{ "documentInfo": { "documentType": "https://xbrl.org/2021/xbrl-json", "features": { "xbrl:canonicalValues": true }, "namespaces": { "draxgroupplc": "http://draxgroupplc.com/xbrl/2023", "ifrs-full": "https://xbrl.ifrs.org/taxonomy/2022-03-24/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/2023/549300YPSNTXR4ZHSR98-2023-12-31.xsd" ] }, "facts": { "fact-1": { "value": "Drax Group plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-671": { "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 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 183 to 187, as well as voluntary information which management believes 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 in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). 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 scheme (measured at fair value and using the projected unit credit method respectively). The Consolidated \ufb01nancial statements are presented in pounds sterling, the functional currency of the Company and the Group\u2019s presentational currency, rounded to the nearest million to one decimal place unless stated otherwise. Foreign currency transactions Each entity in the Group determines its own functional currency and items included in the results of each entity are measured using that functional currency. Transactions in currencies other than an entity\u2019s functional currency are initially recorded in the transaction currency and translated into the entity\u2019s functional currency at the average monthly exchange rate to the extent that this approximates the exchange rate prevailing at the date of the transaction. If the average monthly exchange rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, income and expenditure are translated at the rates prevailing at the date of the transaction. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the 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 the fair value was determined. Foreign exchange gains and losses arising on such translations are recognised in the Consolidated income statement within foreign exchange gains or losses. Foreign exchange gains or losses on qualifying cash flow hedges are recognised in other comprehensive income (OCI) within the Consolidated statement of comprehensive income, and deferred within equity to the extent the hedges are effective, until the hedged item 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 within the Consolidated statement of comprehensive income. Climate change The impact of climate change has been considered throughout the preparation of the Annual report and accounts. In particular, in the Strategic report and in compliance with FCA Listing Rules 9.8.6(8), the Task Force on Climate-Related Financial Disclosures (TCFD) section contains information on the four recommendations and 11 recommended disclosures of TCFD. 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 \u2022 Present value of decommissioning provisions \u2022 Fair value of contingent consideration Further information on these considerations 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, \ufb01nancial position and cash flows, are discussed on pages 1 to 107 of this Annual report and accounts. The current market conditions and \ufb01nancial performance of the Group are considered in the Financial review on page 22. In assessing going concern the Directors have considered the period up to 31 March 2025, as this period extends beyond the Group\u2019s debt repayment of a \u00a3122.5 million tranche of the 2019 UK infrastructure private placement facility in early 2025. Subsequent to the reporting date and prior to the signing date of the Consolidated \ufb01nancial statements, a separate \u00a3122.5 million tranche of the 2019 UK infrastructure private placement facility due in January 2024 has been repaid, as well as \u20ac25.0 million of the 2020 UK infrastructure private placement facility. The Group\u2019s committed \u00a3300 million revolving credit facility (RCF) which was also due to expire in January 2025 has been extended by 12 months to January 2026. On 22 February 2024, the Group signed a new secured committed Term Loan facility for \u00a3209 million (sterling equivalent) and a further \u00a350 million on 27 February 2024. All of these factors have been included in the Group\u2019s going concern assessment. See note 4.2 for further details on the Group\u2019s borrowings. The Directors have also considered any signi\ufb01cant events, including any committed outflows beyond this period, in forming their conclusion. The going concern assessment primarily focuses on cash flow forecasts, available liquidity and continued compliance with banking covenants over the period assessed. The cash flow forecasts used to assess going concern are modelled for the impact of severe but plausible scenarios consistent with the viability assessment detailed on pages 92 and 93. The scenarios modelled included a decrease in power prices and an increase in biomass costs. At 31 December 2023 the Group had cash and committed facilities of \u00a3639.4 million (see note 2.7) and borrowings of \u00a31,425.3 million (see note 4.2). Under all scenarios modelled, the Group maintained suf\ufb01cient liquidity and continued to remain in compliance with its covenants. The Directors have therefore concluded that they have a reasonable expectation that the Group will continue to meet its liabilities as they fall due for a period of at least 12 months from the date of signing these Consolidated \ufb01nancial statements and have adopted the going concern basis in preparing these Consolidated \ufb01nancial statements. See the Viability statement on pages 92 and 93, for details of the Directors assessment that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next \ufb01ve years based on forecasts and projections that take into account reasonably possible changes in trading performance and other key assumptions. Basis of consolidation These Consolidated \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 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 are attributed to the owners of the parent company and to the non-controlling interests even if this results in the non-controlling interests having a 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 has one joint operation and no joint ventures. The Group recognises its direct right to assets, liabilities, revenue and expenses of the joint operation, as well as its share of any jointly entitled assets, liabilities, income and expenditure. Associates are those entities in which the Group has 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 each component of OCI of equity-accounted associates, that are recognised in the Consolidated income statement and Consolidated statement of comprehensive income respectively. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. If the carrying amount of an associate reaches \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 share of pro\ufb01ts or losses from associates in the Consolidated income statement. 8.1 General information Drax Group plc (the Company) is a public company, limited by shares, incorporated in the United Kingdom under the Companies Act 2006 , and registered in England and Wales. The Company and its subsidiaries (collectively, the Group) have three principal activities: \u2022 Production and subsequent sale of biomass pellets for use in electricity generation; \u2022 Electricity generation; and \u2022 Electricity and gas supply to non-domestic customers. The Group\u2019s activities are principally based within the UK, US and Canada. 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 the Company\u2019s direct and indirect related undertakings 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-596": { "value": "
Basis of preparation
The Consolidated \ufb01nancial statements have been prepared in
accordance with the United Kingdom adopted International
Accounting Standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
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 scheme (measured at fair value and using the
projected unit credit method respectively).
The Consolidated \ufb01nancial statements are presented in pounds
sterling, the functional currency of the Company and the Group\u2019s
presentational currency, rounded to the nearest million to one
decimal place unless stated otherwise.
Foreign currency transactions
Each entity in the Group determines its own functional currency
and items included in the results of each entity are measured
using that functional currency. Transactions in currencies other
than an entity\u2019s functional currency are initially recorded in the
transaction currency and translated into the entity\u2019s functional
currency at the average monthly exchange rate to the extent that
this approximates the exchange rate prevailing at the date of the
transaction. If the average monthly exchange rate is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, income and expenditure are
translated at the rates prevailing at the date of the transaction.
At each reporting date, monetary assets and liabilities that are
denominated in foreign currencies are translated at the 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 the fair
value was determined. Foreign exchange gains and losses arising
on such translations are recognised in the Consolidated income
statement within foreign exchange gains or losses. Foreign
exchange gains or losses on qualifying cash flow hedges are
recognised in other comprehensive income (OCI) within the
Consolidated statement of comprehensive income, and deferred
within equity to the extent the hedges are effective, until the
hedged item 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 within the Consolidated statement
of comprehensive income.
Climate change
The impact of climate change has been considered throughout
the preparation of the Annual report and accounts. In particular,
in the Strategic report and in compliance with FCA Listing Rules
9.8.6(8), the Task Force on Climate-Related Financial Disclosures
(TCFD) section contains information on the four
recommendations and 11 recommended disclosures of TCFD.
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
\u2022 Present value of decommissioning provisions
\u2022 Fair value of contingent consideration
Further information on these considerations 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, \ufb01nancial position and
cash flows, are discussed on pages 1 to 107 of this Annual report
and accounts. The current market conditions and \ufb01nancial
performance of the Group are considered in the Financial review
on page 22.
In assessing going concern the Directors have considered the
period up to 31 March 2025, as this period extends beyond the
Group\u2019s debt repayment of a \u00a3122.5 million tranche of the 2019
UK infrastructure private placement facility in early 2025.
Subsequent to the reporting date and prior to the signing date of
the Consolidated \ufb01nancial statements, a separate \u00a3122.5 million
tranche of the 2019 UK infrastructure private placement facility
due in January 2024 has been repaid, as well as \u20ac25.0 million of
the 2020 UK infrastructure private placement facility. The
Group\u2019s committed \u00a3300 million revolving credit facility (RCF)
which was also due to expire in January 2025 has been extended
by 12 months to January 2026. On 22 February 2024, the Group
signed a new secured committed Term Loan facility for
\u00a3209 million (sterling equivalent) and a further \u00a350 million on
27 February 2024. All of these factors have been included in the
Group\u2019s going concern assessment. See note 4.2 for further
details on the Group\u2019s borrowings.
The Directors have also considered any signi\ufb01cant events,
including any committed outflows beyond this period, in forming
their conclusion. The going concern assessment primarily focuses
on cash flow forecasts, available liquidity and continued
compliance with banking covenants over the period assessed.
The cash flow forecasts used to assess going concern are
modelled for the impact of severe but plausible scenarios ,
consistent with the viability assessment detailed on pages 92 and 93. The scenarios modelled included a decrease in power prices and an increase in biomass costs. At 31 December 2023 the Group had cash and committed facilities of \u00a3639.4 million (see note 2.7) and borrowings of \u00a31,425.3 million (see note 4.2). Under all scenarios modelled, the Group maintained suf\ufb01cient liquidity and continued to remain in compliance with its covenants. The Directors have therefore concluded that they have a reasonable expectation that the Group will continue to meet its liabilities as they fall due for a period of at least 12 months from the date of signing these Consolidated \ufb01nancial statements and have adopted the going concern basis in preparing these Consolidated \ufb01nancial statements. See the Viability statement on pages 92 and 93, for details of the Directors assessment that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next \ufb01ve years based on forecasts and projections that take into account reasonably possible changes in trading performance and other key assumptions. Basis of consolidation These Consolidated \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 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 are attributed to the owners of the parent company and to the non-controlling interests even if this results in the non-controlling interests having a 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 has one joint operation and no joint ventures. The Group recognises its direct right to assets, liabilities, revenue and expenses of the joint operation, as well as its share of any jointly entitled assets, liabilities, income and expenditure. Associates are those entities in which the Group has 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 each component of OCI of equity-accounted associates, that are recognised in the Consolidated income statement and Consolidated statement of comprehensive income respectively. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. If the carrying amount of an associate reaches \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 share of pro\ufb01ts or losses from associates in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-646": { "value": "The Consolidated \ufb01nancial statements have been prepared in accordance with the United Kingdom adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). ", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-613": { "value": "Foreign currency transactions Each entity in the Group determines its own functional currency and items included in the results of each entity are measured using that functional currency. Transactions in currencies other than an entity\u2019s functional currency are initially recorded in the transaction currency and translated into the entity\u2019s functional currency at the average monthly exchange rate to the extent that this approximates the exchange rate prevailing at the date of the transaction. If the average monthly exchange rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, income and expenditure are translated at the rates prevailing at the date of the transaction. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the 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 the fair value was determined. Foreign exchange gains and losses arising on such translations are recognised in the Consolidated income statement within foreign exchange gains or losses. Foreign exchange gains or losses on qualifying cash flow hedges are recognised in other comprehensive income (OCI) within the Consolidated statement of comprehensive income, and deferred within equity to the extent the hedges are effective, until the hedged item 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 within the Consolidated statement of comprehensive income. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-645": { "value": "Each entity in the Group determines its own functional currency and items included in the results of each entity are measured using that functional currency. Transactions in currencies other than an entity\u2019s functional currency are initially recorded in the transaction currency and translated into the entity\u2019s functional currency at the average monthly exchange rate to the extent that this approximates the exchange rate prevailing at the date of the transaction. If the average monthly exchange rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, income and expenditure are translated at the rates prevailing at the date of the transaction. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-614": { "value": "Going concern The Group\u2019s business activities, along with future developments that may affect its \ufb01nancial performance, \ufb01nancial position and cash flows, are discussed on pages 1 to 107 of this Annual report and accounts. The current market conditions and \ufb01nancial performance of the Group are considered in the Financial review on page 22. In assessing going concern the Directors have considered the period up to 31 March 2025, as this period extends beyond the Group\u2019s debt repayment of a \u00a3122.5 million tranche of the 2019 UK infrastructure private placement facility in early 2025. Subsequent to the reporting date and prior to the signing date of the Consolidated \ufb01nancial statements, a separate \u00a3122.5 million tranche of the 2019 UK infrastructure private placement facility due in January 2024 has been repaid, as well as \u20ac25.0 million of the 2020 UK infrastructure private placement facility. The Group\u2019s committed \u00a3300 million revolving credit facility (RCF) which was also due to expire in January 2025 has been extended by 12 months to January 2026. On 22 February 2024, the Group signed a new secured committed Term Loan facility for \u00a3209 million (sterling equivalent) and a further \u00a350 million on 27 February 2024. All of these factors have been included in the Group\u2019s going concern assessment. See note 4.2 for further details on the Group\u2019s borrowings. The Directors have also considered any signi\ufb01cant events, including any committed outflows beyond this period, in forming their conclusion. The going concern assessment primarily focuses on cash flow forecasts, available liquidity and continued compliance with banking covenants over the period assessed. The cash flow forecasts used to assess going concern are modelled for the impact of severe but plausible scenarios ,
consistent with the viability assessment detailed on pages 92 and
93. The scenarios modelled included a decrease in power prices
and an increase in biomass costs. At 31 December 2023 the
Group had cash and committed facilities of \u00a3639.4 million (see
note 2.7) and borrowings of \u00a31,425.3 million (see note 4.2). Under
all scenarios modelled, the Group maintained suf\ufb01cient liquidity
and continued to remain in compliance with its covenants. The
Directors have therefore concluded that they have a reasonable
expectation that the Group will continue to meet its liabilities as
they fall due for a period of at least 12 months from the date of
signing these Consolidated \ufb01nancial statements and have
adopted the going concern basis in preparing these Consolidated
\ufb01nancial statements.
See the Viability statement on pages 92 and 93, for details of the
Directors assessment that they have a reasonable expectation
that the Group will be able to continue in operation and meet
its liabilities as they fall due over the next \ufb01ve years based on
forecasts and projections that take into account reasonably
possible changes in trading performance and other key
assumptions.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-615": { "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 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 are attributed
to the owners of the parent company and to the non-controlling
interests even if this results in the non-controlling interests
having a 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 has one joint operation and no joint ventures.
The Group recognises its direct right to assets, liabilities, revenue
and expenses of the joint operation, as well as its share of any
jointly entitled assets, liabilities, income and expenditure.
Associates are those entities in which the Group has 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 each
component of OCI of equity-accounted associates, that are
recognised in the Consolidated income statement and
Consolidated statement of comprehensive income respectively.
Dividends received or receivable from associates are recognised
as a reduction in the carrying amount of the investment. If the
carrying amount of an associate reaches \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 share of pro\ufb01ts or losses from associates
in the Consolidated income statement.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-648": { "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 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 ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-690": { "value": "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 has one joint operation and no joint ventures. The Group recognises its direct right to assets, liabilities, revenue and expenses of the joint operation, as well as its share of any jointly entitled assets, liabilities, income and expenditure. Associates are those entities in which the Group has 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 each component of OCI of equity-accounted associates, that are recognised in the Consolidated income statement and Consolidated statement of comprehensive income respectively. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. If the carrying amount of an associate reaches \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 share of pro\ufb01ts or losses from associates in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-647": { "value": "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 each component of OCI of equity-accounted associates, that are recognised in the Consolidated income statement and Consolidated statement of comprehensive income respectively. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. If the carrying amount of an associate reaches \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 share of pro\ufb01ts or losses from associates in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-612": { "value": "
Accounting policies
The material 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 2022, except for
the adoption of new standards and amendments effective as of
1 January 2023. 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.
Offsetting
IAS 32 requires \ufb01nancial assets and \ufb01nancial liabilities to be offset
and the net amount presented in the Consolidated balance sheet
when the Group has both a current legally enforceable right to
offset the recognised amounts, and also has the intention to settle
on a net basis. The offsetting requirements and relevant guidance
is based on the principle of reflecting the entity\u2019s expected future
cash flows, and requires careful assessment around how the
requirements should be applied to derivative contracts that will be
settled in part through physical delivery of a non-\ufb01nancial asset.
its run-of-river hydro operations. It does not apply to the Group\u2019s
Contract for Difference (CfD) biomass unit or its pumped storage
hydro operations. The EGL applies at a rate of 45% to receipts
from in-scope forms of wholesale electricity generation that
exceed a de\ufb01ned benchmark level, after the deduction of certain
costs, from 1 January 2023 to 31 March 2028.
After consideration of the legislation underpinning the EGL, the
Group has determined that it should be treated as a levy under
IFRIC 21 \u2019Levies\u2019, rather than as a tax under IAS 12 \u2018Income taxes\u2019.
Therefore, the cost is recognised above gross pro\ufb01t. Due to the
materiality of the charge, in terms of both its quantum and nature
(being the \ufb01rst year of applicability), it was determined that the
EGL should be presented as a separate line on the face of the
Consolidated income statement. A reconciliation of Adjusted
EBITDA including EGL to Adjusted EBITDA excluding EGL can
be found in note 2.7.
In accordance with IFRIC 21, a liability for a levy is recognised
once the obligating event, being the activity that triggers the
payment of the levy, has occurred. A liability to pay a levy is
recognised progressively if the obligating event occurs over time.
If an obligation to pay a levy is triggered when a minimum
threshold is reached the corresponding liability is recognised
only when that minimum activity threshold is reached. The EGL
is triggered based on average generation receipts for in-scope
revenue schemes over a reporting period being higher than the
threshold set in the legislation. A liability is therefore recognised
if the average actual generation receipts to date in a \ufb01nancial
period are above the threshold. The threshold for 2023 is \u00a375 per
MWh. The assessment is based on receipts above this threshold
after adjusting for allowable costs.
Previously, the Group did not consider derivatives that resulted in physical delivery of a non-\ufb01nancial asset and were not settled solely in cash or another \ufb01nancial instrument to meet the requirements for offsetting. During the current year, the Group has revised its application of how the offsetting criteria are applied to derivative contracts that are physically settled. This has resulted in a number of physically settled derivatives now being deemed to meet the offsetting criteria. The Group has applied offsetting based on a contract level unit of account. The Consolidated balance sheet for the comparative periods have been restated to re\ufb02ect the revised application. The impact of this change is summarised in the tables below. There is no impact from this change on the Group\u2019s net assets or shareholders\u2019 equity, nor any impact on the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of changes in equity or Consolidated cash \ufb02ow statement.
As at
31 December As at
2022 31 December
Previously 2022
reported Restatement Restated
\u00a3m \u00a3m \u00a3m
Non-current assets
Derivative \ufb01nancial instruments
421.7
(60.7)
361.0
Total non-current assets
3,597.2
(60.7)
3,536.5
Current assets
Derivative \ufb01nancial instruments
796.3
(399.4)
396.9
Total current assets
2.797. 2
(399.4)
2,397. 8
Current liabilities
Derivative \ufb01nancial instruments
(989.4)
399.4
(590.0)
Total current liabilities
(2,607.6)
399.4
(2,208.2)
Non-current liabilities
Derivative \ufb01nancial instruments
(735.4)
60.7
(674.7)
Total non-current liabilities
(2,462.6)
60.7
(2,401.9)
Net assets
(1,324.2)
\u2013
(1,324.2)
As at
31 December As at
2021 31 December
Previously 2021
reported Restatement Restated
\u00a3m \u00a3m \u00a3m
Non-current assets
Derivative \ufb01nancial instruments
357.5
(167.3)
190.2
Total non-current assets
3,476.0
(167.3)
3,308.7
Current assets
Derivative \ufb01nancial instruments
888.6
(478.5)
410.1
Total current assets
2,348.4
(478.5)
1,869.9
Current liabilities
Derivative \ufb01nancial instruments
(962.7)
478.5
(484.2)
Total current liabilities
(2,232.9)
478.5
(1,754.4)
Non-current liabilities
Derivative \ufb01nancial instruments
(541.8)
167.3
(374.5)
Total non-current liabilities
(2,284.7)
167.3
(2,117.4)
Net assets
(1,306.8)
\u2013
(1,306.8)
See the Critical accounting judgements section below and note 7.5 for further details on the Group\u2019s offsetting of \ufb01nancial assets and \ufb01nancial liabilities . Electricity Generator Levy In December 2022, the UK Government con\ufb01rmed the details of a windfall tax \u2013 the Electricity Generator Levy (EGL) \u2013 on renewable and low-carbon generators, for implementation in 2023. The levy applies to the Group\u2019s three biomass units operating under the Renewables Obligation (RO) scheme and 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. 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 from the Group\u2019s processing facilities in North America; \u2022 Generation: the generation and sale of electricity in the UK; and \u2022 Customers: supply of electricity and gas to non-domestic customers in the UK. Operating costs that can be reasonably allocated to the activities of a reportable segment are included within the results of that reportable segment. Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s positions. Central corporate function costs that cannot be reasonably allocated to the activities of a reportable segment are included within Innovation, capital projects and other. Innovation, capital projects and other is not a reportable segment as it does not earn revenues, however it is included in the information presented below to enable reconciliation of the segmental amounts presented to the consolidated IFRS results recognised in these Consolidated \ufb01nancial statements. Given the principal activity of the Group is a generator and seller of electricity, the Consolidated income statement includes all revenue from sales of electricity during the period. Where electricity is purchased rather than generated to ful\ufb01l a sale, either due to operational or other requirements, the cost of this purchase is recorded within Cost of sales. 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 the Generation business, this reflects the direct costs of the commodities to generate the power, the relevant grid connection costs that arise, and from 2023, EGL arising on applicable renewable and low-carbon generation. In respect of the Customers business, this reflects the direct costs of supply, being the costs of the power or gas supplied, together with costs levied on suppliers such as network costs, broker costs and renewables incentive mechanisms. Accordingly, cost of sales excludes indirect overheads and staff costs (presented within operating and administrative expenses), and depreciation (presented separately on the face of the Consolidated income statement). See note 3.4 for details of the costs included within inventories. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements. 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 Renewables Obligation (RO) schemes operate and the related accounting, are provided below the table.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
Pellet sales The Group\u2019s Pellet Production business produces Revenue is recognised at the point that the pellets
(Pellet Production) biomass pellets which are sold to external are loaded onto the shipping vessel. The amount of
customers. Customers generally obtain control revenue recognised is based on the contracted price
of the pellets at the point the pellets are loaded and volume of the pellets.
onto the shipping vessel. For CIF sales, revenue for the freight portion is
Where freight is also arranged for the customer, recognised over the period the vessel sails.
these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is
considered a separate performance obligation.
Invoices are raised in line with contractual terms
and are usually payable within 4\u201310 days.
Electricity sales The Group\u2019s Generation business has contracts Revenues from sales contracts ful\ufb01lled though
(Generation) for wholesale electricity sales. Performance generation are measured based upon metered output
obligations, being the supply of electricity, are met at rates speci\ufb01ed under contract terms. These are
either via generation or through the procurement recognised under the output method, whereby
of electricity from counterparties. The revenue is recognised based on the value transferred
performance obligations for these contracts are to the customer.
deemed to be a series of distinct goods that are Revenue from sales contracts ful\ufb01lled through
substantially the same and transfer consecutively. procured electricity is recognised at the point at
Control is deemed to have transferred to the which this electricity is supplied to the counterparty
customer at the point that the electricity has been in accordance with the contractual terms at rates
supplied in accordance with the contractual terms. speci\ufb01ed under the contract.
Invoices are typically raised on the \ufb01fth banking
day following the month of supply, in line with the
Grid Trade Master Agreement (GTMA) contractual
terms, and are payable on the \ufb01fth banking day
following the date of invoice.
Renewable certi\ufb01cate Renewables Obligation Certi\ufb01cates (ROCs) and External ROC and REGO sales are recognised at the
sales Renewable Energy Guarantees of Origin (REGOs) point the relevant certi\ufb01cates are transferred to the
(Generation) are sold to counterparties at a point in time. counterparty.
ROCs sold to optimise working capital are invoiced See below for further details.
in line with contractual terms and are usually
payable within two days.
Invoices for ROC sales to third parties are raised
when the ROCs are transferred, typically four to
\ufb01ve months following the end of the compliance
period in which they were generated. Invoices are
usually payable within seven days.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
CfD income/payment The Group\u2019s Generation business is party to a CfD The Group recognises the income or cost arising from
(Generation) with the Low Carbon Contracts Company (LCCC), the CfD in the Consolidated income statement as a
a Government-owned entity responsible for component of revenue at the point the Group meets
delivering elements of the Government\u2019s its performance obligation under the CfD contract.
Electricity Market Reform Programme. Under the This is considered to be the point at which the
contract, the Group makes or receives payments relevant generation is delivered and the payment
in respect of electricity dispatched from a speci\ufb01c becomes contractually due.
biomass-fuelled generating unit. See below for further details.
Invoices are raised 7\u201310 days following the date
of supply and are settled within 28 days.
Ancillary services Ancillary services refer to the provision of a range Revenue is recognised by reference to the stage
(Generation) of system support services to National Grid. Most of completion of the contractual performance
contracts are for the delivery of a speci\ufb01c service obligations, which are calculated by reference to
either continually or on an ad-hoc basis over a the amount of the contract term that has elapsed.
period of time. Depending on contract terms, this approach may
Invoices are raised and subsequently settled in line require judgement in estimating probable future
with the National Grid company ancillary services outcomes.
settlement calendar, typically monthly.
Other income Other income is derived from the sale of goods. Revenue is recognised at the point the control of the
(All segments) The customer obtains control typically at the point goods is transferred to the customer.
of delivery to their premises or upon collection.
Invoices are raised in line with contractual terms.
Electricity and gas sales The Group\u2019s Customers business sells electricity Revenue is recognised on the supply of electricity or
(Customers) and gas directly to non-domestic customers. gas when a contract exists, supply has taken place,
Energy supplied is measured based upon metered a quanti\ufb01able price has been established or can be
consumption and contractual rates. determined and the amounts receivable are expected
The Customers business also has long-term to be recovered.
contracts for the sale of electricity and gas, Where supply has taken place but has not yet been
which are deemed as being satis\ufb01ed over time measured or billed, revenue is estimated based on
in line with the progress of the contracts. consumption statistics and selling price estimates
Invoices are raised in line with contractual terms. and is recognised as accrued income. This estimate
For small and medium-sized enterprise (SME) is not considered to be a key source of estimation
customers, payment is generally due within uncertainty because historical experience has
10\u201314 days. For Industrial and Commercial (I&C) demonstrated that these estimates are materially
customers, payment is generally due between accurate based on the subsequent billings
28\u201390 days. and settlements.
Where contracts for the sale of electricity and gas are
held, revenue is recognised in line with the progress
of the contracts.
The revenue recognised for \ufb01xed price contracts is
based on the input method. Revenue is recognised
based on the costs incurred and the estimated
margin to be obtained over the life of the contract.
For variable price contracts revenue is recognised
based on the output method. Revenue is recognised
based on the volume supplied and the contracted
price. Assumptions are applied consistently but
third-party costs can vary, therefore actual outcomes
may vary from initial estimates.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
EBRS and EBDS income The UK Government introduced the EBDS running The discounted price of electricity and gas supplied
(Customers) from 1 April 2023 to 31 March 2024. Under this under both the EBRS and EBDS is recognised in
scheme, energy supplied to eligible non-domestic revenue as it is supplied. The amount claimed back
customers will have a discount applied to each from the UK Government is recognised within
unit of electricity and gas. Certain customers may revenue over the same period as the underlying
be eligible for higher levels of support dependent discounted revenue it relates to is recognised.
on the sector in which they operate. The discount The revenue received from the UK Government is
provided can then be claimed back from the UK included in the EBRS and EBDS income line in the
Government by the supplier. table on page 194. The Group does not recognise any
The EBDS replaced the EBRS which supported additional revenue from the scheme than it would
non-domestic customers between 1 October have done had it not been introduced.
2022 and
31 March 2023. Under the EBRS,
energy supplied to non-domestic customers in this
period had a discount applied for the customer
under the scheme to cap their energy tariff. The
discount provided could then be claimed back
from the UK Government by the supplier.
Payment is due 10 days post submission of
a claim, which typically occurs monthly.
Accounting policy
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.
A CGU is the smallest identi\ufb01able group of assets that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. CGUs are identi\ufb01ed consistently from period to period unless there is a change in the period that
would impact the Group\u2019s CGUs. The Group\u2019s CGUs are reassessed should any such changes occur.
The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGU) whenever there is an indication
that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each
reporting period.
If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to
the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the
expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs 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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic, commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in renewable technologies, 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 estimated future cash flows are 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 what a market participant would pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the Consolidated income statement. Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be allocated on a reasonable and consistent basis. An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual asset is limited to reducing the 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. The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated to them. See note 5.2 for further details on goodwill. 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 third-party 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 other comprehensive income or directly in equity, in which case the current and deferred taxes are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity respectively. The Group has utilised the relief available under the Research and Development Expenditure Credit (RDEC) regime. 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 where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 for a breakdown of the net deferred tax asset or liability position for each jurisdiction. Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to the weighted average number of ordinary shares outstanding in the year. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the parent company (pro\ufb01t or loss after tax, excluding amounts attributable to non-controlling interests) by the weighted average number of ordinary shares that were outstanding during the year. Diluted EPS demonstrates the impact of all outstanding share options that would vest on their future maturity dates if the conditions at the end of the reporting period were the same as those at the end of the vesting period (such as those to be issued under employee share schemes \u2013 see note 6.2), and the options were exercised and treated as ordinary shares as at the reporting date. Repurchased shares of 40.3 million (2022: 13.8 million) held in the treasury shares reserve are not included in the weighted average calculation of shares. See note 2.11 for details of the shares repurchased in the current year as part of the \u00a3150 million share buyback programme and note 4.4 for further details on the treasury shares reserve. For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact. Accounting policy Property, plant and equipment is stated at net book value, which is its cost less any accumulated depreciation and accumulated impairment losses, if required, charged to date. Property, plant and equipment assets are initially measured at cost. Cost comprises: the purchase price (after deducting trade discounts and rebates); any directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and 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 available for use and over its useful economic life (UEL). Where relevant, this is limited to the estimated decommissioning date of the site where the asset is located. The Group constructs many of its assets as part of long-term development projects. Assets that are under the course of construction are not depreciated until they are ready for use in the manner intended by management. 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 reasonably certain 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. Lease remeasurements, lease modi\ufb01cations, and disposals of leased assets are included within other movements in the table below. 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 a by-product of renewable generation and is deducted from the cost of generation. This is recognised in the Consolidated income statement as a reduction to cost of sales. 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. ROC and REGO valuations are comprised of the expected value to be obtained in a sales transaction with a third-party supplier at the point of generation. If the Group has already agreed sales contracts covering the renewable 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. This estimate is made using various sources of information including recently achieved sales prices, ongoing sales negotiations and published forecasted prices from external third parties. 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 Compliance Period (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 in the market. Any impairment loss on these assets is recognised in the Consolidated income statement in the period incurred within cost of sales. Accounting policy The Group\u2019s inventories are valued at the lower of cost and net realisable value. The costs of items of inventory are determined using weighted average costs. The cost of purchased inventories includes all direct costs incurred in bringing the raw material or 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. Biomass 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. Instead, this 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 inventories includes all direct costs as well as conversion costs including labour, direct overheads and an allocation of indirect overheads, including depreciation. The cost of inventories includes other costs incurred in bringing the inventories to their existing condition and location. Costs that do not contribute to bringing inventories to their present condition and location, such as storage and administration overheads, are excluded from the cost of inventories and expensed as incurred. Abnormal amounts of wasted materials, labour or other production costs are also excluded from the cost of inventories. The valuation of \ufb01bre inventory involves estimations of 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 this facility 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 from the Consolidated balance sheet at the point of sale, which is shortly after the initial recognition of the receivable balance, as the signi\ufb01cant risks and rewards of ownership are deemed to have been transferred. Due to the short period between recognising the receivables and them being derecognised, 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 2023, the receivables sold under this facility were \u00a3400.0 million (2022: \u00a3400.0 million). Refer to note 4.3 for further information about the facility. The UK Government introduced the Energy Bills Discount Scheme (EBDS) running from 1 April 2023 to 31 March 2024. Under this scheme, energy supplied to eligible non-domestic customers in this period has a discount applied. The discount provided can then be claimed back from the UK Government by the supplier. 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, or accrued income if not yet claimed at the reporting date. The EBDS replaced the Energy Bill Relief Scheme (EBRS) which supported non-domestic customers between 1 October 2022 and 31 March 2023 by capping their energy tariffs. Amounts recognised under the EBDS are signi\ufb01cantly smaller than under the EBRS due to the reduced level of support provided, and lower market prices in the period since its introduction. See note 2.2 for details of amounts relating to EBDS and EBRS within the Consolidated income statement. 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). 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 smaller 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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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 \ufb01nancial liabilities that are initially measured at fair value. Trade and other payables are subsequently measured at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expire. If the terms of a \ufb01nancial liability are signi\ufb01cantly modi\ufb01ed, the existing \ufb01nancial liability is derecognised and a new \ufb01nancial liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the \ufb01nancial liability based on the terms pre-modi\ufb01cation and post-modi\ufb01cation is recognised in the Consolidated income statement. 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 deposit available cash in low-risk bank accounts or short-term deposit accounts. Accounting policy The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration 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 may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\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 or losses or interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings amounts disclosed in the tables below exclude any impact of hedging instruments. Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt instrument are signi\ufb01cantly modi\ufb01ed, the existing liability is derecognised and a new liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modi\ufb01cation and post- modi\ufb01cation is recognised in the Consolidated income 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. 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 2023, the Group has two (2022: two) subsidiary undertakings with NCIs. These subsidiaries were acquired during 2021 through the acquisition of Pinnacle. During the prior year, the Group purchased the remaining 10% of the 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 transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related costs are recognised as an expense in the Consolidated income statement in the period that they are incurred. Goodwill is measured as the excess of the: \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. Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment post-acquisition are treated as post-acquisition remuneration. Accounting policy 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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised.
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 UELs of the Group\u2019s generation assets and
pellet plants, 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, with the capitalisation shown in the movement in reinstatement asset line in note 3.1 and is
depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges
in the Consolidated income statement.
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.
Other provisions include a provision in respect of dilapidation costs for leased of\ufb01ces and rail cars.
Accounting policy
The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted
at the date of grant and are not subsequently remeasured.
If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way
through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is
accelerated at the point of cancellation.
If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market
performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance
with IFRS 2.
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 schemes 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 2023 have been prepared in accordance with specialist, third-party actuarial advice received and are
consistent with those applied in the prior period.
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
signi\ufb01cant 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 lease liabilities, 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.
Fair value measurement \u2022 Commodity contracts \u2013 the fair value of open commodity contracts that do not qualify for the own-use exemption, or are otherwise within the scope of IFRS 9, is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 the fair value of 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. 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. The assessment of fair value is derived in part by reference to a market price or rate for the instrument in question. The Group bases its assessment of market prices or rates upon forward curves that are largely derived from readily obtainable prices or rates published 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 nature of the derivative \ufb01nancial instruments the Group holds, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but 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 for each derivative contract. 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), or where different forward curves are available. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. However, given the maturity pro\ufb01le of the Group\u2019s contracts, liquid forward market price curves are usually available for the duration of the contracts. The fair value of derivatives is not, however, considered a key source of estimation uncertainty as reasonably possible changes in assumptions are not expected to result in a materially different value within the next \ufb01nancial year. Also, whilst there is a signi\ufb01cant risk that the carrying amount of derivative assets and liabilities will change materially within the next \ufb01nancial year, as a result of movements in market prices or rates, the Group is not expecting to change its methodology or input sources in the next \ufb01nancial year. Any such changes are not as a result of assumptions or other sources of estimation uncertainty as at 31 December 2023 and therefore do not meet the de\ufb01nition of a key source of estimation uncertainty as de\ufb01ned by IAS 1. 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 USD loan notes, the EUR loan notes, and the 2020 UK infrastructure private placement facilities (see note 4.2) 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, foreign currency exchange contracts, interest rate swaps, cross-currency contracts and inflation swaps are largely determined by comparison between observable, liquid, forward market prices or rates, and the trade price or rate; therefore, these contracts are categorised as Level 2. Credit risk is not a signi\ufb01cant input to the fair value calculations. 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. No external specialists have been utilised for the valuation of the current or prior year derivative \ufb01nancial instruments. 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 contingent consideration receivable by the Group relates to the sale of the CCGT generation portfolio in 2021. The gross nominal value of \u00a329.0 million 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 of the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used 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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s energy supply contracts, are excluded from fair value mark-to-market accounting. 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 (see 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 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. 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 and the impact of discounting. 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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting, or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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 94). The Financial Risk Management Committee identi\ufb01es, evaluates and manages \ufb01nancial risks in close co-ordination with the Group\u2019s trading and treasury functions under policies approved by the Board of directors. 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
Hedge accounting
The Group designates its \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK
infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign
currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement
facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating-
to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP
interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 this inflation risk.
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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated in the hedge reserve is transferred and included within the initial cost of the asset. 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 hedging the purchase of inventory denominated in foreign currencies 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. 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 or receivable. ", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-701": { "value": "Offsetting IAS 32 requires \ufb01nancial assets and \ufb01nancial liabilities to be offset and the net amount presented in the Consolidated balance sheet when the Group has both a current legally enforceable right to offset the recognised amounts, and also has the intention to settle on a net basis. The offsetting requirements and relevant guidance is based on the principle of reflecting the entity\u2019s expected future cash flows, and requires careful assessment around how the requirements should be applied to derivative contracts that will be settled in part through physical delivery of a non-\ufb01nancial asset. Previously, the Group did not consider derivatives that resulted in physical delivery of a non-\ufb01nancial asset and were not settled solely in cash or another \ufb01nancial instrument to meet the requirements for offsetting. During the current year, the Group has revised its application of how the offsetting criteria are applied to derivative contracts that are physically settled. This has resulted in a number of physically settled derivatives now being deemed to meet the offsetting criteria. The Group has applied offsetting based on a contract level unit of account. The Consolidated balance sheet for the comparative periods have been restated to re\ufb02ect the revised application. The impact of this change is summarised in the tables below. There is no impact from this change on the Group\u2019s net assets or shareholders\u2019 equity, nor any impact on the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of changes in equity or Consolidated cash \ufb02ow statement.
As at
31 December As at
2022 31 December
Previously 2022
reported Restatement Restated
\u00a3m \u00a3m \u00a3m
Non-current assets
Derivative \ufb01nancial instruments
421.7
(60.7)
361.0
Total non-current assets
3,597.2
(60.7)
3,536.5
Current assets
Derivative \ufb01nancial instruments
796.3
(399.4)
396.9
Total current assets
2.797. 2
(399.4)
2,397. 8
Current liabilities
Derivative \ufb01nancial instruments
(989.4)
399.4
(590.0)
Total current liabilities
(2,607.6)
399.4
(2,208.2)
Non-current liabilities
Derivative \ufb01nancial instruments
(735.4)
60.7
(674.7)
Total non-current liabilities
(2,462.6)
60.7
(2,401.9)
Net assets
(1,324.2)
\u2013
(1,324.2)
As at
31 December As at
2021 31 December
Previously 2021
reported Restatement Restated
\u00a3m \u00a3m \u00a3m
Non-current assets
Derivative \ufb01nancial instruments
357.5
(167.3)
190.2
Total non-current assets
3,476.0
(167.3)
3,308.7
Current assets
Derivative \ufb01nancial instruments
888.6
(478.5)
410.1
Total current assets
2,348.4
(478.5)
1,869.9
Current liabilities
Derivative \ufb01nancial instruments
(962.7)
478.5
(484.2)
Total current liabilities
(2,232.9)
478.5
(1,754.4)
Non-current liabilities
Derivative \ufb01nancial instruments
(541.8)
167.3
(374.5)
Total non-current liabilities
(2,284.7)
167.3
(2,117.4)
Net assets
(1,306.8)
\u2013
(1,306.8)
See the Critical accounting judgements section below and note 7.5 for further details on the Group\u2019s offsetting of \ufb01nancial assets and \ufb01nancial liabilities . ", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationsOrChangesInPresentationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-728": { "value": "Offsetting IAS 32 requires \ufb01nancial assets and \ufb01nancial liabilities to be offset and the net amount presented in the Consolidated balance sheet when the Group has both a current legally enforceable right to offset the recognised amounts, and also has the intention to settle on a net basis. The offsetting requirements and relevant guidance is based on the principle of reflecting the entity\u2019s expected future cash flows, and requires careful assessment around how the requirements should be applied to derivative contracts that will be settled in part through physical delivery of a non-\ufb01nancial asset. Previously, the Group did not consider derivatives that resulted in physical delivery of a non-\ufb01nancial asset and were not settled solely in cash or another \ufb01nancial instrument to meet the requirements for offsetting. During the current year, the Group has revised its application of how the offsetting criteria are applied to derivative contracts that are physically settled. This has resulted in a number of physically settled derivatives now being deemed to meet the offsetting criteria. The Group has applied offsetting based on a contract level unit of account. The Consolidated balance sheet for the comparative periods have been restated to re\ufb02ect the revised application. The impact of this change is summarised in the tables below. There is no impact from this change on the Group\u2019s net assets or shareholders\u2019 equity, nor any impact on the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of changes in equity or Consolidated cash \ufb02ow statement.
As at
31 December As at
2022 31 December
Previously 2022
reported Restatement Restated
\u00a3m \u00a3m \u00a3m
Non-current assets
Derivative \ufb01nancial instruments
421.7
(60.7)
361.0
Total non-current assets
3,597.2
(60.7)
3,536.5
Current assets
Derivative \ufb01nancial instruments
796.3
(399.4)
396.9
Total current assets
2.797. 2
(399.4)
2,397. 8
Current liabilities
Derivative \ufb01nancial instruments
(989.4)
399.4
(590.0)
Total current liabilities
(2,607.6)
399.4
(2,208.2)
Non-current liabilities
Derivative \ufb01nancial instruments
(735.4)
60.7
(674.7)
Total non-current liabilities
(2,462.6)
60.7
(2,401.9)
Net assets
(1,324.2)
\u2013
(1,324.2)
As at
31 December As at
2021 31 December
Previously 2021
reported Restatement Restated
\u00a3m \u00a3m \u00a3m
Non-current assets
Derivative \ufb01nancial instruments
357.5
(167.3)
190.2
Total non-current assets
3,476.0
(167.3)
3,308.7
Current assets
Derivative \ufb01nancial instruments
888.6
(478.5)
410.1
Total current assets
2,348.4
(478.5)
1,869.9
Current liabilities
Derivative \ufb01nancial instruments
(962.7)
478.5
(484.2)
Total current liabilities
(2,232.9)
478.5
(1,754.4)
Non-current liabilities
Derivative \ufb01nancial instruments
(541.8)
167.3
(374.5)
Total non-current liabilities
(2,284.7)
167.3
(2,117.4)
Net assets
(1,306.8)
\u2013
(1,306.8)
See the Critical accounting judgements section below and note 7.5 for further details on the Group\u2019s offsetting of \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 or receivable. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-608": { "value": "
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.
In accordance with IAS 1 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.
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 activity
to optimise the overall portfolio position and potentially release
value in certain circumstances. As such, at each reporting date
the Group undertakes an assessment of whether contracts it
holds to buy and sell biomass are within the scope of IFRS 9.
If the contracts were deemed to be within the scope of IFRS 9,
this could result in these contracts being recognised at fair value
as derivative \ufb01nancial instruments from inception.
If management had not applied offsetting on physically settled derivative contracts in the current year then a number of derivative balances that are currently presented net in the Consolidated balance sheet would have been presented gross resulting in an additional \u00a3172.0 million of current derivative assets and liabilities and \u00a352.1 million of non-current derivative assets and liabilities. See note 7.5 for further details on the Group\u2019s offsetting of all \ufb01nancial assets and \ufb01nancial liabilities. In the \ufb01nancial statements issued in the prior year, management presented all physically settled derivatives gross. See the offsetting section above for further details on the change in presentation applied in the current year, with a restatement of the prior year. 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. Impairment An impairment review is conducted annually on cash-generating units (CGUs) with associated goodwill or intangible assets with an inde\ufb01nite life, and as required for other assets and CGUs where an indicator of possible impairment exists. In 2023, an impairment assessment has been completed for six of the Group\u2019s CGUs which all have allocated goodwill (Drax Energy Solutions, Opus Energy, Pellet Operations, Lanark, Galloway and Cruachan). The assessment of future cash flows that underpin the impairment reviews are based on management\u2019s best estimate of a number of assumptions (see note 2.4 for further details of these key assumptions). Pellet Operations was identi\ufb01ed as the only CGU where a reasonably possible change in certain assumptions could lead to a material adjustment to its carrying value as at 31 December 2023. The key assumptions to which the Pellet Operations CGU is sensitive to a reasonably possible change in are increases to the cost of production and decreases in production volumes. A $10 per tonne increase in the cost of production, with no corresponding impact on revenues, would lead to an impairment of \u00a3105.1 million. A 12% decrease in production volumes would lead to an impairment of \u00a347.2 million. See note 2.4 on page 195 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 suf\ufb01cient 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 as at 31 December 2023 is \u00a3974.1 million and depreciation on these assets in the year, based on the UELs disclosed in note 3.1, was \u00a377.2 million. If the UEL of assets that are limited to the current assumed end of station life of 2039
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 purchase contracts were
within the scope of IFRS 9, a \u00a31 per tonne increase or decrease
in the market price of biomass would result in a \u00a317.4 million
fair value gain or loss respectively being recognised on these
contracts. The Group continues to assess developments in
the biomass market on an ongoing basis to identify any impact
on this assessment.
Capitalisation of development project costs
As the Group executes its strategy, signi\ufb01cant investment is likely
to be required in large development projects, including bioenergy
with carbon capture and storage in the UK (UK BECCS) and the
expansion of Cruachan. In accounting for this expenditure,
judgements are required to determine whether these costs meet
the criteria to be capitalised, or whether they should be expensed
as incurred. The capitalisation of costs under IAS 16 and IAS 38
is based around the expectation that it is probable that economic
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. These factors can change over time and
so any judgements are continually reassessed.
At 31 December 2023 the Group had capitalised a total of
\u00a342.8 million relating to the UK BECCS development project,
including \u00a318.3 million in 2023. Had it been judged that the
criteria for capitalisation had not yet been met, these costs would
have been expensed as incurred. Should expectations around
the qualitative factors noted above change in future, then the
amounts capitalised may need to be impaired. For further details
on UK BECCS see the Development of BECCS at Drax Power
Station in the UK opportunity in the Climate-related opportunities
on page 87. The Group has not yet capitalised any costs in
relation to the expansion of Cruachan or any BECCS projects
outside of the UK, as the recognition criteria have been judged
not to have been met.
Offsetting of \ufb01nancial assets and \ufb01nancial liabilities
IAS 32 requires \ufb01nancial assets and \ufb01nancial liabilities to be offset
and the net amount presented in the Consolidated balance sheet
when the Group currently has both the legally enforceable right
to offset the recognised amounts, and the intention to settle on
a net basis. The offsetting requirements and relevant guidance
is based on the principle of reflecting the entity\u2019s expected future
cash flows. Whilst the offsetting criteria can be met in relation
to derivative \ufb01nancial instruments that will be settled through
physical delivery of a non-\ufb01nancial asset, there is an
interpretation required on how the offsetting criteria should
be applied. Namely, an interpretation is required around the
appropriate unit of account where there are a number of both
physical deliveries and cash flows that collectively settle
\ufb01nancial instruments, and how the offsetting requirements
should be applied to each of these settlements, either
individually or at a contract level.
were to increase by 10 years, the impact on the depreciation charge for the year would be a reduction of approximately \u00a316.6 million. If the assumed end of station life of 2039 were to decrease by 10 years to 2029, the impact on the depreciation charge for the year would be an increase of approximately \u00a372.9 million. See note 3.1 on page 213 Pension liabilities The Group records a net surplus or liability in its Consolidated balance sheet for the fair value of assets held by the de\ufb01ned bene\ufb01t pension scheme, less its obligation to provide bene\ufb01ts under the scheme. The actuarial valuations of the scheme\u2019s 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, all of which are subject to future change. Three of the key estimates within the valuation are the discount rate, inflation rate, and life expectancy. Sensitivities in the valuation are discussed in note 6.3. The value of the pension surplus recognised by the Group at 31 December 2023 is \u00a318.4 million. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-616": { "value": "
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.
Impairment
An impairment review is conducted annually on cash-generating
units (CGUs) with associated goodwill or intangible assets with an
inde\ufb01nite life, and as required for other assets and CGUs where
an indicator of possible impairment exists. In 2023, an impairment
assessment has been completed for six of the Group\u2019s CGUs
which all have allocated goodwill (Drax Energy Solutions, Opus
Energy, Pellet Operations, Lanark, Galloway and Cruachan). The
assessment of future cash flows that underpin the impairment
reviews are based on management\u2019s best estimate of a number
of assumptions (see note 2.4 for further details of these key
assumptions). Pellet Operations was identi\ufb01ed as the only CGU
where a reasonably possible change in certain assumptions
could lead to a material adjustment to its carrying value as at
31 December 2023.
The key assumptions to which the Pellet Operations CGU is
sensitive to a reasonably possible change in are increases to
the cost of production and decreases in production volumes.
A $10 per tonne increase in the cost of production, with no
corresponding impact on revenues, would lead to an impairment
of \u00a3105.1 million. A 12% decrease in production volumes would
lead to an impairment of \u00a347.2 million.
See note 2.4 on page 195
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 suf\ufb01cient 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 as at 31 December 2023 is \u00a3974.1 million
and depreciation on these assets in the year, based on the UELs
disclosed in note 3.1, was \u00a377.2 million. If the UEL of assets that
are limited to the current assumed end of station life of 2039
were to increase by 10 years, the impact on the depreciation charge for the year would be a reduction of approximately \u00a316.6 million. If the assumed end of station life of 2039 were to decrease by 10 years to 2029, the impact on the depreciation charge for the year would be an increase of approximately \u00a372.9 million. See note 3.1 on page 213 Pension liabilities The Group records a net surplus or liability in its Consolidated balance sheet for the fair value of assets held by the de\ufb01ned bene\ufb01t pension scheme, less its obligation to provide bene\ufb01ts under the scheme. The actuarial valuations of the scheme\u2019s 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, all of which are subject to future change. Three of the key estimates within the valuation are the discount rate, inflation rate, and life expectancy. Sensitivities in the valuation are discussed in note 6.3. The value of the pension surplus recognised by the Group at 31 December 2023 is \u00a318.4 million. See note 6.3 on page 245", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-702": { "value": "The key assumptions to which the Pellet Operations CGU is sensitive to a reasonably possible change in are increases to the cost of production and decreases in production volumes. A $10 per tonne increase in the cost of production, with no corresponding impact on revenues, would lead to an impairment of \u00a3105.1 million. A 12% decrease in production volumes would lead to an impairment of \u00a347.2 million. Once suf\ufb01cient 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 as at 31 December 2023 is \u00a3974.1 million and depreciation on these assets in the year, based on the UELs disclosed in note 3.1, was \u00a377.2 million. The value of the pension surplus recognised by the Group at 31 December 2023 is \u00a318.4 million. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
Restated
2023 2022
\u00a3m \u00a3m
Non-current derivative \ufb01nancial instrument assets
293.6
361.0
Current derivative \ufb01nancial instrument assets
368.4
396.9
Total derivative \ufb01nancial instrument assets
662.0
757.9
Non-current derivative \ufb01nancial instrument liabilities
(306.6)
(674.7)
Current derivative \ufb01nancial instrument liabilities
(231.6)
(590.0)
Total derivative \ufb01nancial instrument liabilities
(538.2)
(1,264.7)
Total net derivative \ufb01nancial instruments
123.8
(506.8)
(1) ", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-729": { "value": "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. The Group presents Adjusted results in the Consolidated income statement. Management believes that this approach is useful as it provides a clear and consistent view of underlying trading performance. Exceptional items and certain remeasurements are excluded from Adjusted results and are presented in a separate column in the Consolidated income statement. The Group believes that this presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way the Board and Executive management assess the performance of the business. The Group has a policy and framework for the determination of transactions to present as exceptional. Exceptional items are excluded from Adjusted results as they are transactions that are deemed to be one-off or unlikely to reoccur in future years due to their nature, size, the expected frequency of similar events or the commercial context. By excluding these amounts this provides users of the Consolidated \ufb01nancial statements with a more representative view of the results of the Group and enables comparisons with other reporting periods as it excludes amounts from activities or transactions that are not likely to reoccur. All transactions presented as exceptional are approved by the Audit Committee. See the Audit Committee report on page 132 for further details. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExceptionalItemsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-672": { "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.
Each year management con\ufb01rms the judgements made regarding
the Group\u2019s de\ufb01nition of APMs, including exceptional items and
certain remeasurements and Net debt. The assessment as to
whether a transaction or group of transactions should or
should not be classi\ufb01ed as an exceptional item or a certain
remeasurement can have a signi\ufb01cant impact on the Adjusted
results of the Group. Deciding which items to include or exclude
from an APM\u2019s de\ufb01nition can have a signi\ufb01cant impact on the
APM presented. 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 136.
De\ufb01ned below are the key APMs used by the Board to assess
performance. The APMs glossary table on page 285 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 the Board and
Executive management 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.
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.
During the year ended 31 December 2022, the application
guidance for this policy was enhanced, in particular, setting de
minimis thresholds for classifying items as exceptional. These de
minimis thresholds were applied during the second half of 2022
and throughout 2023. The policy has been reviewed by the Audit
Committee during the year ended 31 December 2023. This
review did not result in any signi\ufb01cant changes to the policy.
Certain remeasurements comprise fair value gains and losses on
derivative contracts to the extent those contracts do not qualify
for hedge accounting (or hedge accounting is not effective)
which, under IFRS, are recorded in revenue, cost of sales, interest
payable and similar charges or foreign exchange gains or losses.
Management believes adjusting for fair value gains and losses
recognised on derivative contracts provides readers of the
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) in Adjusted results in the period the transaction takes
place, and also to take into account the impact of associated
\ufb01nancial derivative contracts (such as forward foreign currency
purchases) in Adjusted results on maturity, being the period these
contracts are intending to hedge.
Further information on exceptional items and certain
remeasurements in the current and comparative periods is
included in note 2.7.
Adjusted EBITDA including EGL and Adjusted EBITDA
excluding EGL
The Group previously presented Adjusted EBITDA. Due to the
introduction of EGL in the current year, the Group is presenting
both Adjusted EBITDA including EGL and Adjusted EBITDA
excluding EGL to enable comparability between prior and future
periods. Both Adjusted EBITDA including EGL and Adjusted
EBITDA excluding EGL are primary measures used by the Board
and Executive management to assess the \ufb01nancial performance
of the Group as they provide a comparable assessment of the
Group\u2019s trading performance period-on-period. They are also
key metrics used by the investor community to assess the
performance of the Group\u2019s operations.
Adjusted EBITDA including EGL is earnings before interest, tax,
depreciation, amortisation, other gains or losses and impairment
of non-current assets, excluding the impact of exceptional items
and certain remeasurements (de\ufb01ned above). Adjusted EBITDA
including EGL excludes any earnings from associates and
Adjusted EBITDA directly attributable to non-controlling
interests. Adjusted EBITDA excluding EGL is consistent with the
de\ufb01nition of Adjusted EBITDA including EGL, apart from it does
not include the cost of EGL.
Adjusted basic earnings per share
Adjusted basic earnings per share (Adjusted basic EPS) is
Adjusted pro\ufb01t attributable to the owners of the parent company
divided by the weighted average number of shares outstanding
during the period. Repurchased shares held in the Treasury
shares reserve are not included in the weighted average
calculation of shares. This is the same denominator used when
calculating Total basic EPS. This metric is used in discussions
with the investor community.
Net debt
The Group de\ufb01nes Net debt as borrowings less cash and cash
equivalents. Borrowings denominated in foreign currencies
to which the Group has entered into hedging arrangements
associated with this currency exposure are translated at the
hedged rate for the purposes of calculating Net debt. This is to
take into account the effect of \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.
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), net of any deferred \ufb01nance costs.
Borrowings does not include other \ufb01nancial liabilities such as
pension obligations (see note 6.3), trade and other payables
(see note 3.5), lease liabilities calculated in accordance with IFRS
16 (see note 3.2) and working capital facilities linked directly to
speci\ufb01c payables (such as credit cards and deferred letters of
credit) that provide short extension of payment terms of less than
12 months (see note 4.3). The Group does not include balances
related to supply chain \ufb01nancing in borrowings as there are no
changes to the Group\u2019s payment terms under this arrangement,
nor would there be if the arrangement was to cease (see note 3.7).
Net debt excludes the proportion of cash and borrowings in
non-wholly owned entities that would be attributable to the
non-controlling interests. Net debt includes the impact of any
cash collateral receipts from counterparties or cash collateral
posted to counterparties.
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.
Net debt to Adjusted EBITDA including EGL ratio
This metric is the ratio of Net debt to Adjusted EBITDA including
EGL, expressed as a multiple. The Group has a long-term target for
Net debt to Adjusted EBITDA including EGL of around 2.0 times.
The Net debt to Adjusted EBITDA including EGL ratio gives an
indication of the size of the Group\u2019s Net debt in relation to its
trading performance and is a key metric used by the investor
community to assess the performance of the Group\u2019s operations.
Net debt to Adjusted EBITDA excluding EGL ratio
The Group also presents a Net debt to Adjusted EBITDA excluding
EGL ratio to enable readers to compare, on a consistent basis, the
Net debt ratio in prior periods in which EGL was not applicable.
2.7 Alternative performance measures The alternative performance measures (APMs) glossary to these Consolidated \ufb01nancial statements on page 285 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. Management believes that this approach is useful as it provides a clear and consistent view of underlying trading performance. Exceptional items and certain remeasurements are excluded from Adjusted results and are presented in a separate column in the Consolidated income statement. The Group believes that this presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way the Board and Executive management assess the performance of the business. The Group has a policy and framework for the determination of transactions to present as exceptional. Exceptional items are excluded from Adjusted results as they are transactions that are deemed to be one-off or unlikely to reoccur in future years due to their nature, size, the expected frequency of similar events or the commercial context. By excluding these amounts this provides users of the Consolidated \ufb01nancial statements with a more representative view of the results of the Group and enables comparisons with other reporting periods as it excludes amounts from activities or transactions that are not likely to reoccur. All transactions presented as exceptional are approved by the Audit Committee. See the Audit Committee report on page 132 for further details. In these Consolidated \ufb01nancial statements, the following transactions have been designated as exceptional items and presented separately: \u2022 Impairment charges related to the Opus Energy CGU (2023, Customers). See note 2.4 for further information. \u2022 Proceeds from a legal settlement relating to a supplier\u2019s failure to perform under their contract (2023, Customers). See note 5.2 for further information. \u2022 Change in the fair value of contingent consideration (2023, Generation). See note 7.1 for further information. \u2022 Impact of the UK tax rate change on deferred tax balances (2023, Generation and Customers; 2022, Generation and Customers). See note 2.6 for further information. \u2022 Impairment charges incurred on the application of the Group\u2019s new accounting policy for Software as a Service (SaaS) costs, consistent with the IFRIC agenda decision (2022, All segments), and on costs associated with the Customers billing system (2022, Customers). See note 5.2 for further details. 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. Gains and losses on derivative contracts prior to maturity generally reflect the difference between the contracted price and the current market price, which management does not believe provides meaningful information as the Group is not entering contracts with the intention of creating value from changes in market prices. The Group is entering forward contracts as economic hedges to secure prices and rates, and lock in value for its future expected pellet production, generation or energy supply activities. The effect of excluding certain remeasurements from Adjusted results is that commodity sales and purchases are recognised in the period they are intended to hedge at their contracted prices i.e. at the all-in-hedged amount paid or received in respect of the delivery of the commodity in question. It also results in the total impact of \ufb01nancial contracts being recognised in the period they are intended to hedge. Management believes this better reflects the performance of the business as it more accurately represents the intention for entering derivative contracts. 2022 saw high prices and volatility in \ufb01nancial and commodity markets. As prices increased this 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. In the current year prices have reduced compared to the 2022 highs, and therefore certain gains and losses recognised in the prior year have reversed. Further details on the Group\u2019s derivative \ufb01nancial instruments are provided in Section 7.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Exceptional items:
Impairment of non-current assets
(69.1)
(24.9)
Net credit from legal claim
13.7
\u2013
Change in fair value of contingent consideration
(18.2)
\u2013
Exceptional items included within operating pro\ufb01t and pro\ufb01t before tax
(73.6)
(24.9)
Tax on exceptional items
10.8
4.7
Impact of tax rate change
0.7
(9.8)
Exceptional items after tax
(62.1)
(30.0)
Certain remeasurements:
Net fair value remeasurements on derivative contracts included in revenue
70.7
(441.4)
Net remeasurements realised on maturity of derivative contracts included in revenue
228.6
107.7
Net hedge ineffectiveness reclassi\ufb01ed to pro\ufb01t or loss included in revenue
(16.4)
(50.2)
Net fair value remeasurements on derivative contracts included in cost of sales
(127.0)
32.6
Net remeasurements realised on maturity of derivative contracts included in cost of sales
44.3
53.1
Certain remeasurements included within operating pro\ufb01t
200.2
(298.2)
Net remeasurements on maturity of derivative contracts included in interest payable and similar charges
(0.3)
(0.4)
Net fair value remeasurements on derivative contracts included in foreign exchange gains/(losses)
4.9
(3.8)
Certain remeasurements included in pro\ufb01t before tax
204.8
(302.4)
Tax on certain remeasurements
(4 8.1)
57.5
Impact of tax rate change
(3.1)
19.4
Certain remeasurements after tax
153.6
(225.5)
Reconciliation of pro\ufb01t after tax:
Adjusted pro\ufb01t after tax
469.4
338.0
Exceptional items after tax
(62.1)
(30.0)
Certain remeasurements after tax
153.6
(225.5)
Total pro\ufb01t after tax
560.9
82.5
For each item designated as exceptional or as a certain remeasurement, the table below summarises the impact of the item on Adjusted and Total pro\ufb01t after tax, Basic EPS and net cash flow from operating activities.
Year ended 31 December 2023
Pro\ufb01t/(loss) Basic Net cash from
Operating Pro\ufb01t Tax (charge)/ for the earnings/(loss) operating
Revenue Gross pro\ufb01t pro\ufb01t before tax credit period per share activities
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Pence \u00a3m
Total results IFRS measure
8 ,125. 3
1,953.6
908.2
796.4
(235.5)
560.9
142.8
835.6
Certain remeasurements:
Net fair value remeasurement on
derivative contracts
(282.9)
(200.2)
(200.2)
(204.8)
4 8 .1
(156.7)
(39.7)
\u2013
Impact of tax rate change
\u2013
\u2013
\u2013
\u2013
3.1
3.1
0.8
\u2013
Exceptional items:
Impairment of non-current assets
\u2013
\u2013
69.1
69.1
(13.5)
55.6
14 .1
\u2013
Proceeds from legal claim
\u2013
\u2013
(13.7)
(13.7)
2.7
(11.0)
(2.8)
(9.3)
Change in fair value of contingent
consideration
\u2013
\u2013
18.2
18.2
\u2013
18.2
4.6
\u2013
Impact of tax rate change
\u2013
\u2013
\u2013
\u2013
(0.7)
(0.7)
(0.2)
\u2013
Total
(282.9)
(200.2)
(126.6)
(131.2)
39.7
(91.5)
(23.2)
(9.3)
Adjusted results totals
7,8 42.4
1,753.4
781.6
665.2
(195.8)
469.4
119.6
826.3
Year ended 31 December 2022
Pro\ufb01t/(loss) for Basic Net cash from
Operating Pro\ufb01t Tax credit/ the earnings/(loss) operating
Revenue Gross pro\ufb01t pro\ufb01t before tax (charge) period per share activities
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Pence \u00a3m
Total results IFRS measure
7,7 75.3
1,023.3
146.3
78.1
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
323.1
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
85.1
207.7
A cost of \u00a3204.6 million has been recognised in relation to EGL for the year. The cost has been recognised within the Electricity Generator Levy line in the Consolidated income statement. The liability for EGL has been recognised within Trade and other payables and contract liabilities within the Consolidated balance sheet. Both Adjusted EBITDA including EGL and Adjusted EBITDA excluding EGL are presented below. Management believes that providing both measures provides useful information, as it enables readers to compare, on a consistent basis, the current period Adjusted EBITDA to prior periods in which the EGL was not applicable, and also to see the impact of EGL, which is relevant for comparison in future periods.
Year ended 31 December 2023
Attributable to
Owners of the Non-controlling
parent company interests Total
\u00a3m \u00a3m \u00a3m
Adjusted operating pro\ufb01t
782.9
(1.3)
781.6
Depreciation and amortisation
223.7
1.3
225.0
Other gains
(0.7)
\u2013
(0.7)
Share of losses from associates
1.6
\u2013
1.6
Impairment of non-current assets
1.7
\u2013
1.7
Adjusted EBITDA including Electricity Generator Levy
1,009.2
\u2013
1,009.2
Electricity Generator Levy
204.6
\u2013
204.6
Adjusted EBITDA excluding Electricity Generator Levy
1,213.8
\u2013
1,213.8
Year ended 31 December 2022
Attributable to
Owners of the Non-controlling
parent company interests Total
\u00a3m \u00a3m \u00a3m
Adjusted operating pro\ufb01t
472.0
(2.6)
469.4
Depreciation and amortisation
237. 2
2.2
239.4
Other losses
5.7
0.1
5.8
Share of pro\ufb01ts from associates
(0.5)
\u2013
(0.5)
Impairment of non-current assets
16.6
\u2013
16.6
Adjusted EBITDA
731.0
(0.3)
730.7
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Segment Adjusted EBITDA excluding Electricity Generator Levy:
Pellet Production
88.9
133.7
Generation
1,13
8 .1
695.5
Customers
71.8
25.8
Innovation, capital projects and other
(78.1)
(113.6)
Intra-group eliminations
(6.9)
(10.4)
Total Adjusted EBITDA excluding Electricity Generator Levy
1,213.8
731.0
Electricity Generator Levy
(204.6)
\u2013
Total Adjusted EBITDA including Electricity Generator Levy
1,009.2
731.0
(1) (1) The Electricity Generator Levy relates wholly to the Generation segment, therefore Adjusted EBITDA including Electricity Generator Levy for the Generation segment is \u00a3933.5 million. 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). Net debt excludes the share of borrowings and cash and cash equivalents attributable to non-controlling interests. 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), net of any deferred \ufb01nance costs. Borrowings does not include other \ufb01nancial liabilities such as pension obligations (see note 6.3), trade and other payables (see note 3.7), lease liabilities calculated in accordance with IFRS 16 (see note 3.2) and working capital facilities (such as credit cards and deferred letters of credit) linked directly to speci\ufb01c payables that provide short extension of payment terms of less than 12 months (see note 4.3). The Group does not include balances related to supply chain \ufb01nancing in Net debt as there are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease (see note 3.7). Net debt includes the impact of any cash collateral receipts from counterparties or cash collateral posted to counterparties. The Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This re\ufb02ects 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. 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. The Group has also entered a \ufb01xed rate foreign exchange forward to \ufb01x the sterling value of the principal repayment of the Canadian (CAD) denominated debt (see note 4.2). For the purpose of calculating Net debt, USD, EUR and CAD balances are translated at the hedged rate, rather than the rate prevailing at the reporting date, which impacts the carrying amount of the Group\u2019s borrowings. See the APMs glossary and the APMs section within the Basis of preparation for further details on the calculation of Net debt. 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, cash collateral may be required to be paid to the counterparty. When derivative positions are in the money, cash collateral may be received from counterparties. These positions reverse when contracts are settled and the cash collateral is returned. At 31 December 2023, net cash postings of \u00a378.6 million had been made to counterparties (2022: \u00a3234.0 million) to support commodity hedging activity. Cash collateral payments of \u00a398.9 million (2022: \u00a3234.0 million) are recognised in other receivables and \u00a320.3 million (2022: \u00a3nil) of cash collateral receipts are recognised in other payables. The decrease in cash collateral payments is due to the settlement of trades from the prior year as well as a reduction in commodity prices seen in the power, gas and carbon markets. See note 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. The Group\u2019s de\ufb01nition of Net debt includes the impact of cash collateral. In the table below, Net debt excluding collateral is also presented and reconciled to Net debt.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
(1,425.3)
(1,440.9)
Cash and cash equivalents
379.5
238.0
Net cash and borrowings
(1,045.8)
(1,202.9)
NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries
(0.3)
(0.7)
Impact of hedging instruments
(37.8)
(2.4)
Net debt
(1,083.9)
(1,206.0)
Net cash collateral posted
78.6
234.0
Net debt excluding collateral
(1,005.3)
(972.0)
The table below reconciles Net debt in terms of changes in these balances across the year:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Net debt at 1 January
(1,206.0)
(1,10
8 .0)
Increase/(decrease) in owners of the parent company\u2019s share of cash and cash equivalents
146.3
(85.6)
Increase in borrowings
(19.8)
(8.6)
Effect of changes in foreign exchange rates
31.0
(65.8)
Movement in the impact of hedging instruments
(35.4)
62.0
Net debt at 31 December
(1,083.9)
(1,206.0)
A reconciliation of the change in borrowings during the year is set out in the table in note 4.2. As explained in the Basis of preparation, the Group has a long-term target for Net debt to Adjusted EBITDA including EGL of around 2.0 times.
As at 31 December
2023
2022
Adjusted EBITDA including EGL (\u00a3m)
1,009.2
731.0
Adjusted EBITDA excluding EGL (\u00a3m)
1,213.8
731.0
Net debt (\u00a3m)
(1,083.9)
(1,206.0)
Net debt excluding collateral (\u00a3m)
(1,005.3)
(972.0)
Net debt to Adjusted EBITDA including EGL ratio
1.1
1.6
Net debt to Adjusted EBITDA excluding EGL ratio
0.9
1.6
Cash and committed facilities The below table reconciles the Group\u2019s available cash and committed facilities:
As at 31 December
2023 2022
\u00a3m \u00a3m
Cash and cash equivalents (note 4.1)
379.5
238.0
RCF available but not utilised
(1)
259.9
26 0.1
Liquidity facility available but not utilised
\u2013
200.0
Total cash and committed facilities
639.4
698 .1
(2) (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 2023, \u00a346.1 million letters of credit were drawn (2022: \u00a346.0 million). (2) In December 2022, the Group secured a new \u00a3200 million committed liquidity facility with banks within its lending group. This facility provided an additional source of liquidity to the Group\u2019s existing undrawn RCFs, until December 2023. This facility was undrawn at 31 December 2022 and as at 31 December 2023 has matured. Further commentary on total cash and committed facilities is contained within the Financial review starting on page 22. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfAlternativePerformanceMeasures", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-7": { "value": "7842400000", "decimals": -5, "dimensions": { "concept": "ifrs-full:Revenue", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:AdjustedResultsMember", "unit": "iso4217:GBP" } }, "fact-8": { "value": "282900000", "decimals": -5, "dimensions": { "concept": "ifrs-full:Revenue", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:ExceptionalItemsAndCertainRemeasurementsMember", "unit": "iso4217:GBP" } }, "fact-9": { "value": "8125300000", "decimals": -5, "dimensions": { "concept": "ifrs-full:Revenue", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": 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"concept": "ifrs-full:CostOfSales", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:AdjustedResultsMember", "unit": "iso4217:GBP" } }, "fact-14": { "value": "82700000", "decimals": -5, "dimensions": { "concept": "ifrs-full:CostOfSales", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:ExceptionalItemsAndCertainRemeasurementsMember", "unit": "iso4217:GBP" } }, "fact-15": { "value": "5967100000", "decimals": -5, "dimensions": { "concept": "ifrs-full:CostOfSales", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-16": { "value": "6837700000", "decimals": -5, "dimensions": { "concept": "ifrs-full:CostOfSales", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", 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"fact-20": { "value": "-0", "decimals": -5, "dimensions": { "concept": "draxgroupplc:ElectricityGeneratorLevy", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:ExceptionalItemsAndCertainRemeasurementsMember", "unit": "iso4217:GBP" } }, "fact-21": { "value": "204600000", "decimals": -5, "dimensions": { "concept": "draxgroupplc:ElectricityGeneratorLevy", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-22": { "value": "-0", "decimals": -5, "dimensions": { "concept": "draxgroupplc:ElectricityGeneratorLevy", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:AdjustedResultsMember", "unit": "iso4217:GBP" } }, "fact-23": { "value": "-0", "decimals": -5, "dimensions": { "concept": "draxgroupplc:ElectricityGeneratorLevy", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:ExceptionalItemsAndCertainRemeasurementsMember", "unit": "iso4217:GBP" } }, "fact-24": { "value": "-0", "decimals": -5, "dimensions": { "concept": "draxgroupplc:ElectricityGeneratorLevy", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-25": { "value": "1753400000", "decimals": -5, "dimensions": { "concept": "ifrs-full:GrossProfit", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "draxgroupplc:ConsolidatedIncomeStatementAxis": "draxgroupplc:AdjustedResultsMember", "unit": "iso4217:GBP" } }, "fact-26": { "value": "200200000", "decimals": -5, "dimensions": { "concept": "ifrs-full:GrossProfit", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": 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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 Total and Adjusted results, dividends, retained pro\ufb01ts and the share buyback (notes 2.7\u20132.11). Further commentary on the Group\u2019s trading and operational performance during the year can be found in the Strategic report on pages 1 to 107, 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. 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 from the Group\u2019s processing facilities in North America; \u2022 Generation: the generation and sale of electricity in the UK; and \u2022 Customers: supply of electricity and gas to non-domestic customers in the UK. Operating costs that can be reasonably allocated to the activities of a reportable segment are included within the results of that reportable segment. Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s positions. Central corporate function costs that cannot be reasonably allocated to the activities of a reportable segment are included within Innovation, capital projects and other. Innovation, capital projects and other is not a reportable segment as it does not earn revenues, however it is included in the information presented below to enable reconciliation of the segmental amounts presented to the consolidated IFRS results recognised in these Consolidated \ufb01nancial statements. Given the principal activity of the Group is a generator and seller of electricity, the Consolidated income statement includes all revenue from sales of electricity during the period. Where electricity is purchased rather than generated to ful\ufb01l a sale, either due to operational or other requirements, the cost of this purchase is recorded within Cost of sales. 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 the Generation business, this reflects the direct costs of the commodities to generate the power, the relevant grid connection costs that arise, and from 2023, EGL arising on applicable renewable and low-carbon generation. In respect of the Customers business, this reflects the direct costs of supply, being the costs of the power or gas supplied, together with costs levied on suppliers such as network costs, broker costs and renewables incentive mechanisms. Accordingly, cost of sales excludes indirect overheads and staff costs (presented within operating and administrative expenses), and depreciation (presented separately on the face of the Consolidated income statement). See note 3.4 for details of the costs included within inventories. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements. 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, which drives higher prices and higher levels of generation. Conversely, demand is typically lower in the summer months (April to September) when temperatures are milder, and therefore prices and levels of generation are generally lower. This trend is experienced by all of the Group\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 due to seasonality by regular production and dispatch schedules under its contracts with customers, both intra-group and externally. Section 2: Financial performance
Segment revenues and results
The following is an analysis of the Group\u2019s performance by reportable segment and any other information necessary to enable
reconciliation to the Group\u2019s total IFRS results recognised for the year ended 31 December 2023. Revenue for each segment is split
between sales to external parties and inter-segment sales. Inter-segment sales are eliminated in the intra-group eliminations column
along with any adjustments required for unrealised pro\ufb01ts (primarily inventory purchased by the Generation segment from the Pellet
Production segment that is still held as inventory at the reporting date).
Adjusted EBITDA by reportable segment is presented in note 2.7.
Year ended 31 December 2023
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue
External sales
397.8
2,486.3
4,958.3
\u2013
\u2013
7, 8 4 2 .4
282.9
8 ,12 5.3
Inter-segment sales
424.6
4,300.7
\u2013
\u2013
(4,725.3)
\u2013
\u2013
\u2013
Total revenue
822.4
6,787.0
4,958.3
\u2013
(4,725.3)
7,8 42.4
282.9
8 ,12 5.3
Cost of sales
(511.8)
(5,320.7)
(4,763.3)
\u2013
4,711.4
(5,884.4)
(82.7)
(5,967.1)
Electricity Generator Levy
\u2013
(204.6)
\u2013
\u2013
\u2013
(204.6)
\u2013
(204.6)
Gross pro\ufb01t
310.6
1,261.7
195.0
\u2013
(13.9)
1,753.4
200.2
1,953.6
Operating and administrative expenses
(221.7)
(328.2)
(90.7)
(78 .1)
7. 0
(711.7)
\u2013
(711.7)
Impairment losses on \ufb01nancial assets
\u2013
\u2013
(32.5)
\u2013
\u2013
(32.5)
\u2013
(32.5)
Depreciation and amortisation
(94.0)
(103.0)
(22.5)
(3.3)
(2.2)
(225.0)
\u2013
(225.0)
Impairment of non-current assets
(2.8)
1.1
\u2013
\u2013
\u2013
(1.7)
(69.1)
(70.8)
Other gains/(losses)
0.5
0.2
\u2013
\u2013
\u2013
0.7
(4.5)
(3.8)
Share of (losses)/pro\ufb01ts from associates
(1.7)
\u2013
\u2013
0 .1
\u2013
(1.6)
\u2013
(1.6)
Operating pro\ufb01t/(loss)
(9.1)
831.8
49.3
(81.3)
(9.1)
781.6
126.6
908.2
Further information on the main revenue streams of each segment is presented in note 2.2.
Included within the Innovation, capital projects and other segment historically has been certain corporate costs that are utilised by
the wider Group. In the current year, management has undertaken an exercise to recharge these costs to the respective business
segments: \u00a310.8 million to Pellet Production, \u00a381.9 million to Generation and \u00a37.5 million to Customers. This updated allocation
methodology has not been applied to the comparative amounts presented in the table below.
The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2022:
Year ended 31 December 2022
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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)
7,7 75.3
Cost of sales
(501.9)
(6,479.2)
(3,985.0)
\u2013
4 ,128 .4
(6,837.7)
85.7
(6,752.0)
Gross pro\ufb01t
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)
Share of pro\ufb01ts 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
Capital expenditure by reportable segment Assets and working capital are monitored on a consolidated basis; however, capital expenditure is monitored by segment.
Additions to property, plant and
Additions to intangible assets equipment
2023 2022 2023 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m
Pellet Production
\u2013
\u2013
163.0
66.0
Generation
1.9
2.8
333.4
171.5
Customers
2.7
2.3
0.2
0.3
Innovation, capital projects and other
5.3
4.3
12.6
8.2
Total
9.9
9.4
509.2
246.0
Total cash outflows in relation to capital expenditure during the year were \u00a3441.1 million (2022: \u00a3174.7 million). In the current year, the cash outflow in relation to property, plant and equipment is lower than the cost capitalised (see note 3.1) predominantly as a result of prepaid amounts in the prior year being capitalised in 2023 and an increase in creditors relating to capital expenditure compared to the prior year. 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 2023, the Pellet Production segment sold biomass pellets and provided associated services with a total value of \u00a3424.6 million (2022: \u00a3425.4 million) to the Generation segment and the Generation segment sold electricity, gas and renewable energy certi\ufb01cates with a total value of \u00a34,252.0 million (2022: \u00a33,719.3 million) to the Customers segment. During 2023 the Generation segment sold biomass pellets to the Pellet Production segment with a total value of \u00a348.7 million (2022: \u00a3nil). 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 external revenue and non-current assets for the Generation and Customers segments are all UK-based. The Pellet Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s non-current assets are located in North America, in both Canada and the US.
Revenue
(based on location of customer)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
North America (Canada and US)
8.5
10.6
Europe (excluding UK)
60.3
27.6
Asia
280.1
275.4
UK
7,776 .4
7,461.7
Total
8,125. 3
7,7 75.3
Non-current assets
(based on asset\u2019s location)
As at 31 December
2023 2022
\u00a3m \u00a3m
Canada
406.7
542.6
US
666.0
502.6
Asia
0.3
\u2013
UK
2, 255.1
2,054.5
Total
3, 328 .1
3,099.7
(1) (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) and Energy Bills Discount Scheme (EBDS). See note 2.7 for further
details of certain remeasurements and note 7.2.4 for inflation risk management.
Year ended 31 December 2023
Year ended 31 December 2022
Exceptional Exceptional
items and items and
Adjusted certain Total Adjusted certain Total
results remeasurements results results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue from contracts with customers
7,54
0.4
\u2013
7,54
0.4
7,882.5
\u2013
7,882.5
Other revenue
302.0
282.9
584.9
276.7
(383.9)
(107.2)
Total revenue
7, 8 42 .4
282.9
8 ,125. 3
8,159.2
(383.9)
7,775.3
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 Renewables Obligation (RO) schemes operate and the related
accounting, are provided below the table.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
Pellet sales The Group\u2019s Pellet Production business produces Revenue is recognised at the point that the pellets
(Pellet Production) biomass pellets which are sold to external are loaded onto the shipping vessel. The amount of
customers. Customers generally obtain control revenue recognised is based on the contracted price
of the pellets at the point the pellets are loaded and volume of the pellets.
onto the shipping vessel. For CIF sales, revenue for the freight portion is
Where freight is also arranged for the customer, recognised over the period the vessel sails.
these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is
considered a separate performance obligation.
Invoices are raised in line with contractual terms
and are usually payable within 4\u201310 days.
Electricity sales The Group\u2019s Generation business has contracts Revenues from sales contracts ful\ufb01lled though
(Generation) for wholesale electricity sales. Performance generation are measured based upon metered output
obligations, being the supply of electricity, are met at rates speci\ufb01ed under contract terms. These are
either via generation or through the procurement recognised under the output method, whereby
of electricity from counterparties. The revenue is recognised based on the value transferred
performance obligations for these contracts are to the customer.
deemed to be a series of distinct goods that are Revenue from sales contracts ful\ufb01lled through
substantially the same and transfer consecutively. procured electricity is recognised at the point at
Control is deemed to have transferred to the which this electricity is supplied to the counterparty
customer at the point that the electricity has been in accordance with the contractual terms at rates
supplied in accordance with the contractual terms. speci\ufb01ed under the contract.
Invoices are typically raised on the \ufb01fth banking
day following the month of supply, in line with the
Grid Trade Master Agreement (GTMA) contractual
terms, and are payable on the \ufb01fth banking day
following the date of invoice.
Renewable certi\ufb01cate Renewables Obligation Certi\ufb01cates (ROCs) and External ROC and REGO sales are recognised at the
sales Renewable Energy Guarantees of Origin (REGOs) point the relevant certi\ufb01cates are transferred to the
(Generation) are sold to counterparties at a point in time. counterparty.
ROCs sold to optimise working capital are invoiced See below for further details.
in line with contractual terms and are usually
payable within two days.
Invoices for ROC sales to third parties are raised
when the ROCs are transferred, typically four to
\ufb01ve months following the end of the compliance
period in which they were generated. Invoices are
usually payable within seven days.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
CfD income/payment The Group\u2019s Generation business is party to a CfD The Group recognises the income or cost arising from
(Generation) with the Low Carbon Contracts Company (LCCC), the CfD in the Consolidated income statement as a
a Government-owned entity responsible for component of revenue at the point the Group meets
delivering elements of the Government\u2019s its performance obligation under the CfD contract.
Electricity Market Reform Programme. Under the This is considered to be the point at which the
contract, the Group makes or receives payments relevant generation is delivered and the payment
in respect of electricity dispatched from a speci\ufb01c becomes contractually due.
biomass-fuelled generating unit. See below for further details.
Invoices are raised 7\u201310 days following the date
of supply and are settled within 28 days.
Ancillary services Ancillary services refer to the provision of a range Revenue is recognised by reference to the stage
(Generation) of system support services to National Grid. Most of completion of the contractual performance
contracts are for the delivery of a speci\ufb01c service obligations, which are calculated by reference to
either continually or on an ad-hoc basis over a the amount of the contract term that has elapsed.
period of time. Depending on contract terms, this approach may
Invoices are raised and subsequently settled in line require judgement in estimating probable future
with the National Grid company ancillary services outcomes.
settlement calendar, typically monthly.
Other income Other income is derived from the sale of goods. Revenue is recognised at the point the control of the
(All segments) The customer obtains control typically at the point goods is transferred to the customer.
of delivery to their premises or upon collection.
Invoices are raised in line with contractual terms.
Electricity and gas sales The Group\u2019s Customers business sells electricity Revenue is recognised on the supply of electricity or
(Customers) and gas directly to non-domestic customers. gas when a contract exists, supply has taken place,
Energy supplied is measured based upon metered a quanti\ufb01able price has been established or can be
consumption and contractual rates. determined and the amounts receivable are expected
The Customers business also has long-term to be recovered.
contracts for the sale of electricity and gas, Where supply has taken place but has not yet been
which are deemed as being satis\ufb01ed over time measured or billed, revenue is estimated based on
in line with the progress of the contracts. consumption statistics and selling price estimates
Invoices are raised in line with contractual terms. and is recognised as accrued income. This estimate
For small and medium-sized enterprise (SME) is not considered to be a key source of estimation
customers, payment is generally due within uncertainty because historical experience has
10\u201314 days. For Industrial and Commercial (I&C) demonstrated that these estimates are materially
customers, payment is generally due between accurate based on the subsequent billings
28\u201390 days. and settlements.
Where contracts for the sale of electricity and gas are
held, revenue is recognised in line with the progress
of the contracts.
The revenue recognised for \ufb01xed price contracts is
based on the input method. Revenue is recognised
based on the costs incurred and the estimated
margin to be obtained over the life of the contract.
For variable price contracts revenue is recognised
based on the output method. Revenue is recognised
based on the volume supplied and the contracted
price. Assumptions are applied consistently but
third-party costs can vary, therefore actual outcomes
may vary from initial estimates.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
EBRS and EBDS income The UK Government introduced the EBDS running The discounted price of electricity and gas supplied
(Customers) from 1 April 2023 to 31 March 2024. Under this under both the EBRS and EBDS is recognised in
scheme, energy supplied to eligible non-domestic revenue as it is supplied. The amount claimed back
customers will have a discount applied to each from the UK Government is recognised within
unit of electricity and gas. Certain customers may revenue over the same period as the underlying
be eligible for higher levels of support dependent discounted revenue it relates to is recognised.
on the sector in which they operate. The discount The revenue received from the UK Government is
provided can then be claimed back from the UK included in the EBRS and EBDS income line in the
Government by the supplier. table on page 194. The Group does not recognise any
The EBDS replaced the EBRS which supported additional revenue from the scheme than it would
non-domestic customers between 1 October have done had it not been introduced.
2022 and
31 March 2023. Under the EBRS,
energy supplied to non-domestic customers in this
period had a discount applied for the customer
under the scheme to cap their energy tariff. The
discount provided could then be claimed back
from the UK Government by the supplier.
Payment is due 10 days post submission of
a claim, which typically occurs monthly.
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 Renewables Obligation (RO) scheme places an obligation on electricity suppliers to source an increasing proportion of their
electricity from renewable sources. Under the RO scheme, ROCs are issued to generators of renewable electricity which are then sold
bilaterally to counterparties, including suppliers, to demonstrate that they have 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 2023
the Group is operating in CP22.
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 CP22 is \u00a359.01 (2022: CP21 \u00a352.88). 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 the 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 \u00a3583.3 million of such sales (2022: \u00a3604.5 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. The primary use of REGOs is for the Fuel Mix
Disclosure that requires licensed electricity suppliers to disclose to potential and existing customers the mix of fuels used to generate
the electricity supplied. REGOs are managed in compliance periods (CPs), running from April to March annually. CP1 commenced in
April 2002. At 31 December 2023 the Group is operating in CP22.
The \ufb01nancial bene\ufb01t of a REGO is recognised in the Consolidated income statement at the point of generation based on the expected
value to be obtained in a sale transaction with a third-party supplier. If the Group has already agreed sales contracts covering the
REGOs generated in a period, the expected value is recognised at the point of generation based on the contracted price. The expected
value of REGOs not covered by agreed sales contracts are recognised at the point of generation based on published third-party market
price assessments.
See note 3.3 for further details of renewable certi\ufb01cates generated and sold by the Generation business and those utilised by the
Customers business during the year.
CfD income/payment
The income/payment is calculated by reference to a strike price per MWh. The base year for the strike price was 2012 and it increases
each year in line with the UK Consumer Price Index (CPI) and changes in system balancing costs. The strike price at 31 December 2023
was \u00a3132.47 per MWh (2022: \u00a3126.37).
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/receipts 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 Customers business. Having already ceased acquiring new gas customers, following internal processes and a
regulatory driven 60-day grace period, no renewal contracts have been offered since May 2023. It is anticipated that the portfolio will
be fully phased out by 2027.
Further analysis of revenue for the year ended 31 December 2023 is provided in the table below:
Year ended 31 December 2023
External Inter-segment Total
\u00a3m \u00a3m \u00a3m
Pellet Production
Pellet sales
391.3
424.6
815.9
Other income
6.5
\u2013
6.5
Total Pellet Production
397.8
424.6
822.4
Generation
Electricity sales
1,600.3
3,817. 2
5,417.5
Renewable certi\ufb01cate sales
842.6
434.8
1, 277.4
CfD payment
(63.0)
\u2013
(63.0)
Ancillary services
55.4
\u2013
55.4
Other income
51.0
48.7
99.7
Total Generation
2,486.3
4,300.7
6 ,787. 0
Customers
Electricity and gas sales
4,554.4
\u2013
4,554.4
EBRS and EBDS income
365.8
\u2013
365.8
Renewable certi\ufb01cate sales
37.9
\u2013
37.9
Other income
0.2
\u2013
0.2
Total Customers
4,958.3
\u2013
4,958.3
Elimination of inter-segment sales
\u2013
(4,725.3)
(4,725.3)
Total consolidated revenue in Adjusted results
7,8 42 .4
\u2013
7, 8 42 .4
Certain remeasurements
282.9
\u2013
282.9
Total consolidated revenue in Total results
8,125. 3
\u2013
8
,12 5.3
Revenue recognised in Adjusted results of \u00a37,842.4 million differs from revenue recognised in Total results of \u00a38,125.3 million due to
certain remeasurements gains of \u00a3282.9 million (2022: losses of \u00a3383.9 million), 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 \u00a328.5 million (2022: \u00a36.6 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 (2022: \u00a3nil).
The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2022:
Year ended 31 December 2022
External Inter-segment Total
\u00a3m \u00a3m \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, 277.5
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
3,853.1
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
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, see notes 3.5 and 3.7. For accounting policies and other disclosures related to costs incurred to acquire customer contracts, see note 3.6 . 2.3 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 provided to the Group during the year. The following expenditure has been charged in arriving at operating pro\ufb01t:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Staff costs (note 6.1)
294.0
248.9
Repairs and maintenance expenditure on property, plant and equipment
173.9
110.3
Other operating and administrative expenses
243.8
183.6
Total operating and administrative expenses
711.7
542.8
Auditor\u2019s remuneration
Year ended 31 December
2023 2022
\u00a3\u2019000 \u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements
1,500.0
1,375.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts
40.0
40.0
Total audit fees
1,540.0
1,415.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements
140.0
115.0
Assurance services provided to non-material af\ufb01liates
18.3
18.0
Other services
47.0
46.2
Other assurance services
130.0
65.0
Total non-audit fees
335.3
244.2
Total auditor\u2019s remuneration
1,875.3
1,659.2
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, the audit of certain head of\ufb01ce companies are not required for the Group audit opinion. The audit fee allocation of these companies is included in fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. Other assurance services provided by Deloitte LLP in the current and prior year consist of corporate re\ufb01nancing fees. See the Audit Committee report on page 132 for further details. 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. A CGU is the smallest identi\ufb01able group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are identi\ufb01ed consistently from period to period unless there is a change in the period that would impact the Group\u2019s CGUs. The Group\u2019s CGUs are reassessed should any such changes occur. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGU) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each reporting period. If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs 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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those
hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic,
commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in
renewable technologies, 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 estimated future cash flows are 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 what a market participant would
pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an
impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any
impairment loss is recognised immediately in the Consolidated income statement.
Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely
independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are
allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU
on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be
allocated on a reasonable and consistent basis.
An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the
other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the
CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual
asset is limited to reducing the 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.
The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated
to them. See note 5.2 for further details on goodwill.
CGUs
As at 31 December
2023
Goodwill
Segment name
CGUs contained within segment
\u00a3m
Pellet Production
Pellet Operations
17 7.0
Generation
Drax Power Station
\u2013
Lanark
11.3
Galloway
4 0.1
Cruachan
26.9
OCGTs
\u2013
Daldowie
\u2013
Customers
Drax Energy Solutions
161.4
Opus Energy
\u2013
416.7
The Pellet Production business previously consisted of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill
recognised on the acquisition of Pinnacle in 2021 was allocated to the Pellet Production segment due to the segment as a whole being
expected to bene\ufb01t from the synergies of the larger, combined Pellet Operations. Reflecting the continued integration and increased
interdependence between the Group\u2019s pellet plants across Northern and Southern Operations since acquisition, the Pellet Production
business is now considered to be a single CGU.
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. There are no changes to any of the
Generation CGUs from the prior year.
The OCGT assets are still under construction. Once complete, the three OCGT plants are expected to be operated as a portfolio with
signi\ufb01cant interdependence around the decisions, activities and resulting cash inflows. Therefore the Group continues to treat the
OCGTs as one CGU.
The Customers business has undergone a reorganisation in recent years, which substantially completed during 2023. Certain activities
that were previously part of the Opus Energy CGU have transferred to the Drax Energy Solutions CGU. The Customers business is still
deemed to consist of two CGUs equivalent to the operating entities within it, Opus Energy and Drax Energy Solutions, however the
activities and resulting cash inflows that are attributed to each CGU have changed due to the reorganisation. Principally, the
renewables activities, being the purchase and subsequent sale of power from Power Purchase Agreements (PPAs), that were part
of the Opus Energy CGU in the prior year are now operated through Drax Energy Solutions and therefore form part of that CGU in
the current year. The Opus Energy CGU now consists solely of electricity and gas supply activities.
The Opus Energy CGU had \u00a3159.2 million of goodwill allocated to it at 31 December 2022. As the composition of the Opus Energy CGU
changed during 2023, the goodwill previously allocated has been reallocated to the CGUs affected by the reorganisation in accordance
with IAS 36. This reallocation has been performed using a relative value approach as speci\ufb01ed in IAS 36, resulting in \u00a3144.7 million of
goodwill being reallocated to the Drax Energy Solutions CGU, leaving \u00a314.5 million of goodwill remaining within the Opus Energy CGU.
During the year, Drax Energy Solutions Limited acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM) for
consideration of \u00a39.0 million. This resulted in the recognition of \u00a36.0 million of goodwill. See note 5.1 for further details. BMM installs
and maintains electric vehicle charging points. The Drax Energy Solutions CGU provides a full-service energy supply and energy
services offering to customers which includes the installation and maintenance of electric vehicle charging points. As such the BMM
activities form part of the Drax Energy Solutions CGU. The Drax Energy Solutions CGU had \u00a310.7 million of existing goodwill prior to
the reallocation of the Opus Energy CGU goodwill and the BMM acquisition. Subsequent to the reallocation and the acquisition, the
Drax Energy Solutions CGU now has goodwill amounting to \u00a3161.4 million (see note 5.2 for further details on goodwill).
The Innovation, capital projects and other segment does not have any external cash inflows and therefore does not meet the de\ufb01nition
of a CGU. However, as explained above, corporate assets are considered for impairment individually where possible or as part of a CGU,
and relevant centrally managed costs are allocated to each CGU.
Assessment of indicators of impairment for CGUs to which no goodwill is allocated
Full impairment reviews were performed on all CGUs to which goodwill had been allocated (see Impairment review section below).
For CGUs to which no goodwill is allocated, impairment reviews are only performed if impairment indicators are identi\ufb01ed. The review
of the Group\u2019s CGUs to which no goodwill is allocated did not give rise to any such impairment indicators in the current year.
In determining whether impairment indicators existed in respect of these CGUs, the Group considered changes in market prices for
commodities, foreign currency exchange rates, changes in macro-economic conditions, potential impacts of climate change and
regulatory requirements since the previous reporting date, and their potential impact on the Group\u2019s long-term planning models and
future forecast cash flows. In particular, consideration was given to the changes in the economic environment, including interest rates
and inflation, and changes in market prices.
The market price of certain commodities (e.g. power and gas) have fallen since the prior year but still remain above historical averages.
This was not an impairment indicator for the Drax Power Station and OCGT CGUs as they are less sensitive to power price changes
due to certain generation income being under a CfD, or generation activities being more dependent on the spread between gas and
power prices. Also, a high proportion of their income is not linked to power prices, such as renewable certi\ufb01cates, system support and
ancillary services. The Drax Power Station CGU also has a high hedged power position. Gas prices are a key input cost for Daldowie
and therefore this CGU has bene\ufb01ted as these prices have reduced during 2023.
In considering the economic environment, management concluded that the Drax Power Station, OCGTs and Daldowie CGUs tend to
be less sensitive to changes in the economy, as energy is required to power and heat homes and businesses in the UK and waste water
treatment is a necessity, and therefore these activities are generally considered essential spend.
Interest rates were also considered, including their impact on discount rates. During the current year interest rates have increased
slightly, however, the impact on discount rates was not signi\ufb01cant enough to be considered an impairment indicator.
Consideration was also given to assumptions regarding biomass generation and biomass prices post March 2027, when current
subsidies for biomass generation at Drax Power Station are due to end, and whether that was an indicator of impairment (see the
Principal risks and uncertainties section starting on page 94 for further details). Whilst management\u2019s forecasts extend beyond 2027,
they indicate that the carrying amount of the Drax Power Station 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 the 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.
Signi\ufb01cant assumptions for value in use
CGUs
calculation
Management\u2019s bases for determining estimates used in value in use calculation
Pellet Operations
\u2022
Production costs
\u2022
Future production costs are estimated based on current year actual
\u2022
Production volumes
production costs plus in\ufb02ation expectations
\u2022
Sales prices
\u2022
Production volumes are estimated based on the current capacity of the
\u2022
Discount rate
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
Lanark, Galloway
\u2022
Power prices
\u2022
Future wholesale energy price estimates are based on market traded power
and Cruachan
\u2022
Sources of stability income
prices for around three years (the period they are liquid), gas market prices as
\u2022
Volume of generation (hydro
a proxy for power for another two years, then the Group\u2019s long-term power
assets only) price forecast, which is prepared using externally provided gas price forecast
\u2022
Discount rate
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
See below for details of the basis used to estimate discount rates
Drax Energy
\u2022
Customer margins
\u2022
Customer margin estimates are based on previously achieved pro\ufb01tability
Solutions and Opus
\u2022
Supply volumes
\u2022
The expectation of future organic volumes is based on past performance
Energy
\u2022
Collection rates
and management\u2019s expectations of market developments
\u2022
Power prices
\u2022
Collection rates are estimated based on historical data and adjusted for
\u2022
Third-party cost estimates
expected changes in future circumstances
\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
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
See below for details of the basis used to estimate discount rates
For the Drax Energy Solutions CGU and Opus Energy CGU, management has projected detailed cash flows based on a period of
\ufb01ve years. For all other CGUs, management has projected detailed cash flows based on a period of 15 years. 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\u2019s Generation and Pellet Production businesses operate. 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.
Where possible, for relevant commodities, forecasts are based on either contracted prices, particularly for Pellet Operations where
the Group has a number of longer term contracts to support the prices used, or observable market curves. Beyond the liquid portion
of forward curves, internally constructed price curves are benchmarked against third-party market analysis to validate the
reasonableness of the assumptions used. Management also periodically reviews forecasting accuracy and after considering the impact
of changes in circumstances and events that could not reasonably be foreseen between the date of the forecast and the forecast
period, these reviews support the accuracy of management\u2019s forecasts. This supports management\u2019s ability to forecast reliably over
the 15-year periods and the use of a detailed forecast period of longer than \ufb01ve years.
Cash flows beyond the \ufb01ve or 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 speci\ufb01c industry and markets in which the CGU operates (taking into account relevant peer data sets). This calculation uses the
relevant tax rates to calculate a pre-tax discount rate.
Further details on the assessments for each group of CGUs as well as sensitivities for reasonably possible changes in key assumptions
are given below. Where reasonably possible changes would result in a material adjustment to the carrying value, these are disclosed
as a key source of estimation uncertainty.
Pellet Operations
The recoverable amount of the Pellet Operations CGU is measured at least annually due to the goodwill allocated to it. The CGU is
principally engaged in the production and sale of biomass pellets. Management has projected detailed cash flows based over a period
of 15 years. 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. This is 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 impact of changing weather patterns, the impact of decarbonisation
and the expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Using
a period of only \ufb01ve years for detailed cash flows could materially overstate or understate the value in use of the CGU as the impact
of these factors in periods after \ufb01ve years can be signi\ufb01cant.
The carrying amount, discount rate and the perpetuity growth rate applied to the Pellet Operations CGU is set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Pellet Operations
1,069.0
10.3%
2%
The pre-tax nominal discount rate of 10.3% (2022: 10.5%) was calculated based on third-party analysis from external specialists that
the Group commissioned.
The value in use for the Pellet Operations CGU was in excess of its carrying amount. For the Pellet Operations CGU, a reasonably
possible increase in production costs of $10 per tonne in the value in use calculation, with no corresponding increase in sales price,
would result in a \u00a3105.1 million impairment and a reasonably possible 12% decrease in production volumes would result in a
\u00a347. 2 million impairment. Accordingly, reasonably possible changes in assumptions within the value in use calculation could result in
a material adjustment to the carrying value of the Pellet Operations CGU. Therefore, the assumptions in the value in use calculation
of the Pellet Operations CGU has been identi\ufb01ed as a key source of estimation uncertainty.
Drax Energy Solutions and Opus Energy
The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured at least annually due to the existence
of goodwill allocated to these CGUs. These businesses are principally focused on renewable electricity sales, with Opus Energy also
selling gas to some existing customers, and therefore, consideration of climate and environmental impacts are already a key feature
of the business models. Management has projected detailed cash flows over 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.
The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Drax Energy Solutions
17 7.7
10.4%
2%
Opus Energy
12.0
10.2%
2%
The expected future cash flows of the Drax Energy Solutions CGU and Opus Energy CGU were discounted using a pre-tax nominal
discount rate of 10.4% (2022: 10.3%) and 10.2% (2022: 10.3%) respectively, calculated based on third-party analysis from external
specialists that the Group commissioned, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s Customers
business. The Group believes that these rates reflect the prospects for well-established Customers businesses, reflecting the
comparatively long trading record and customer bases these businesses hold.
Drax Energy Solutions CGU
The value in use of the Drax Energy Solutions CGU was in excess of its carrying amount. A reasonably possible increase in the discount
rate to 11.3% combined with factoring in a 1% perpetuity growth rate in the calculation would reduce the headroom by \u00a351.2 million,
which would not result in an impairment. Whilst reasonably possible changes in assumptions would reduce the headroom, they would
not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably
possible changes in the key assumptions would result in an adjustment to the carrying value of the Drax Energy Solutions CGU.
Opus Energy CGU
A full impairment review was carried out on the Opus Energy CGU. The carrying amount of \u00a381.1 million was higher than the calculated
value in use and so an impairment charge of \u00a369.1 million was recognised in the Consolidated income statement. The value in use has
reduced in the current year due to the strategic decision to offboard the gas portfolio, which also resulted in the loss of some
electricity customers who were supplied both gas and electricity. The value in use was also impacted by reduced demand as some
customers have changed their behaviour in response to higher energy prices.
The Opus Energy CGU\u2019s goodwill of \u00a314.5 million was fully impaired. The Opus Energy head of\ufb01ce property was impaired by
\u00a38.9 million down to its recoverable amount of \u00a36.0 million. The remaining \u00a345.7 million impairment was allocated to the remaining
non-current assets on a pro rata basis (see the table below for details of this pro rata allocation). A reasonably possible decrease in the
discount rate to 9.4% would have reduced the impairment by \u00a31.1 million. No reasonably possible change in assumptions would result
in a materially different impairment charge in the year. Whilst reasonably possible changes to assumptions would result in an
adjustment to the carrying value of the Opus Energy CGU, they would not result in a material adjustment to its carrying value and so
it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1.
Year ended 31 December 2023
Carrying value
Carrying value after
before impairment Impairment charge impairment
\u00a3m \u00a3m \u00a3m
Goodwill (note 5.2)
14.5
(14.5)
\u2013
Freehold land and buildings (note 3.1)
14.9
(8.9)
6.0
Property, plant and equipment (note 3.1)
0.1
(0.1)
\u2013
Intangible assets: customer related assets (note 5.2)
35.6
(31.5)
4 .1
Intangible assets: brand assets (note 5.2)
3.5
(3.0)
0.5
Intangible assets: computer software (note 5.2)
12.5
(11.1)
1.4
Total
81.1
(69.1)
12.0
Lanark, Galloway and Cruachan
The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment at least 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. 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. This is to align to the Group\u2019s long-term strategic planning, which is relevant to take
into account future structural changes forecast within the electricity generation industry in the models used. These include climate
change, changing weather patterns (increased rain fall from storms and drier summer months), the impact of decarbonisation and the
continued transition to renewable forms of energy and net zero, the impact of subsidy and support regimes, and the impact of repairs
and maintenance expenditure which is not uniform across the lives of the assets. Using a period of only \ufb01ve years for detailed cash
flow forecasting could materially overstate or understate the value in use of the CGUs as the impact of these factors in periods after
\ufb01ve years can be signi\ufb01cant.
The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated Perpetuity
goodwill) Discount growth
CGU \u00a3me rate rate
Lanark
47.4
10.1%
2%
Galloway
172.7
10.1%
2%
Cruachan
251.2
10.1%
2%
The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 10.1% (2022: 8.5%).
The discount rates were calculated based on third-party analysis from external specialists that the Group commissioned, 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) were in excess of their carrying amounts. A reasonably possible
1% increase in the discount rate to 11.1% for Galloway and Cruachan would reduce the headroom by \u00a321.1 million and \u00a358.6 million
respectively and would not result in an impairment. A reasonably possible decrease in power prices of 10% in each of the value in use
calculations would reduce the headroom for Galloway and Cruachan by \u00a329.5 million and \u00a317.0 million respectively but would not
result in an impairment. Whilst reasonably possible changes in assumptions for the Galloway and Cruachan CGUs would reduce the
headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe
that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Galloway or
Cruachan CGUs.
A reasonably possible 1% increase in the discount rate for Lanark would result in a \u00a31.6 million impairment. A reasonably possible
10% decrease in power prices for Lanark would result in an impairment of \u00a32.5 million. The Lanark CGU is sensitive to reasonably
possible changes in the key assumptions. Whilst reasonably possible changes to assumptions would result in an adjustment to the
carrying value of the Lanark CGU, they would not result in a material adjustment to its carrying value and so it is not considered a
key source of estimation uncertainty as de\ufb01ned by IAS 1.
Drax Power Station, Daldowie and OCGTs
For the Drax Power Station, Daldowie and OCGTs CGUs, there were no impairment indicators identi\ufb01ed and none of these CGUs
have allocated goodwill. Therefore, value in use calculations to determine the recoverable amount of these CGUs were not required.
Impairment of non-current assets
The recoverable amount of the Opus Energy head of\ufb01ce property was assessed and an impairment charge of \u00a38.9 million was
recognised to reduce the carrying value to its recoverable amount of \u00a36.0 million. The value in use calculation of the Opus Energy CGU
resulted in recognising a full impairment of the \u00a314.5 million allocated goodwill and a further \u00a345.7 million impairment charge across
the remaining non-current assets. The total impairment charge recognised in the Consolidated income statement in relation to the
non-current assets in the Opus Energy CGU was \u00a369.1 million.
Other impairments of non-current assets in the year totalled \u00a31.7 million and were charged to the Consolidated income statement.
Due to a change in accounting policy in the prior year an impairment charge of \u00a35.7 million was recognised during 2022 on intangible
assets relating to Software as a Service (SaaS) costs previously capitalised. An impairment charge of \u00a319.2 million was also recognised
on a billing system where the Group had stopped development as it no longer expected future economic bene\ufb01ts would be recovered
as an ongoing intangible asset. A legal claim in respect of this was settled during the current year. See notes 2.7 and 5.2 for further
details.
It is the Group\u2019s policy that any impairments of land or 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 and are
subject to depreciation or amortisation charges, the impairment is reflected in the accumulated depreciation or accumulated
amortisation of the asset.
Year ended 31 December 2023
Year ended 31 December 2022
Customers SaaS
Opus Energy Other assets Total Daldowie OCGTs billing system assets Total
Impairment \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill \u2013 cost
14.5
\u2013
14.5
\u2013
\u2013
\u2013
\u2013
\u2013
Freehold land and buildings \u2013 cost
1.0
\u2013
1.0
\u2013
0.2
\u2013
\u2013
0.2
Freehold land and buildings \u2013 accumulated
depreciation
7.9
\u2013
7.9
0.5
\u2013
\u2013
\u2013
0.5
Plant and equipment \u2013 accumulated depreciation
0.1
\u2013
0.1
7.5
\u2013
\u2013
\u2013
7.5
Assets under the course of construction \u2013 cost
\u2013
1.7
1.7
\u2013
6.7
\u2013
\u2013
6.7
Intangible assets \u2013 cost: computer software
\u2013
\u2013
\u2013
\u2013
1.7
19.2
\u2013
20.9
Intangible assets \u2013 accumulated amortisation:
Customer related assets: acquired separately
31.5
\u2013
31.5
\u2013
\u2013
\u2013
\u2013
\u2013
Brand assets: acquired separately
3.0
\u2013
3.0
\u2013
\u2013
\u2013
\u2013
\u2013
Computer software: internally generated
11.1
\u2013
11.1
\u2013
\u2013
\u2013
5.7
5.7
Total impairment of non-current assets
69.1
1.7
70.8
8.0
8.6
19.2
5.7
41.5
The total impairment charge for the year of \u00a370.8 million (2022: \u00a341.5 million) is recognised in the impairment of non-current assets
line in the Consolidated income statement. The \u00a369.1 million impairment of Opus Energy was treated as an exceptional item (2022: the
impairment of SaaS intangible assets and the Customers billing system totalling \u00a324.9 million were 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 capital 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
economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group
generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income
on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3).
A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying
assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of
credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has
been applied.
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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss
of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This
loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in
Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries
into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign
subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income.
2.6 Current and deferred tax
The tax charge (2022: credit) 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 2023 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 third-party 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 other comprehensive income or directly in equity, in which case the current and deferred taxes
are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity
respectively.
The Group has utilised the relief available under the Research and Development Expenditure Credit (RDEC) regime. 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 where deemed
necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 for a breakdown
of the net deferred tax asset or liability position for each jurisdiction.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Total tax (charge)/credit comprises:
Current tax
\u2013 UK tax
(186.5)
(66.0)
\u2013 Overseas tax
(1.6)
\u2013
\u2013 Adjustments in respect of prior periods
2.0
1.9
Deferred tax
\u2013 Before impact of tax rate changes
(46.7)
61.9
\u2013 Adjustments in respect of prior periods
0.3
(0.1)
\u2013 Effect of changes in tax rate
(3.0)
6.7
Total tax (charge)/credit
(235.5)
4.4
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Tax (charged)/credited on items recognised in other comprehensive income:
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension surplus
7.2
6 .1
Deferred tax on cash \ufb02ow hedges
(130.7)
(5.6)
Deferred tax on cost of hedging
(1.9)
2.2
Total tax (charge)/credit
(125.4)
2.7
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Tax credited on items released directly from equity:
Current tax on share-based payments
6.9
\u2013
Deferred tax on cost of hedging
9.0
7.2
Deferred tax on cash \ufb02ow hedges
10.9
4.8
Deferred tax on share-based payments
(2.4)
7.4
Total tax credit
24.4
19.4
UK corporation tax is the main income tax applicable on the Group\u2019s taxable pro\ufb01ts and is calculated at 23.5% (2022: 19.0%) of the
assessable pro\ufb01t or loss for the year. This follows the rate increase to 25.0% from 1 April 2023 that was included within the Finance
Bill 2021.
Due to the Group\u2019s overseas operations, the US income tax rate of 21.0% (2022: 21.0%) and the Canadian corporate income tax rate
of 27.0% (2022: 27.0%) are also relevant to the Group\u2019s UK corporation tax charge.
The effective tax rate for the full year, before the impact of changes in tax rates, is higher than the standard corporation tax rate
applicable in the UK, principally due to the introduction of the non-deductible Electricity Generator Levy from 1 January 2023 (see
the Electricity Generator Levy section on page 179 for further details). The primary current tax rate bene\ufb01ts arise from research and
development credits, UK Patent Box claims and the UK super-deduction introduced in the Finance Act 2021, which allowed 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 Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows:
Year ended 31 December 2023
Year ended 31 December 2022
Exceptional Exceptional
items items
Adjusted and certain Total Adjusted and certain Total
results remeasurements results results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Pro\ufb01t/(loss) before tax
665.2
131.2
796.4
405.4
(327.3)
78 .1
Pro\ufb01t/(loss) before tax multiplied by the rate of
corporation tax in the UK of 23.5% (2022: 19.0%)
156.3
30.8
187.1
77.0
(62.2)
14.8
Effects of:
Adjustments in respect of prior periods
(2.3)
\u2013
(2.3)
(1.8)
\u2013
(1.8)
Expenses not deductible for tax purposes
5.2
6.5
11.7
4.5
\u2013
4.5
Electricity Generator Levy
4 8 .1
\u2013
4 8 .1
\u2013
\u2013
\u2013
Impact of tax rate change
0.6
2.4
3.0
2.9
(9.6)
(6.7)
Share-based payments recognised in equity
8.1
\u2013
8 .1
\u2013
\u2013
\u2013
Difference in overseas tax rates
(0.7)
\u2013
(0.7)
(1.3)
\u2013
(1.3)
UK Patent Box bene\ufb01t
(17. 4)
\u2013
(17.4)
(9.6)
\u2013
(9.6)
Tax effect of RDEC
(0.9)
\u2013
(0.9)
(0.8)
\u2013
(0.8)
UK super-deduction
(1.2)
\u2013
(1.2)
(3.5)
\u2013
(3.5)
Total tax charge/(credit)
195.8
39.7
235.5
67.4
(71.8)
(4.4)
The movements in deferred tax assets and liabilities during each year are shown below.
Accelerated
Financial capital Non-trade Intangible Trade Other Other
instruments allowances losses assets losses liabilities assets Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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
\ufb02ow 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 1 January 2023
124.7
(321.3)
0.5
(12.9)
8 0.1
(33.3)
57.9
(104.3)
(Charged)/credited to the income
statement
(51.2)
9.0
(0.5)
12.3
(21.0)
(0.6)
2.6
(49.4)
Credited to other comprehensive
income in respect of actuarial gains
\u2013
\u2013
\u2013
\u2013
\u2013
7. 2
\u2013
7. 2
Charged to other comprehensive
income in respect of cash \ufb02ow
hedges
(130.7)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(130.7)
Charged to other comprehensive
income in respect of cost of hedging
(1.9)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(1.9)
Credited to equity in respect of cash
\ufb02ow hedges
10.9
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
10.9
Credited to equity in respect of cost
of hedging
9.0
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
9.0
Charged to equity in respect of
share-based payments
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(2.4)
(2.4)
Impact of acquisition
\u2013
\u2013
\u2013
(1.3)
\u2013
\u2013
\u2013
(1.3)
Effect of changes in foreign
exchange rates
\u2013
1.8
\u2013
\u2013
(2.5)
(0.1)
(0.5)
(1.3)
At 31 December 2023
(39.2)
(310.5)
\u2013
(1.9)
56.6
(26.8)
57.6
(264.2)
Deferred tax balances (after offset)
for \ufb01nancial reporting purposes:
Net Canadian deferred tax asset at
31 December 2023
\u2013
(18.8)
\u2013
0.4
16.8
(0.2)
28.2
26.4
Net US deferred tax asset at
31 December 2023
\u2013
(21.9)
\u2013
\u2013
39.8
\u2013
8.6
26.5
Net UK deferred tax liability at
31 December 2023
(39.2)
(269.8)
\u2013
(2.3)
\u2013
(26.6)
20.8
( 317.1)
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)
Deferred tax assets and liabilities are offset where the Group has both a legally enforceable right to offset the recognised amounts
and the intention to settle on a net basis, otherwise they are shown separately in the Consolidated balance sheet. Within the above
trade losses deferred tax asset of \u00a356.6 million (2022: \u00a380.1 million) there is \u00a339.8 million (2022: \u00a353.0 million) in relation to losses
in the US Pellet Production business. The remaining \u00a316.8 million relates to losses of the Canadian Pellet Production business
(2022: \u00a327.1 million).
On 31 August 2023 the Group acquired BMM Energy Solutions Limited, a UK-based electric vehicle charge point installer (see note 5.1
for further details). A deferred tax liability of \u00a31.3 million has been recognised on customer relationships included within this
acquisition, as noted above in the \u2018impact of acquisition\u2019 line. This liability will unwind as the intangible asset is amortised.
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 92.
As at 31 December 2023 the Group held \u00a378.8 million (2022: \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.
The Group is within scope of the Organisation for Economic Co-operation and Development\u2019s (OECD\u2019s) Global Anti-Base Erosion Rules,
which provide for an internationally co-ordinated system of taxation to ensure that large multinational groups pay a minimum level of
corporate income tax in countries in which they operate, referred to as Pillar Two. The legislation implementing the rules in the UK was
substantively enacted on 20 June 2023 and will apply to the Group from the \ufb01nancial year ending 31 December 2024 onwards.
The Group has applied the temporary exemption under IAS 12 in relation to the accounting for deferred taxes arising from the
implementation of the Pillar Two rules, so that the Group neither recognises nor discloses information about deferred tax assets and
liabilities related to Pillar Two. Based on an initial review of 2023 and the medium term forecasts up to and including the year ending
31 December 2026, the Group would fall within the Transitional Country by Country Reporting Safe Harbour, such that the expected
top up tax payable over this period under the Pillar Two rules is expected to be \u00a3nil.
The Group continues to monitor developments in the UK and outside of the UK and will undertake a detailed review in 2024 to ensure
ongoing compliance with its administrative obligations under these rules.
2.7 Alternative performance measures
The alternative performance measures (APMs) glossary to these Consolidated \ufb01nancial statements on page 285 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. Management believes that this approach is useful as it
provides a clear and consistent view of underlying trading performance. Exceptional items and certain remeasurements are excluded
from Adjusted results and are presented in a separate column in the Consolidated income statement. The Group believes that this
presentation provides useful information about the \ufb01nancial performance of the business and is consistent with the way the Board
and Executive management assess the performance of the business.
The Group has a policy and framework for the determination of transactions to present as exceptional. Exceptional items are excluded
from Adjusted results as they are transactions that are deemed to be one-off or unlikely to reoccur in future years due to their nature,
size, the expected frequency of similar events or the commercial context. By excluding these amounts this provides users of the
Consolidated \ufb01nancial statements with a more representative view of the results of the Group and enables comparisons with other
reporting periods as it excludes amounts from activities or transactions that are not likely to reoccur. All transactions presented as
exceptional are approved by the Audit Committee. See the Audit Committee report on page 132 for further details.
In these Consolidated \ufb01nancial statements, the following transactions have been designated as exceptional items and presented
separately:
\u2022 Impairment charges related to the Opus Energy CGU (2023, Customers). See note 2.4 for further information.
\u2022 Proceeds from a legal settlement relating to a supplier\u2019s failure to perform under their contract (2023, Customers). See note 5.2
for further information.
\u2022 Change in the fair value of contingent consideration (2023, Generation). See note 7.1 for further information.
\u2022 Impact of the UK tax rate change on deferred tax balances (2023, Generation and Customers; 2022, Generation and Customers).
See note 2.6 for further information.
\u2022 Impairment charges incurred on the application of the Group\u2019s new accounting policy for Software as a Service (SaaS) costs,
consistent with the IFRIC agenda decision (2022, All segments), and on costs associated with the Customers billing system (2022,
Customers). See note 5.2 for further details.
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. Gains and
losses on derivative contracts prior to maturity generally reflect the difference between the contracted price and the current market
price, which management does not believe provides meaningful information as the Group is not entering contracts with the intention
of creating value from changes in market prices. The Group is entering forward contracts as economic hedges to secure prices and
rates, and lock in value for its future expected pellet production, generation or energy supply activities. The effect of excluding certain
remeasurements from Adjusted results is that commodity sales and purchases are recognised in the period they are intended to hedge
at their contracted prices i.e. at the all-in-hedged amount paid or received in respect of the delivery of the commodity in question. It
also results in the total impact of \ufb01nancial contracts being recognised in the period they are intended to hedge. Management believes
this better reflects the performance of the business as it more accurately represents the intention for entering derivative contracts.
2022 saw high prices and volatility in \ufb01nancial and commodity markets. As prices increased this 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. In the current year prices have reduced compared to the 2022 highs, and therefore certain gains and losses recognised in the
prior year have reversed.
Further details on the Group\u2019s derivative \ufb01nancial instruments are provided in Section 7.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Exceptional items:
Impairment of non-current assets
(69.1)
(24.9)
Net credit from legal claim
13.7
\u2013
Change in fair value of contingent consideration
(18.2)
\u2013
Exceptional items included within operating pro\ufb01t and pro\ufb01t before tax
(73.6)
(24.9)
Tax on exceptional items
10.8
4.7
Impact of tax rate change
0.7
(9.8)
Exceptional items after tax
(62.1)
(30.0)
Certain remeasurements:
Net fair value remeasurements on derivative contracts included in revenue
70.7
(441.4)
Net remeasurements realised on maturity of derivative contracts included in revenue
228.6
107.7
Net hedge ineffectiveness reclassi\ufb01ed to pro\ufb01t or loss included in revenue
(16.4)
(50.2)
Net fair value remeasurements on derivative contracts included in cost of sales
(127.0)
32.6
Net remeasurements realised on maturity of derivative contracts included in cost of sales
44.3
53.1
Certain remeasurements included within operating pro\ufb01t
200.2
(298.2)
Net remeasurements on maturity of derivative contracts included in interest payable and similar charges
(0.3)
(0.4)
Net fair value remeasurements on derivative contracts included in foreign exchange gains/(losses)
4.9
(3.8)
Certain remeasurements included in pro\ufb01t before tax
204.8
(302.4)
Tax on certain remeasurements
(4 8.1)
57.5
Impact of tax rate change
(3.1)
19.4
Certain remeasurements after tax
153.6
(225.5)
Reconciliation of pro\ufb01t after tax:
Adjusted pro\ufb01t after tax
469.4
338.0
Exceptional items after tax
(62.1)
(30.0)
Certain remeasurements after tax
153.6
(225.5)
Total pro\ufb01t after tax
560.9
82.5
For each item designated as exceptional or as a certain remeasurement, the table below summarises the impact of the item on
Adjusted and Total pro\ufb01t after tax, Basic EPS and net cash flow from operating activities.
Year ended 31 December 2023
Pro\ufb01t/(loss) Basic Net cash from
Operating Pro\ufb01t Tax (charge)/ for the earnings/(loss) operating
Revenue Gross pro\ufb01t pro\ufb01t before tax credit period per share activities
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Pence \u00a3m
Total results IFRS measure
8 ,125. 3
1,953.6
908.2
796.4
(235.5)
560.9
142.8
835.6
Certain remeasurements:
Net fair value remeasurement on
derivative contracts
(282.9)
(200.2)
(200.2)
(204.8)
4 8 .1
(156.7)
(39.7)
\u2013
Impact of tax rate change
\u2013
\u2013
\u2013
\u2013
3.1
3.1
0.8
\u2013
Exceptional items:
Impairment of non-current assets
\u2013
\u2013
69.1
69.1
(13.5)
55.6
14 .1
\u2013
Proceeds from legal claim
\u2013
\u2013
(13.7)
(13.7)
2.7
(11.0)
(2.8)
(9.3)
Change in fair value of contingent
consideration
\u2013
\u2013
18.2
18.2
\u2013
18.2
4.6
\u2013
Impact of tax rate change
\u2013
\u2013
\u2013
\u2013
(0.7)
(0.7)
(0.2)
\u2013
Total
(282.9)
(200.2)
(126.6)
(131.2)
39.7
(91.5)
(23.2)
(9.3)
Adjusted results totals
7,8 42.4
1,753.4
781.6
665.2
(195.8)
469.4
119.6
826.3
Year ended 31 December 2022
Pro\ufb01t/(loss) for Basic Net cash from
Operating Pro\ufb01t Tax credit/ the earnings/(loss) operating
Revenue Gross pro\ufb01t pro\ufb01t before tax (charge) period per share activities
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Pence \u00a3m
Total results IFRS measure
7,7 75.3
1,023.3
146.3
78.1
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
323.1
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
85.1
207.7
A cost of \u00a3204.6 million has been recognised in relation to EGL for the year. The cost has been recognised within the Electricity
Generator Levy line in the Consolidated income statement. The liability for EGL has been recognised within Trade and other payables
and contract liabilities within the Consolidated balance sheet.
Both Adjusted EBITDA including EGL and Adjusted EBITDA excluding EGL are presented below. Management believes that providing
both measures provides useful information, as it enables readers to compare, on a consistent basis, the current period Adjusted
EBITDA to prior periods in which the EGL was not applicable, and also to see the impact of EGL, which is relevant for comparison
in future periods.
Year ended 31 December 2023
Attributable to
Owners of the Non-controlling
parent company interests Total
\u00a3m \u00a3m \u00a3m
Adjusted operating pro\ufb01t
782.9
(1.3)
781.6
Depreciation and amortisation
223.7
1.3
225.0
Other gains
(0.7)
\u2013
(0.7)
Share of losses from associates
1.6
\u2013
1.6
Impairment of non-current assets
1.7
\u2013
1.7
Adjusted EBITDA including Electricity Generator Levy
1,009.2
\u2013
1,009.2
Electricity Generator Levy
204.6
\u2013
204.6
Adjusted EBITDA excluding Electricity Generator Levy
1,213.8
\u2013
1,213.8
Year ended 31 December 2022
Attributable to
Owners of the Non-controlling
parent company interests Total
\u00a3m \u00a3m \u00a3m
Adjusted operating pro\ufb01t
472.0
(2.6)
469.4
Depreciation and amortisation
237. 2
2.2
239.4
Other losses
5.7
0.1
5.8
Share of pro\ufb01ts from associates
(0.5)
\u2013
(0.5)
Impairment of non-current assets
16.6
\u2013
16.6
Adjusted EBITDA
731.0
(0.3)
730.7
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Segment Adjusted EBITDA excluding Electricity Generator Levy:
Pellet Production
88.9
133.7
Generation
1,13
8 .1
695.5
Customers
71.8
25.8
Innovation, capital projects and other
(78.1)
(113.6)
Intra-group eliminations
(6.9)
(10.4)
Total Adjusted EBITDA excluding Electricity Generator Levy
1,213.8
731.0
Electricity Generator Levy
(204.6)
\u2013
Total Adjusted EBITDA including Electricity Generator Levy
1,009.2
731.0
(1)
(1) The Electricity Generator Levy relates wholly to the Generation segment, therefore Adjusted EBITDA including Electricity Generator Levy for the Generation segment is \u00a3933.5 million.
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). Net debt excludes the share of borrowings and cash and cash equivalents
attributable to non-controlling interests.
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), net of any deferred \ufb01nance costs. Borrowings does not include other \ufb01nancial liabilities such as pension
obligations (see note 6.3), trade and other payables (see note 3.7), lease liabilities calculated in accordance with IFRS 16 (see note 3.2)
and working capital facilities (such as credit cards and deferred letters of credit) linked directly to speci\ufb01c payables that provide short
extension of payment terms of less than 12 months (see note 4.3). The Group does not include balances related to supply chain
\ufb01nancing in Net debt as there are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the
arrangement was to cease (see note 3.7). Net debt includes the impact of any cash collateral receipts from counterparties or cash
collateral posted to counterparties.
The Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This re\ufb02ects 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.
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. The Group has also entered a \ufb01xed rate foreign exchange
forward to \ufb01x the sterling value of the principal repayment of the Canadian (CAD) denominated debt (see note 4.2). For the purpose
of calculating Net debt, USD, EUR and CAD balances are translated at the hedged rate, rather than the rate prevailing at the reporting
date, which impacts the carrying amount of the Group\u2019s borrowings. See the APMs glossary and the APMs section within the Basis
of preparation for further details on the calculation of Net debt.
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, cash collateral may be required to be paid to the counterparty. When derivative positions
are in the money, cash collateral may be received from counterparties. These positions reverse when contracts are settled and the
cash collateral is returned.
At 31 December 2023, net cash postings of \u00a378.6 million had been made to counterparties (2022: \u00a3234.0 million) to support
commodity hedging activity. Cash collateral payments of \u00a398.9 million (2022: \u00a3234.0 million) are recognised in other receivables and
\u00a320.3 million (2022: \u00a3nil) of cash collateral receipts are recognised in other payables. The decrease in cash collateral payments is due
to the settlement of trades from the prior year as well as a reduction in commodity prices seen in the power, gas and carbon markets.
See note 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities.
The Group\u2019s de\ufb01nition of Net debt includes the impact of cash collateral. In the table below, Net debt excluding collateral is also
presented and reconciled to Net debt.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
(1,425.3)
(1,440.9)
Cash and cash equivalents
379.5
238.0
Net cash and borrowings
(1,045.8)
(1,202.9)
NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries
(0.3)
(0.7)
Impact of hedging instruments
(37.8)
(2.4)
Net debt
(1,083.9)
(1,206.0)
Net cash collateral posted
78.6
234.0
Net debt excluding collateral
(1,005.3)
(972.0)
The table below reconciles Net debt in terms of changes in these balances across the year:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Net debt at 1 January
(1,206.0)
(1,10
8 .0)
Increase/(decrease) in owners of the parent company\u2019s share of cash and cash equivalents
146.3
(85.6)
Increase in borrowings
(19.8)
(8.6)
Effect of changes in foreign exchange rates
31.0
(65.8)
Movement in the impact of hedging instruments
(35.4)
62.0
Net debt at 31 December
(1,083.9)
(1,206.0)
A reconciliation of the change in borrowings during the year is set out in the table in note 4.2.
As explained in the Basis of preparation, the Group has a long-term target for Net debt to Adjusted EBITDA including EGL of around
2.0 times.
As at 31 December
2023
2022
Adjusted EBITDA including EGL (\u00a3m)
1,009.2
731.0
Adjusted EBITDA excluding EGL (\u00a3m)
1,213.8
731.0
Net debt (\u00a3m)
(1,083.9)
(1,206.0)
Net debt excluding collateral (\u00a3m)
(1,005.3)
(972.0)
Net debt to Adjusted EBITDA including EGL ratio
1.1
1.6
Net debt to Adjusted EBITDA excluding EGL ratio
0.9
1.6
Cash and committed facilities
The below table reconciles the Group\u2019s available cash and committed facilities:
As at 31 December
2023 2022
\u00a3m \u00a3m
Cash and cash equivalents (note 4.1)
379.5
238.0
RCF available but not utilised
(1)
259.9
26 0.1
Liquidity facility available but not utilised
\u2013
200.0
Total cash and committed facilities
639.4
698 .1
(2)
(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 2023, \u00a346.1 million letters of credit were drawn (2022: \u00a346.0 million).
(2) In December 2022, the Group secured a new \u00a3200 million committed liquidity facility with banks within its lending group. This facility provided an additional source
of liquidity to the Group\u2019s existing undrawn RCFs, until December 2023. This facility was undrawn at 31 December 2022 and as at 31 December 2023 has matured.
Further commentary on total cash and committed facilities is contained within the Financial review starting on page 22.
2.8 Earnings per share
Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to the weighted average number
of ordinary shares outstanding in the year. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the parent
company (pro\ufb01t or loss after tax, excluding amounts attributable to non-controlling interests) by the weighted average number of
ordinary shares that were outstanding during the year. Diluted EPS demonstrates the impact of all outstanding share options that
would vest on their future maturity dates if the conditions at the end of the reporting period were the same as those at the end of the
vesting period (such as those to be issued under employee share schemes \u2013 see note 6.2), and the options were exercised and treated
as ordinary shares as at the reporting date. Repurchased shares of 40.3 million (2022: 13.8 million) held in the treasury shares reserve
are not included in the weighted average calculation of shares. See note 2.11 for details of the shares repurchased in the current year
as part of the \u00a3150 million share buyback programme and note 4.4 for further details on the treasury shares reserve. For the purpose of
calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact.
Year ended 31 December
2023
2022
Number of shares (millions):
Weighted average number of ordinary shares for the purposes of calculating Basic earnings per share
393.8
400.4
Effect of dilutive potential ordinary shares under share plans
9.3
14.0
Weighted average number of ordinary shares for the purposes of calculating Diluted earnings per share
4 03.1
414.4
Year ended 31 December
2023
2022
Adjusted results
Total results
Adjusted results
Total results
Earnings per share attributable to owners of the parent company
Earnings \u2013 pro\ufb01t after tax (\u00a3m)
470.7
562.2
340.6
85.1
Earnings per share \u2013 Basic (pence)
119.6
142.8
85.1
21.3
Earnings per share \u2013 Diluted (pence)
116.8
139.5
82.2
20.5
2.9 Dividends
Year ended 31 December
2023 2022
Pence per share \u00a3m \u00a3m
Amounts recognised as distributions to equity holders in the year (based on the number
of shares outstanding at the record date):
Interim dividend for the year ended 31 December 2023 paid on 3 October 2023
9.2
35.7
\u2013
Final dividend for the year ended 31 December 2022 paid on 19 May 2023
12 . 6
50.6
\u2013
Interim dividend for the year ended 31 December 2022 paid on 7 October 2022
8.4
\u2013
33.7
Final dividend for the year ended 31 December 2021 paid on 13 May 2022
11.3
\u2013
45.2
Total distributions
86.3
78.9
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 2023 of 1 3.9 pence per share (equivalent to approximately \u00a353 .5 million)
payable on 17 May 2024. The \ufb01nal dividend has not been included as a liability as at 31 December 2023. This would bring total
dividends payable in respect of the 2023 \ufb01nancial year to approximately \u00a389.2 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
2023 2022
\u00a3m \u00a3m
At 1 January
193.8
198.3
Pro\ufb01t for the year attributable to the owners of the parent company
562.2
85.1
Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3)
(28.8)
(24.4)
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6)
7. 2
6 .1
Tax on share-based payments (note 2.6)
4.5
7.4
Equity dividends paid (note 2.9)
(86.3)
(78.9)
Movements in equity associated with share-based payments
13.4
9.5
Acquisition of NCI without a change in control (note 4.5)
\u2013
(9.3)
Gain on equity investments
0.4
\u2013
At 31 December
666.4
193.8
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, set out on pages 275 to 281 of these Annual report and accounts, disclose the basis of
the parent company\u2019s distributable reserves. 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 \u00a3379.5 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 that can be made
in any given year. The Group expects to be able to make dividend payments, in line with its policy, within these conditions for the
foreseeable future. See note 4.2 for further details on the covenants relating to the \ufb01nancing facilities.
2.11 Share buyback programme
On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme
commenced on 18 May 2023 and concluded on 15 September 2023. The shares were acquired at an average price of 567.5 pence
per share, with prices ranging from 521.6 pence to 637.7 pence. In total the Group repurchased 26.5 million ordinary shares at a total
net cost of \u00a3149.2 million. These shares are held in a separate treasury shares reserve awaiting reissue or cancellation and have no
voting rights attached to them. See note 4.4 for a reconciliation of the movement in the treasury shares reserve.
", "dimensions": { "concept": "draxgroupplc:DisclosureOfFinancialPerformance", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-617": { "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.
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 from the Group\u2019s processing facilities in North America;
\u2022 Generation: the generation and sale of electricity in the UK; and
\u2022 Customers: supply of electricity and gas to non-domestic customers in the UK.
Operating costs that can be reasonably allocated to the activities of a reportable segment are included within the results of that
reportable segment. Central corporate and commercial functions provide certain specialist and shared services, including optimisation
of the Group\u2019s positions. Central corporate function costs that cannot be reasonably allocated to the activities of a reportable segment
are included within Innovation, capital projects and other. Innovation, capital projects and other is not a reportable segment as it does
not earn revenues, however it is included in the information presented below to enable reconciliation of the segmental amounts
presented to the consolidated IFRS results recognised in these Consolidated \ufb01nancial statements.
Given the principal activity of the Group is a generator and seller of electricity, the Consolidated income statement includes all revenue
from sales of electricity during the period. Where electricity is purchased rather than generated to ful\ufb01l a sale, either due to
operational or other requirements, the cost of this purchase is recorded within Cost of sales.
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 the Generation business, this reflects the direct costs of the commodities to generate the power, the relevant grid
connection costs that arise, and from 2023, EGL arising on applicable renewable and low-carbon generation. In respect of the
Customers business, this reflects the direct costs of supply, being the costs of the power or gas supplied, together with costs levied
on suppliers such as network costs, broker costs and renewables incentive mechanisms.
Accordingly, cost of sales excludes indirect overheads and staff costs (presented within operating and administrative expenses), and
depreciation (presented separately on the face of the Consolidated income statement). See note 3.4 for details of the costs included
within inventories.
The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the
same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements.
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, which drives higher prices and higher levels of generation. Conversely,
demand is typically lower in the summer months (April to September) when temperatures are milder, and therefore prices and levels
of generation are generally lower.
This trend is experienced by all of the Group\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 due to seasonality by regular production and dispatch schedules under its contracts with
customers, both intra-group and externally.
Segment revenues and results The following is an analysis of the Group\u2019s performance by reportable segment and any other information necessary to enable reconciliation to the Group\u2019s total IFRS results recognised for the year ended 31 December 2023. Revenue for each segment is split between sales to external parties and inter-segment sales. Inter-segment sales are eliminated in the intra-group eliminations column along with any adjustments required for unrealised pro\ufb01ts (primarily inventory purchased by the Generation segment from the Pellet Production segment that is still held as inventory at the reporting date). Adjusted EBITDA by reportable segment is presented in note 2.7.
Year ended 31 December 2023
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue
External sales
397.8
2,486.3
4,958.3
\u2013
\u2013
7, 8 4 2 .4
282.9
8 ,12 5.3
Inter-segment sales
424.6
4,300.7
\u2013
\u2013
(4,725.3)
\u2013
\u2013
\u2013
Total revenue
822.4
6,787.0
4,958.3
\u2013
(4,725.3)
7,8 42.4
282.9
8 ,12 5.3
Cost of sales
(511.8)
(5,320.7)
(4,763.3)
\u2013
4,711.4
(5,884.4)
(82.7)
(5,967.1)
Electricity Generator Levy
\u2013
(204.6)
\u2013
\u2013
\u2013
(204.6)
\u2013
(204.6)
Gross pro\ufb01t
310.6
1,261.7
195.0
\u2013
(13.9)
1,753.4
200.2
1,953.6
Operating and administrative expenses
(221.7)
(328.2)
(90.7)
(78 .1)
7. 0
(711.7)
\u2013
(711.7)
Impairment losses on \ufb01nancial assets
\u2013
\u2013
(32.5)
\u2013
\u2013
(32.5)
\u2013
(32.5)
Depreciation and amortisation
(94.0)
(103.0)
(22.5)
(3.3)
(2.2)
(225.0)
\u2013
(225.0)
Impairment of non-current assets
(2.8)
1.1
\u2013
\u2013
\u2013
(1.7)
(69.1)
(70.8)
Other gains/(losses)
0.5
0.2
\u2013
\u2013
\u2013
0.7
(4.5)
(3.8)
Share of (losses)/pro\ufb01ts from associates
(1.7)
\u2013
\u2013
0 .1
\u2013
(1.6)
\u2013
(1.6)
Operating pro\ufb01t/(loss)
(9.1)
831.8
49.3
(81.3)
(9.1)
781.6
126.6
908.2
Further information on the main revenue streams of each segment is presented in note 2.2. Included within the Innovation, capital projects and other segment historically has been certain corporate costs that are utilised by the wider Group. In the current year, management has undertaken an exercise to recharge these costs to the respective business segments: \u00a310.8 million to Pellet Production, \u00a381.9 million to Generation and \u00a37.5 million to Customers. This updated allocation methodology has not been applied to the comparative amounts presented in the table below. The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2022:
Year ended 31 December 2022
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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)
7,7 75.3
Cost of sales
(501.9)
(6,479.2)
(3,985.0)
\u2013
4 ,128 .4
(6,837.7)
85.7
(6,752.0)
Gross pro\ufb01t
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)
Share of pro\ufb01ts 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
Capital expenditure by reportable segment
Assets and working capital are monitored on a consolidated basis; however, capital expenditure is monitored by segment.
Additions to property, plant and
Additions to intangible assets equipment
2023 2022 2023 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m
Pellet Production
\u2013
\u2013
163.0
66.0
Generation
1.9
2.8
333.4
171.5
Customers
2.7
2.3
0.2
0.3
Innovation, capital projects and other
5.3
4.3
12.6
8.2
Total
9.9
9.4
509.2
246.0
Total cash outflows in relation to capital expenditure during the year were \u00a3441.1 million (2022: \u00a3174.7 million). In the current year,
the cash outflow in relation to property, plant and equipment is lower than the cost capitalised (see note 3.1) predominantly as a result
of prepaid amounts in the prior year being capitalised in 2023 and an increase in creditors relating to capital expenditure compared to
the prior year.
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 2023, the Pellet Production segment sold biomass pellets and provided associated services with
a total value of \u00a3424.6 million (2022: \u00a3425.4 million) to the Generation segment and the Generation segment sold electricity, gas and
renewable energy certi\ufb01cates with a total value of \u00a34,252.0 million (2022: \u00a33,719.3 million) to the Customers segment. During 2023
the Generation segment sold biomass pellets to the Pellet Production segment with a total value of \u00a348.7 million (2022: \u00a3nil).
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 external revenue and non-current assets for the Generation and Customers segments are all UK-based. The Pellet
Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s
non-current assets are located in North America, in both Canada and the US.
Revenue
(based on location of customer)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
North America (Canada and US)
8.5
10.6
Europe (excluding UK)
60.3
27.6
Asia
280.1
275.4
UK
7,776 .4
7,461.7
Total
8,125. 3
7,7 75.3
Non-current assets
(based on asset\u2019s location)
As at 31 December
2023 2022
\u00a3m \u00a3m
Canada
406.7
542.6
US
666.0
502.6
Asia
0.3
\u2013
UK
2, 255.1
2,054.5
Total
3, 328 .1
3,099.7
(1)
(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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-730": { "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. 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 from the Group\u2019s processing facilities in North America; \u2022 Generation: the generation and sale of electricity in the UK; and \u2022 Customers: supply of electricity and gas to non-domestic customers in the UK. Operating costs that can be reasonably allocated to the activities of a reportable segment are included within the results of that reportable segment. Central corporate and commercial functions provide certain specialist and shared services, including optimisation of the Group\u2019s positions. Central corporate function costs that cannot be reasonably allocated to the activities of a reportable segment are included within Innovation, capital projects and other. Innovation, capital projects and other is not a reportable segment as it does not earn revenues, however it is included in the information presented below to enable reconciliation of the segmental amounts presented to the consolidated IFRS results recognised in these Consolidated \ufb01nancial statements. Given the principal activity of the Group is a generator and seller of electricity, the Consolidated income statement includes all revenue from sales of electricity during the period. Where electricity is purchased rather than generated to ful\ufb01l a sale, either due to operational or other requirements, the cost of this purchase is recorded within Cost of sales. 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 the Generation business, this reflects the direct costs of the commodities to generate the power, the relevant grid connection costs that arise, and from 2023, EGL arising on applicable renewable and low-carbon generation. In respect of the Customers business, this reflects the direct costs of supply, being the costs of the power or gas supplied, together with costs levied on suppliers such as network costs, broker costs and renewables incentive mechanisms. Accordingly, cost of sales excludes indirect overheads and staff costs (presented within operating and administrative expenses), and depreciation (presented separately on the face of the Consolidated income statement). See note 3.4 for details of the costs included within inventories. The accounting policies applied for the purpose of measuring the reportable segments\u2019 pro\ufb01ts or losses, assets and liabilities are the same as those used in measuring the corresponding amounts in the Consolidated \ufb01nancial statements. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-649": { "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 the Generation business, this reflects the direct costs of the commodities to generate the power, the relevant grid connection costs that arise, and from 2023, EGL arising on applicable renewable and low-carbon generation. In respect of the Customers business, this reflects the direct costs of supply, being the costs of the power or gas supplied, together with costs levied on suppliers such as network costs, broker costs and renewables incentive mechanisms. Accordingly, cost of sales excludes indirect overheads and staff costs (presented within operating and administrative expenses), and depreciation (presented separately on the face of the Consolidated income statement). See note 3.4 for details of the costs included within inventories. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCostOfSalesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-703": { "value": "Segment revenues and results The following is an analysis of the Group\u2019s performance by reportable segment and any other information necessary to enable reconciliation to the Group\u2019s total IFRS results recognised for the year ended 31 December 2023. Revenue for each segment is split between sales to external parties and inter-segment sales. Inter-segment sales are eliminated in the intra-group eliminations column along with any adjustments required for unrealised pro\ufb01ts (primarily inventory purchased by the Generation segment from the Pellet Production segment that is still held as inventory at the reporting date). Adjusted EBITDA by reportable segment is presented in note 2.7.
Year ended 31 December 2023
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue
External sales
397.8
2,486.3
4,958.3
\u2013
\u2013
7, 8 4 2 .4
282.9
8 ,12 5.3
Inter-segment sales
424.6
4,300.7
\u2013
\u2013
(4,725.3)
\u2013
\u2013
\u2013
Total revenue
822.4
6,787.0
4,958.3
\u2013
(4,725.3)
7,8 42.4
282.9
8 ,12 5.3
Cost of sales
(511.8)
(5,320.7)
(4,763.3)
\u2013
4,711.4
(5,884.4)
(82.7)
(5,967.1)
Electricity Generator Levy
\u2013
(204.6)
\u2013
\u2013
\u2013
(204.6)
\u2013
(204.6)
Gross pro\ufb01t
310.6
1,261.7
195.0
\u2013
(13.9)
1,753.4
200.2
1,953.6
Operating and administrative expenses
(221.7)
(328.2)
(90.7)
(78 .1)
7. 0
(711.7)
\u2013
(711.7)
Impairment losses on \ufb01nancial assets
\u2013
\u2013
(32.5)
\u2013
\u2013
(32.5)
\u2013
(32.5)
Depreciation and amortisation
(94.0)
(103.0)
(22.5)
(3.3)
(2.2)
(225.0)
\u2013
(225.0)
Impairment of non-current assets
(2.8)
1.1
\u2013
\u2013
\u2013
(1.7)
(69.1)
(70.8)
Other gains/(losses)
0.5
0.2
\u2013
\u2013
\u2013
0.7
(4.5)
(3.8)
Share of (losses)/pro\ufb01ts from associates
(1.7)
\u2013
\u2013
0 .1
\u2013
(1.6)
\u2013
(1.6)
Operating pro\ufb01t/(loss)
(9.1)
831.8
49.3
(81.3)
(9.1)
781.6
126.6
908.2
Further information on the main revenue streams of each segment is presented in note 2.2. Included within the Innovation, capital projects and other segment historically has been certain corporate costs that are utilised by the wider Group. In the current year, management has undertaken an exercise to recharge these costs to the respective business segments: \u00a310.8 million to Pellet Production, \u00a381.9 million to Generation and \u00a37.5 million to Customers. This updated allocation methodology has not been applied to the comparative amounts presented in the table below. The following is an analysis of the Group\u2019s performance by reportable segment for the year ended 31 December 2022:
Year ended 31 December 2022
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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)
7,7 75.3
Cost of sales
(501.9)
(6,479.2)
(3,985.0)
\u2013
4 ,128 .4
(6,837.7)
85.7
(6,752.0)
Gross pro\ufb01t
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)
Share of pro\ufb01ts 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
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 external revenue and non-current assets for the Generation and Customers segments are all UK-based. The Pellet Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s non-current assets are located in North America, in both Canada and the US.
Revenue
(based on location of customer)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
North America (Canada and US)
8.5
10.6
Europe (excluding UK)
60.3
27.6
Asia
280.1
275.4
UK
7,776 .4
7,461.7
Total
8,125. 3
7,7 75.3
Non-current assets
(based on asset\u2019s location)
As at 31 December
2023 2022
\u00a3m \u00a3m
Canada
406.7
542.6
US
666.0
502.6
Asia
0.3
\u2013
UK
2, 255.1
2,054.5
Total
3, 328 .1
3,099.7
(1) (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) and Energy Bills Discount Scheme (EBDS). See note 2.7 for further details of certain remeasurements and note 7.2.4 for inflation risk management.
Year ended 31 December 2023
Year ended 31 December 2022
Exceptional Exceptional
items and items and
Adjusted certain Total Adjusted certain Total
results remeasurements results results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue from contracts with customers
7,54
0.4
\u2013
7,54
0.4
7,882.5
\u2013
7,882.5
Other revenue
302.0
282.9
584.9
276.7
(383.9)
(107.2)
Total revenue
7, 8 42 .4
282.9
8 ,125. 3
8,159.2
(383.9)
7,775.3
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 Renewables Obligation (RO) schemes operate and the related accounting, are provided below the table.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
Pellet sales The Group\u2019s Pellet Production business produces Revenue is recognised at the point that the pellets
(Pellet Production) biomass pellets which are sold to external are loaded onto the shipping vessel. The amount of
customers. Customers generally obtain control revenue recognised is based on the contracted price
of the pellets at the point the pellets are loaded and volume of the pellets.
onto the shipping vessel. For CIF sales, revenue for the freight portion is
Where freight is also arranged for the customer, recognised over the period the vessel sails.
these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is
considered a separate performance obligation.
Invoices are raised in line with contractual terms
and are usually payable within 4\u201310 days.
Electricity sales The Group\u2019s Generation business has contracts Revenues from sales contracts ful\ufb01lled though
(Generation) for wholesale electricity sales. Performance generation are measured based upon metered output
obligations, being the supply of electricity, are met at rates speci\ufb01ed under contract terms. These are
either via generation or through the procurement recognised under the output method, whereby
of electricity from counterparties. The revenue is recognised based on the value transferred
performance obligations for these contracts are to the customer.
deemed to be a series of distinct goods that are Revenue from sales contracts ful\ufb01lled through
substantially the same and transfer consecutively. procured electricity is recognised at the point at
Control is deemed to have transferred to the which this electricity is supplied to the counterparty
customer at the point that the electricity has been in accordance with the contractual terms at rates
supplied in accordance with the contractual terms. speci\ufb01ed under the contract.
Invoices are typically raised on the \ufb01fth banking
day following the month of supply, in line with the
Grid Trade Master Agreement (GTMA) contractual
terms, and are payable on the \ufb01fth banking day
following the date of invoice.
Renewable certi\ufb01cate Renewables Obligation Certi\ufb01cates (ROCs) and External ROC and REGO sales are recognised at the
sales Renewable Energy Guarantees of Origin (REGOs) point the relevant certi\ufb01cates are transferred to the
(Generation) are sold to counterparties at a point in time. counterparty.
ROCs sold to optimise working capital are invoiced See below for further details.
in line with contractual terms and are usually
payable within two days.
Invoices for ROC sales to third parties are raised
when the ROCs are transferred, typically four to
\ufb01ve months following the end of the compliance
period in which they were generated. Invoices are
usually payable within seven days.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
CfD income/payment The Group\u2019s Generation business is party to a CfD The Group recognises the income or cost arising from
(Generation) with the Low Carbon Contracts Company (LCCC), the CfD in the Consolidated income statement as a
a Government-owned entity responsible for component of revenue at the point the Group meets
delivering elements of the Government\u2019s its performance obligation under the CfD contract.
Electricity Market Reform Programme. Under the This is considered to be the point at which the
contract, the Group makes or receives payments relevant generation is delivered and the payment
in respect of electricity dispatched from a speci\ufb01c becomes contractually due.
biomass-fuelled generating unit. See below for further details.
Invoices are raised 7\u201310 days following the date
of supply and are settled within 28 days.
Ancillary services Ancillary services refer to the provision of a range Revenue is recognised by reference to the stage
(Generation) of system support services to National Grid. Most of completion of the contractual performance
contracts are for the delivery of a speci\ufb01c service obligations, which are calculated by reference to
either continually or on an ad-hoc basis over a the amount of the contract term that has elapsed.
period of time. Depending on contract terms, this approach may
Invoices are raised and subsequently settled in line require judgement in estimating probable future
with the National Grid company ancillary services outcomes.
settlement calendar, typically monthly.
Other income Other income is derived from the sale of goods. Revenue is recognised at the point the control of the
(All segments) The customer obtains control typically at the point goods is transferred to the customer.
of delivery to their premises or upon collection.
Invoices are raised in line with contractual terms.
Electricity and gas sales The Group\u2019s Customers business sells electricity Revenue is recognised on the supply of electricity or
(Customers) and gas directly to non-domestic customers. gas when a contract exists, supply has taken place,
Energy supplied is measured based upon metered a quanti\ufb01able price has been established or can be
consumption and contractual rates. determined and the amounts receivable are expected
The Customers business also has long-term to be recovered.
contracts for the sale of electricity and gas, Where supply has taken place but has not yet been
which are deemed as being satis\ufb01ed over time measured or billed, revenue is estimated based on
in line with the progress of the contracts. consumption statistics and selling price estimates
Invoices are raised in line with contractual terms. and is recognised as accrued income. This estimate
For small and medium-sized enterprise (SME) is not considered to be a key source of estimation
customers, payment is generally due within uncertainty because historical experience has
10\u201314 days. For Industrial and Commercial (I&C) demonstrated that these estimates are materially
customers, payment is generally due between accurate based on the subsequent billings
28\u201390 days. and settlements.
Where contracts for the sale of electricity and gas are
held, revenue is recognised in line with the progress
of the contracts.
The revenue recognised for \ufb01xed price contracts is
based on the input method. Revenue is recognised
based on the costs incurred and the estimated
margin to be obtained over the life of the contract.
For variable price contracts revenue is recognised
based on the output method. Revenue is recognised
based on the volume supplied and the contracted
price. Assumptions are applied consistently but
third-party costs can vary, therefore actual outcomes
may vary from initial estimates.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
EBRS and EBDS income The UK Government introduced the EBDS running The discounted price of electricity and gas supplied
(Customers) from 1 April 2023 to 31 March 2024. Under this under both the EBRS and EBDS is recognised in
scheme, energy supplied to eligible non-domestic revenue as it is supplied. The amount claimed back
customers will have a discount applied to each from the UK Government is recognised within
unit of electricity and gas. Certain customers may revenue over the same period as the underlying
be eligible for higher levels of support dependent discounted revenue it relates to is recognised.
on the sector in which they operate. The discount The revenue received from the UK Government is
provided can then be claimed back from the UK included in the EBRS and EBDS income line in the
Government by the supplier. table on page 194. The Group does not recognise any
The EBDS replaced the EBRS which supported additional revenue from the scheme than it would
non-domestic customers between 1 October have done had it not been introduced.
2022 and
31 March 2023. Under the EBRS,
energy supplied to non-domestic customers in this
period had a discount applied for the customer
under the scheme to cap their energy tariff. The
discount provided could then be claimed back
from the UK Government by the supplier.
Payment is due 10 days post submission of
a claim, which typically occurs monthly.
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 Renewables Obligation (RO) scheme places an obligation on electricity suppliers to source an increasing proportion of their electricity from renewable sources. Under the RO scheme, ROCs are issued to generators of renewable electricity which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have 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 2023 the Group is operating in CP22. 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 CP22 is \u00a359.01 (2022: CP21 \u00a352.88). 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 the 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 \u00a3583.3 million of such sales (2022: \u00a3604.5 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. The primary use of REGOs is for the Fuel Mix Disclosure that requires licensed electricity suppliers to disclose to potential and existing customers the mix of fuels used to generate the electricity supplied. REGOs are managed in compliance periods (CPs), running from April to March annually. CP1 commenced in April 2002. At 31 December 2023 the Group is operating in CP22. The \ufb01nancial bene\ufb01t of a REGO is recognised in the Consolidated income statement at the point of generation based on the expected value to be obtained in a sale transaction with a third-party supplier. If the Group has already agreed sales contracts covering the REGOs generated in a period, the expected value is recognised at the point of generation based on the contracted price. The expected value of REGOs not covered by agreed sales contracts are recognised at the point of generation based on published third-party market price assessments. See note 3.3 for further details of renewable certi\ufb01cates generated and sold by the Generation business and those utilised by the Customers business during the year. CfD income/payment The income/payment is calculated by reference to a strike price per MWh. The base year for the strike price was 2012 and it increases each year in line with the UK Consumer Price Index (CPI) and changes in system balancing costs. The strike price at 31 December 2023 was \u00a3132.47 per MWh (2022: \u00a3126.37). 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/receipts 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 Customers business. Having already ceased acquiring new gas customers, following internal processes and a regulatory driven 60-day grace period, no renewal contracts have been offered since May 2023. It is anticipated that the portfolio will be fully phased out by 2027. Further analysis of revenue for the year ended 31 December 2023 is provided in the table below:
Year ended 31 December 2023
External Inter-segment Total
\u00a3m \u00a3m \u00a3m
Pellet Production
Pellet sales
391.3
424.6
815.9
Other income
6.5
\u2013
6.5
Total Pellet Production
397.8
424.6
822.4
Generation
Electricity sales
1,600.3
3,817. 2
5,417.5
Renewable certi\ufb01cate sales
842.6
434.8
1, 277.4
CfD payment
(63.0)
\u2013
(63.0)
Ancillary services
55.4
\u2013
55.4
Other income
51.0
48.7
99.7
Total Generation
2,486.3
4,300.7
6 ,787. 0
Customers
Electricity and gas sales
4,554.4
\u2013
4,554.4
EBRS and EBDS income
365.8
\u2013
365.8
Renewable certi\ufb01cate sales
37.9
\u2013
37.9
Other income
0.2
\u2013
0.2
Total Customers
4,958.3
\u2013
4,958.3
Elimination of inter-segment sales
\u2013
(4,725.3)
(4,725.3)
Total consolidated revenue in Adjusted results
7,8 42 .4
\u2013
7, 8 42 .4
Certain remeasurements
282.9
\u2013
282.9
Total consolidated revenue in Total results
8,125. 3
\u2013
8
,12 5.3
Revenue recognised in Adjusted results of \u00a37,842.4 million differs from revenue recognised in Total results of \u00a38,125.3 million due to certain remeasurements gains of \u00a3282.9 million (2022: losses of \u00a3383.9 million), 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 \u00a328.5 million (2022: \u00a36.6 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 (2022: \u00a3nil). The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2022:
Year ended 31 December 2022
External Inter-segment Total
\u00a3m \u00a3m \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, 277.5
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
3,853.1
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
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, see notes 3.5 and 3.7. For accounting policies and other disclosures related to costs incurred to acquire customer contracts, see note 3.6 ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-715": { "value": "
Year ended 31 December 2023
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue
External sales
397.8
2,486.3
4,958.3
\u2013
\u2013
7, 8 4 2 .4
282.9
8 ,12 5.3
Inter-segment sales
424.6
4,300.7
\u2013
\u2013
(4,725.3)
\u2013
\u2013
\u2013
Total revenue
822.4
6,787.0
4,958.3
\u2013
(4,725.3)
7,8 42.4
282.9
8 ,12 5.3
Cost of sales
(511.8)
(5,320.7)
(4,763.3)
\u2013
4,711.4
(5,884.4)
(82.7)
(5,967.1)
Electricity Generator Levy
\u2013
(204.6)
\u2013
\u2013
\u2013
(204.6)
\u2013
(204.6)
Gross pro\ufb01t
310.6
1,261.7
195.0
\u2013
(13.9)
1,753.4
200.2
1,953.6
Operating and administrative expenses
(221.7)
(328.2)
(90.7)
(78 .1)
7. 0
(711.7)
\u2013
(711.7)
Impairment losses on \ufb01nancial assets
\u2013
\u2013
(32.5)
\u2013
\u2013
(32.5)
\u2013
(32.5)
Depreciation and amortisation
(94.0)
(103.0)
(22.5)
(3.3)
(2.2)
(225.0)
\u2013
(225.0)
Impairment of non-current assets
(2.8)
1.1
\u2013
\u2013
\u2013
(1.7)
(69.1)
(70.8)
Other gains/(losses)
0.5
0.2
\u2013
\u2013
\u2013
0.7
(4.5)
(3.8)
Share of (losses)/pro\ufb01ts from associates
(1.7)
\u2013
\u2013
0 .1
\u2013
(1.6)
\u2013
(1.6)
Operating pro\ufb01t/(loss)
(9.1)
831.8
49.3
(81.3)
(9.1)
781.6
126.6
908.2
Year ended 31 December 2022
Innovation, Exceptional
capital items
Pellet projects and Intra-group Adjusted and certain Total
Production Generation Customers other eliminations results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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)
7,7 75.3
Cost of sales
(501.9)
(6,479.2)
(3,985.0)
\u2013
4 ,128 .4
(6,837.7)
85.7
(6,752.0)
Gross pro\ufb01t
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)
Share of pro\ufb01ts 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
", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-650": { "value": "Major customers There was no individual customer, in either the current or previous \ufb01nancial year, that represented 10% or more of total revenue. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSegmentsMajorCustomersExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-651": { "value": "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 external revenue and non-current assets for the Generation and Customers segments are all UK-based. The Pellet Production segment has third-party pellet sales to both the UK and other locations around the world. The Pellet Production segment\u2019s non-current assets are located in North America, in both Canada and the US.
Revenue
(based on location of customer)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
North America (Canada and US)
8.5
10.6
Europe (excluding UK)
60.3
27.6
Asia
280.1
275.4
UK
7,776 .4
7,461.7
Total
8,125. 3
7,7 75.3
Non-current assets
(based on asset\u2019s location)
As at 31 December
2023 2022
\u00a3m \u00a3m
Canada
406.7
542.6
US
666.0
502.6
Asia
0.3
\u2013
UK
2, 255.1
2,054.5
Total
3, 328 .1
3,099.7
(1) (1) Non-current assets comprise goodwill, intangible assets, property, plant and equipment, right-of-use assets and investments . ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeographicalAreasExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-673": { "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) and Energy Bills Discount Scheme (EBDS). See note 2.7 for further details of certain remeasurements and note 7.2.4 for inflation risk management.
Year ended 31 December 2023
Year ended 31 December 2022
Exceptional Exceptional
items and items and
Adjusted certain Total Adjusted certain Total
results remeasurements results results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Revenue from contracts with customers
7,54
0.4
\u2013
7,54
0.4
7,882.5
\u2013
7,882.5
Other revenue
302.0
282.9
584.9
276.7
(383.9)
(107.2)
Total revenue
7, 8 42 .4
282.9
8 ,125. 3
8,159.2
(383.9)
7,775.3
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 Renewables Obligation (RO) schemes operate and the related accounting, are provided below the table.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
Pellet sales The Group\u2019s Pellet Production business produces Revenue is recognised at the point that the pellets
(Pellet Production) biomass pellets which are sold to external are loaded onto the shipping vessel. The amount of
customers. Customers generally obtain control revenue recognised is based on the contracted price
of the pellets at the point the pellets are loaded and volume of the pellets.
onto the shipping vessel. For CIF sales, revenue for the freight portion is
Where freight is also arranged for the customer, recognised over the period the vessel sails.
these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is
considered a separate performance obligation.
Invoices are raised in line with contractual terms
and are usually payable within 4\u201310 days.
Electricity sales The Group\u2019s Generation business has contracts Revenues from sales contracts ful\ufb01lled though
(Generation) for wholesale electricity sales. Performance generation are measured based upon metered output
obligations, being the supply of electricity, are met at rates speci\ufb01ed under contract terms. These are
either via generation or through the procurement recognised under the output method, whereby
of electricity from counterparties. The revenue is recognised based on the value transferred
performance obligations for these contracts are to the customer.
deemed to be a series of distinct goods that are Revenue from sales contracts ful\ufb01lled through
substantially the same and transfer consecutively. procured electricity is recognised at the point at
Control is deemed to have transferred to the which this electricity is supplied to the counterparty
customer at the point that the electricity has been in accordance with the contractual terms at rates
supplied in accordance with the contractual terms. speci\ufb01ed under the contract.
Invoices are typically raised on the \ufb01fth banking
day following the month of supply, in line with the
Grid Trade Master Agreement (GTMA) contractual
terms, and are payable on the \ufb01fth banking day
following the date of invoice.
Renewable certi\ufb01cate Renewables Obligation Certi\ufb01cates (ROCs) and External ROC and REGO sales are recognised at the
sales Renewable Energy Guarantees of Origin (REGOs) point the relevant certi\ufb01cates are transferred to the
(Generation) are sold to counterparties at a point in time. counterparty.
ROCs sold to optimise working capital are invoiced See below for further details.
in line with contractual terms and are usually
payable within two days.
Invoices for ROC sales to third parties are raised
when the ROCs are transferred, typically four to
\ufb01ve months following the end of the compliance
period in which they were generated. Invoices are
usually payable within seven days.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
CfD income/payment The Group\u2019s Generation business is party to a CfD The Group recognises the income or cost arising from
(Generation) with the Low Carbon Contracts Company (LCCC), the CfD in the Consolidated income statement as a
a Government-owned entity responsible for component of revenue at the point the Group meets
delivering elements of the Government\u2019s its performance obligation under the CfD contract.
Electricity Market Reform Programme. Under the This is considered to be the point at which the
contract, the Group makes or receives payments relevant generation is delivered and the payment
in respect of electricity dispatched from a speci\ufb01c becomes contractually due.
biomass-fuelled generating unit. See below for further details.
Invoices are raised 7\u201310 days following the date
of supply and are settled within 28 days.
Ancillary services Ancillary services refer to the provision of a range Revenue is recognised by reference to the stage
(Generation) of system support services to National Grid. Most of completion of the contractual performance
contracts are for the delivery of a speci\ufb01c service obligations, which are calculated by reference to
either continually or on an ad-hoc basis over a the amount of the contract term that has elapsed.
period of time. Depending on contract terms, this approach may
Invoices are raised and subsequently settled in line require judgement in estimating probable future
with the National Grid company ancillary services outcomes.
settlement calendar, typically monthly.
Other income Other income is derived from the sale of goods. Revenue is recognised at the point the control of the
(All segments) The customer obtains control typically at the point goods is transferred to the customer.
of delivery to their premises or upon collection.
Invoices are raised in line with contractual terms.
Electricity and gas sales The Group\u2019s Customers business sells electricity Revenue is recognised on the supply of electricity or
(Customers) and gas directly to non-domestic customers. gas when a contract exists, supply has taken place,
Energy supplied is measured based upon metered a quanti\ufb01able price has been established or can be
consumption and contractual rates. determined and the amounts receivable are expected
The Customers business also has long-term to be recovered.
contracts for the sale of electricity and gas, Where supply has taken place but has not yet been
which are deemed as being satis\ufb01ed over time measured or billed, revenue is estimated based on
in line with the progress of the contracts. consumption statistics and selling price estimates
Invoices are raised in line with contractual terms. and is recognised as accrued income. This estimate
For small and medium-sized enterprise (SME) is not considered to be a key source of estimation
customers, payment is generally due within uncertainty because historical experience has
10\u201314 days. For Industrial and Commercial (I&C) demonstrated that these estimates are materially
customers, payment is generally due between accurate based on the subsequent billings
28\u201390 days. and settlements.
Where contracts for the sale of electricity and gas are
held, revenue is recognised in line with the progress
of the contracts.
The revenue recognised for \ufb01xed price contracts is
based on the input method. Revenue is recognised
based on the costs incurred and the estimated
margin to be obtained over the life of the contract.
For variable price contracts revenue is recognised
based on the output method. Revenue is recognised
based on the volume supplied and the contracted
price. Assumptions are applied consistently but
third-party costs can vary, therefore actual outcomes
may vary from initial estimates.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
EBRS and EBDS income The UK Government introduced the EBDS running The discounted price of electricity and gas supplied
(Customers) from 1 April 2023 to 31 March 2024. Under this under both the EBRS and EBDS is recognised in
scheme, energy supplied to eligible non-domestic revenue as it is supplied. The amount claimed back
customers will have a discount applied to each from the UK Government is recognised within
unit of electricity and gas. Certain customers may revenue over the same period as the underlying
be eligible for higher levels of support dependent discounted revenue it relates to is recognised.
on the sector in which they operate. The discount The revenue received from the UK Government is
provided can then be claimed back from the UK included in the EBRS and EBDS income line in the
Government by the supplier. table on page 194. The Group does not recognise any
The EBDS replaced the EBRS which supported additional revenue from the scheme than it would
non-domestic customers between 1 October have done had it not been introduced.
2022 and
31 March 2023. Under the EBRS,
energy supplied to non-domestic customers in this
period had a discount applied for the customer
under the scheme to cap their energy tariff. The
discount provided could then be claimed back
from the UK Government by the supplier.
Payment is due 10 days post submission of
a claim, which typically occurs monthly.
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 Renewables Obligation (RO) scheme places an obligation on electricity suppliers to source an increasing proportion of their electricity from renewable sources. Under the RO scheme, ROCs are issued to generators of renewable electricity which are then sold bilaterally to counterparties, including suppliers, to demonstrate that they have 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 2023 the Group is operating in CP22. 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 CP22 is \u00a359.01 (2022: CP21 \u00a352.88). 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 the 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 \u00a3583.3 million of such sales (2022: \u00a3604.5 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. The primary use of REGOs is for the Fuel Mix Disclosure that requires licensed electricity suppliers to disclose to potential and existing customers the mix of fuels used to generate the electricity supplied. REGOs are managed in compliance periods (CPs), running from April to March annually. CP1 commenced in April 2002. At 31 December 2023 the Group is operating in CP22. The \ufb01nancial bene\ufb01t of a REGO is recognised in the Consolidated income statement at the point of generation based on the expected value to be obtained in a sale transaction with a third-party supplier. If the Group has already agreed sales contracts covering the REGOs generated in a period, the expected value is recognised at the point of generation based on the contracted price. The expected value of REGOs not covered by agreed sales contracts are recognised at the point of generation based on published third-party market price assessments. See note 3.3 for further details of renewable certi\ufb01cates generated and sold by the Generation business and those utilised by the Customers business during the year. CfD income/payment The income/payment is calculated by reference to a strike price per MWh. The base year for the strike price was 2012 and it increases each year in line with the UK Consumer Price Index (CPI) and changes in system balancing costs. The strike price at 31 December 2023 was \u00a3132.47 per MWh (2022: \u00a3126.37). 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/receipts 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 Customers business. Having already ceased acquiring new gas customers, following internal processes and a regulatory driven 60-day grace period, no renewal contracts have been offered since May 2023. It is anticipated that the portfolio will be fully phased out by 2027. Further analysis of revenue for the year ended 31 December 2023 is provided in the table below:
Year ended 31 December 2023
External Inter-segment Total
\u00a3m \u00a3m \u00a3m
Pellet Production
Pellet sales
391.3
424.6
815.9
Other income
6.5
\u2013
6.5
Total Pellet Production
397.8
424.6
822.4
Generation
Electricity sales
1,600.3
3,817. 2
5,417.5
Renewable certi\ufb01cate sales
842.6
434.8
1, 277.4
CfD payment
(63.0)
\u2013
(63.0)
Ancillary services
55.4
\u2013
55.4
Other income
51.0
48.7
99.7
Total Generation
2,486.3
4,300.7
6 ,787. 0
Customers
Electricity and gas sales
4,554.4
\u2013
4,554.4
EBRS and EBDS income
365.8
\u2013
365.8
Renewable certi\ufb01cate sales
37.9
\u2013
37.9
Other income
0.2
\u2013
0.2
Total Customers
4,958.3
\u2013
4,958.3
Elimination of inter-segment sales
\u2013
(4,725.3)
(4,725.3)
Total consolidated revenue in Adjusted results
7,8 42 .4
\u2013
7, 8 42 .4
Certain remeasurements
282.9
\u2013
282.9
Total consolidated revenue in Total results
8,125. 3
\u2013
8
,12 5.3
Revenue recognised in Adjusted results of \u00a37,842.4 million differs from revenue recognised in Total results of \u00a38,125.3 million due to certain remeasurements gains of \u00a3282.9 million (2022: losses of \u00a3383.9 million), 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 \u00a328.5 million (2022: \u00a36.6 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 (2022: \u00a3nil). The following is an analysis of the Group\u2019s revenues for the year ended 31 December 2022:
Year ended 31 December 2022
External Inter-segment Total
\u00a3m \u00a3m \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, 277.5
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
3,853.1
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
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, see notes 3.5 and 3.7. For accounting policies and other disclosures related to costs incurred to acquire customer contracts, see note 3.6 . ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-731": { "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 Renewables Obligation (RO) schemes operate and the related accounting, are provided below the table.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
Pellet sales The Group\u2019s Pellet Production business produces Revenue is recognised at the point that the pellets
(Pellet Production) biomass pellets which are sold to external are loaded onto the shipping vessel. The amount of
customers. Customers generally obtain control revenue recognised is based on the contracted price
of the pellets at the point the pellets are loaded and volume of the pellets.
onto the shipping vessel. For CIF sales, revenue for the freight portion is
Where freight is also arranged for the customer, recognised over the period the vessel sails.
these sales are known as Cost, insurance and
freight (CIF) sales. The freight component is
considered a separate performance obligation.
Invoices are raised in line with contractual terms
and are usually payable within 4\u201310 days.
Electricity sales The Group\u2019s Generation business has contracts Revenues from sales contracts ful\ufb01lled though
(Generation) for wholesale electricity sales. Performance generation are measured based upon metered output
obligations, being the supply of electricity, are met at rates speci\ufb01ed under contract terms. These are
either via generation or through the procurement recognised under the output method, whereby
of electricity from counterparties. The revenue is recognised based on the value transferred
performance obligations for these contracts are to the customer.
deemed to be a series of distinct goods that are Revenue from sales contracts ful\ufb01lled through
substantially the same and transfer consecutively. procured electricity is recognised at the point at
Control is deemed to have transferred to the which this electricity is supplied to the counterparty
customer at the point that the electricity has been in accordance with the contractual terms at rates
supplied in accordance with the contractual terms. speci\ufb01ed under the contract.
Invoices are typically raised on the \ufb01fth banking
day following the month of supply, in line with the
Grid Trade Master Agreement (GTMA) contractual
terms, and are payable on the \ufb01fth banking day
following the date of invoice.
Renewable certi\ufb01cate Renewables Obligation Certi\ufb01cates (ROCs) and External ROC and REGO sales are recognised at the
sales Renewable Energy Guarantees of Origin (REGOs) point the relevant certi\ufb01cates are transferred to the
(Generation) are sold to counterparties at a point in time. counterparty.
ROCs sold to optimise working capital are invoiced See below for further details.
in line with contractual terms and are usually
payable within two days.
Invoices for ROC sales to third parties are raised
when the ROCs are transferred, typically four to
\ufb01ve months following the end of the compliance
period in which they were generated. Invoices are
usually payable within seven days.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
CfD income/payment The Group\u2019s Generation business is party to a CfD The Group recognises the income or cost arising from
(Generation) with the Low Carbon Contracts Company (LCCC), the CfD in the Consolidated income statement as a
a Government-owned entity responsible for component of revenue at the point the Group meets
delivering elements of the Government\u2019s its performance obligation under the CfD contract.
Electricity Market Reform Programme. Under the This is considered to be the point at which the
contract, the Group makes or receives payments relevant generation is delivered and the payment
in respect of electricity dispatched from a speci\ufb01c becomes contractually due.
biomass-fuelled generating unit. See below for further details.
Invoices are raised 7\u201310 days following the date
of supply and are settled within 28 days.
Ancillary services Ancillary services refer to the provision of a range Revenue is recognised by reference to the stage
(Generation) of system support services to National Grid. Most of completion of the contractual performance
contracts are for the delivery of a speci\ufb01c service obligations, which are calculated by reference to
either continually or on an ad-hoc basis over a the amount of the contract term that has elapsed.
period of time. Depending on contract terms, this approach may
Invoices are raised and subsequently settled in line require judgement in estimating probable future
with the National Grid company ancillary services outcomes.
settlement calendar, typically monthly.
Other income Other income is derived from the sale of goods. Revenue is recognised at the point the control of the
(All segments) The customer obtains control typically at the point goods is transferred to the customer.
of delivery to their premises or upon collection.
Invoices are raised in line with contractual terms.
Electricity and gas sales The Group\u2019s Customers business sells electricity Revenue is recognised on the supply of electricity or
(Customers) and gas directly to non-domestic customers. gas when a contract exists, supply has taken place,
Energy supplied is measured based upon metered a quanti\ufb01able price has been established or can be
consumption and contractual rates. determined and the amounts receivable are expected
The Customers business also has long-term to be recovered.
contracts for the sale of electricity and gas, Where supply has taken place but has not yet been
which are deemed as being satis\ufb01ed over time measured or billed, revenue is estimated based on
in line with the progress of the contracts. consumption statistics and selling price estimates
Invoices are raised in line with contractual terms. and is recognised as accrued income. This estimate
For small and medium-sized enterprise (SME) is not considered to be a key source of estimation
customers, payment is generally due within uncertainty because historical experience has
10\u201314 days. For Industrial and Commercial (I&C) demonstrated that these estimates are materially
customers, payment is generally due between accurate based on the subsequent billings
28\u201390 days. and settlements.
Where contracts for the sale of electricity and gas are
held, revenue is recognised in line with the progress
of the contracts.
The revenue recognised for \ufb01xed price contracts is
based on the input method. Revenue is recognised
based on the costs incurred and the estimated
margin to be obtained over the life of the contract.
For variable price contracts revenue is recognised
based on the output method. Revenue is recognised
based on the volume supplied and the contracted
price. Assumptions are applied consistently but
third-party costs can vary, therefore actual outcomes
may vary from initial estimates.
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
EBRS and EBDS income The UK Government introduced the EBDS running The discounted price of electricity and gas supplied
(Customers) from 1 April 2023 to 31 March 2024. Under this under both the EBRS and EBDS is recognised in
scheme, energy supplied to eligible non-domestic revenue as it is supplied. The amount claimed back
customers will have a discount applied to each from the UK Government is recognised within
unit of electricity and gas. Certain customers may revenue over the same period as the underlying
be eligible for higher levels of support dependent discounted revenue it relates to is recognised.
on the sector in which they operate. The discount The revenue received from the UK Government is
provided can then be claimed back from the UK included in the EBRS and EBDS income line in the
Government by the supplier. table on page 194. The Group does not recognise any
The EBDS replaced the EBRS which supported additional revenue from the scheme than it would
non-domestic customers between 1 October have done had it not been introduced.
2022 and
31 March 2023. Under the EBRS,
energy supplied to non-domestic customers in this
period had a discount applied for the customer
under the scheme to cap their energy tariff. The
discount provided could then be claimed back
from the UK Government by the supplier.
Payment is due 10 days post submission of
a claim, which typically occurs monthly.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-652": { "value": "
Revenue stream Nature and timing of performance obligations,
(Segment)
including signi\ufb01cant payment terms
Method of recognising revenue, including any estimation uncertainties
EBRS and EBDS income The UK Government introduced the EBDS running The discounted price of electricity and gas supplied
(Customers) from 1 April 2023 to 31 March 2024. Under this under both the EBRS and EBDS is recognised in
scheme, energy supplied to eligible non-domestic revenue as it is supplied. The amount claimed back
customers will have a discount applied to each from the UK Government is recognised within
unit of electricity and gas. Certain customers may revenue over the same period as the underlying
be eligible for higher levels of support dependent discounted revenue it relates to is recognised.
on the sector in which they operate. The discount The revenue received from the UK Government is
provided can then be claimed back from the UK included in the EBRS and EBDS income line in the
Government by the supplier. table on page 194. The Group does not recognise any
The EBDS replaced the EBRS which supported additional revenue from the scheme than it would
non-domestic customers between 1 October have done had it not been introduced.
2022 and
31 March 2023. Under the EBRS,
energy supplied to non-domestic customers in this
period had a discount applied for the customer
under the scheme to cap their energy tariff. The
discount provided could then be claimed back
from the UK Government by the supplier.
Payment is due 10 days post submission of
a claim, which typically occurs monthly.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGovernmentGrantsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-619": { "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 provided to the Group during the year. The following expenditure has been charged in arriving at operating pro\ufb01t:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Staff costs (note 6.1)
294.0
248.9
Repairs and maintenance expenditure on property, plant and equipment
173.9
110.3
Other operating and administrative expenses
243.8
183.6
Total operating and administrative expenses
711.7
542.8
Auditor\u2019s remuneration
Year ended 31 December
2023 2022
\u00a3\u2019000 \u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements
1,500.0
1,375.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts
40.0
40.0
Total audit fees
1,540.0
1,415.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements
140.0
115.0
Assurance services provided to non-material af\ufb01liates
18.3
18.0
Other services
47.0
46.2
Other assurance services
130.0
65.0
Total non-audit fees
335.3
244.2
Total auditor\u2019s remuneration
1,875.3
1,659.2
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, the audit of certain head of\ufb01ce companies are not required for the Group audit opinion. The audit fee allocation of these companies is included in fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. Other assurance services provided by Deloitte LLP in the current and prior year consist of corporate re\ufb01nancing fees. See the Audit Committee report on page 132 for further details. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-722": { "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 provided to the Group during the year. The following expenditure has been charged in arriving at operating pro\ufb01t:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Staff costs (note 6.1)
294.0
248.9
Repairs and maintenance expenditure on property, plant and equipment
173.9
110.3
Other operating and administrative expenses
243.8
183.6
Total operating and administrative expenses
711.7
542.8
Auditor\u2019s remuneration
Year ended 31 December
2023 2022
\u00a3\u2019000 \u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements
1,500.0
1,375.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts
40.0
40.0
Total audit fees
1,540.0
1,415.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements
140.0
115.0
Assurance services provided to non-material af\ufb01liates
18.3
18.0
Other services
47.0
46.2
Other assurance services
130.0
65.0
Total non-audit fees
335.3
244.2
Total auditor\u2019s remuneration
1,875.3
1,659.2
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, the audit of certain head of\ufb01ce companies are not required for the Group audit opinion. The audit fee allocation of these companies is included in fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. Other assurance services provided by Deloitte LLP in the current and prior year consist of corporate re\ufb01nancing fees. See the Audit Committee report on page 132 for further details.
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
453.8
3
,16 0 .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 1 January 2023
503.3
3,376.7
81.0
308.9
4,269.9
Additions at cost
\u2013
0.4
8.1
500.7
509.2
Acquired in business combinations (see note 5.1)
\u2013
0 .1
\u2013
\u2013
0.1
Impairment
(1.0)
\u2013
\u2013
(1.7)
(2.7)
Disposals
(0.3)
(27.8)
\u2013
\u2013
(28.1)
Movement in reinstatement asset (see note 5.3)
\u2013
22.7
\u2013
\u2013
22.7
Issues to maintenance projects
\u2013
\u2013
(6.5)
\u2013
(6.5)
Transfers to intangibles
\u2013
(0.1)
\u2013
(0.5)
(0.6)
Transfers between PPE categories
0.4
168.0
0.5
(168.9)
\u2013
Effect of changes in foreign exchange rates
(9.5)
(33.8)
\u2013
(4.2)
(47.5)
At 31 December 2023
492.9
3,506.2
83.1
634.3
4,716.5
Accumulated depreciation:
At 1 January 2022
118.2
1,534.1
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 1 January 2023
142.3
1
,70 6 .1
33.5
\u2013
1,881.9
Depreciation charge for the year
19.3
145.2
2.6
\u2013
167.1
Impairment
7.9
0 .1
\u2013
\u2013
8.0
Disposals
(0 .1)
(25.1)
\u2013
\u2013
(25.2)
Issues to maintenance projects
\u2013
\u2013
(0.7)
\u2013
(0.7)
Effect of changes in foreign exchange rates
(2.7)
(10.7)
\u2013
\u2013
(13.4)
At 31 December 2023
166.7
1,815.6
35.4
\u2013
2 ,017.7
Net book value:
At 31 December 2022
361.0
1,670.6
47.5
308.9
2,388.0
At 31 December 2023
326.2
1,690.6
47.7
634.3
2,698.8
Included within the cost of assets under the course of construction are capitalised interest of \u00a313.3 million (2022: \u00a35.2 million) relating to the construction of the three OCGT projects. See note 2.5 for further details of borrowing costs capitalised during the year. See note 2.4 for further details of the Group\u2019s accounting policy and presentation of impairments of non-current assets.
Pellet Total
Biomass Hydro production plant and
plant plant plants Other equipment
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
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 1 January 2023
2 ,141. 3
479.4
738.8
17. 2
3,376.7
Additions at cost
\u2013
\u2013
\u2013
0.4
0.4
Acquired in business combinations (see note 5.1)
\u2013
\u2013
\u2013
0 .1
0 .1
Disposals
\u2013
\u2013
(27.6)
(0.2)
(27.8)
Movement in reinstatement asset (see note 5.3)
20 .1
\u2013
2.6
\u2013
22.7
Transfers between PPE categories
117.1
\u2013
50.9
\u2013
168.0
Transfers to intangibles
\u2013
