of the Board and Executive management. There were no other transactions with directors for the periods covered by these Consolidated \ufb01nancial statements.", "dimensions": { "concept": "draxgroupplc:DisclosureOfReferenceInformation", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-586": { "value": "Drax Group plc (the Company) is incorporated in England and Wales under the Companies Act 2006. The Company and its subsidiaries (together, the Group) have three principal activities: \u2022 Production and subsequent sale of biomass pellets for use in electricity production; \u2022 Electricity generation; and \u2022 Electricity and gas supply to business customers. The Group\u2019s activities are principally based within the UK and North America. ", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-11": { "value": "plc ", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-8": { "value": "England and Wales", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-9": { "value": "UK and North America", "dimensions": { "concept": "ifrs-full:PrincipalPlaceOfBusiness", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-10": { "value": "Drax Power Station, Selby, North Yorkshire, YO8 8PH, United Kingdom ", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-715": { "value": "8.2 Adoption of new and revised accounting standards The following amendments became effective for the \ufb01rst time in 2022. The Group adopted the following from 1 January 2022: \u2022 Annual Improvements 2018-2020 Cycle \u2013 effective from 1 January 2022. \u2022 IAS 37 (amended) \u2013 Onerous Contracts: Cost of Ful\ufb01lling a Contract \u2013 effective from 1 January 2022. \u2022 IAS 16 (amended) \u2013 Property, Plant and Equipment \u2013 Proceeds before Intended Use \u2013 effective from 1 January 2022. \u2022 IFRS 3 (amended) \u2013 Reference to the Conceptual Framework \u2013 effective from 1 January 2022. The adoption of these amendments in the current year has not had a material impact on the Consolidated \ufb01nancial statements. At the date of approval of this report, the following new or amended standards and relevant interpretations, which have not been applied in these Consolidated \ufb01nancial statements, were in issue but not yet effective. \u2022 IFRS 10 (amended) \u2013 Consolidated Financial Statements \u2013 effective date deferred inde\ufb01nitely.* \u2022 IAS 28 (amended) \u2013 Investments in Associates and Joint Ventures (2011) \u2013 effective date deferred inde\ufb01nitely.* \u2022 IFRS 16 (amended) \u2013 Lease Liability in a Sale and Leaseback \u2013 effective from 1 January 2024.* \u2022 IFRS 17 Insurance Contracts \u2013 effective from 1 January 2023. \u2022 IAS 1 (amended) \u2013 Classi\ufb01cation of Liabilities as Current or Non-Current \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Non-current Liabilities with Covenants \u2013 effective from 1 January 2024.* \u2022 IAS 1 (amended) \u2013 Disclosure of Accounting Policies \u2013 effective from 1 January 2023. \u2022 IAS 8 (amended) \u2013 De\ufb01nition of Accounting Estimates \u2013 effective from 1 January 2023. \u2022 IAS 12 (amended) \u2013 Deferred Tax related to Assets and Liabilities arising from a single Transaction \u2013 effective from 1 January 2023. * Pending endorsement by the UK Endorsement Board (UKEB). Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the Consolidated \ufb01nancial statements of the Group. The Group will continue to monitor the developments of these new or amended standards as and when they are endorsed for use in the United Kingdom. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFirstTimeAdoptionExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-701": { "value": "8.3 Related party transactions A related party is either an individual or entity with control or signi\ufb01cant influence over the Group, or a company that is linked to the Group by investment (such as an associated company or joint venture). The Group\u2019s related parties are primarily its associate and its key management personnel. Amounts below are the total amount of transactions that have been entered into with any related parties in the year . Houston Pellet Limited Partnership (HPLP) HPLP is owned 30% by the Group and 70% by non-related third parties. The Group purchases biomass pellets from HPLP. The Group manages and administers the business affairs of HPLP and charges a management fee. These transactions are at negotiated amounts between the Group and the non-related third parties. The transactions in the period and the balances at the reporting date with the related party are summarised below: Transactions in the period to 31 December 2022 Balances as at 31 December 2022 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.1 18.2 1.7 0.4 Transactions in the period to 31 December 2021(2 ) Balances as at 31 December 2021 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.2 10.3 1.4 0.6 (1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing. (2) The transactions in the period to 31 December 2021 represent the transactions from the acquisition date of 13 April 2021 to the reporting date. Remuneration of key management personnel The remuneration of the Directors and Executive management, who are considered to be the key management personnel of the Group, is set out below in aggregate for each of the categories speci\ufb01ed in IAS 24. Further information about the remuneration of individual directors, together with the directors\u2019 interests in the share capital of the Company, is provided in the audited part of the Remuneration Committee report. Year ended 31 December 2022 \u00a3000 2021 \u00a3000 Short-term employee bene\ufb01ts 7,531 6,755 Share-based payments 3,964 2,826 Post-employment bene\ufb01ts 489 635 Total remuneration 11,984 10,216 Compensation of the Group\u2019s key management personnel includes short-term employee bene\ufb01ts, which includes salaries, other short-term bene\ufb01ts, and contributions to post-employment money purchase pension schemes. Share-based payments compensation represents the amounts receivable under share-based incentive schemes as disclosed in note 6.2. Amounts included in the table above reflect the remuneration of the 17 (2021: 17) members of the Board and Executive management. There were no other transactions with directors for the periods covered by these Consolidated \ufb01nancial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-633": { "value": "A related party is either an individual or entity with control or signi\ufb01cant influence over the Group, or a company that is linked to the Group by investment (such as an associated company or joint venture). The Group\u2019s related parties are primarily its associate and its key management personnel. Amounts below are the total amount of transactions that have been entered into with any related parties in the year ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTransactionsWithRelatedPartiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-727": { "value": "Houston Pellet Limited Partnership (HPLP) HPLP is owned 30% by the Group and 70% by non-related third parties. The Group purchases biomass pellets from HPLP. The Group manages and administers the business affairs of HPLP and charges a management fee. These transactions are at negotiated amounts between the Group and the non-related third parties. The transactions in the period and the balances at the reporting date with the related party are summarised below: Transactions in the period to 31 December 2022 Balances as at 31 December 2022 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.1 18.2 1.7 0.4 Transactions in the period to 31 December 2021(2 ) Balances as at 31 December 2021 (1) Drax Ownership Management fee income \u00a3m Purchases \u00a3m Payable \u00a3m Receivable \u00a3m Houston Pellet Limited Partnership HPLP 30% 0.2 10.3 1.4 0.6 (1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing. (2) The transactions in the period to 31 December 2021 represent the transactions from the acquisition date of 13 April 2021 to the reporting date. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-716": { "value": "Remuneration of key management personnel The remuneration of the Directors and Executive management, who are considered to be the key management personnel of the Group, is set out below in aggregate for each of the categories speci\ufb01ed in IAS 24. Further information about the remuneration of individual directors, together with the directors\u2019 interests in the share capital of the Company, is provided in the audited part of the Remuneration Committee report. Year ended 31 December 2022 \u00a3000 2021 \u00a3000 Short-term employee bene\ufb01ts 7,531 6,755 Share-based payments 3,964 2,826 Post-employment bene\ufb01ts 489 635 Total remuneration 11,984 10,216 Compensation of the Group\u2019s key management personnel includes short-term employee bene\ufb01ts, which includes salaries, other short-term bene\ufb01ts, and contributions to post-employment money purchase pension schemes. Share-based payments compensation represents the amounts receivable under share-based incentive schemes as disclosed in note 6.2. Amounts included in the table above reflect the remuneration of the 17 (2021: 17) members of the Board and Executive management. There were no other transactions with directors for the periods covered by these Consolidated \ufb01nancial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } } } }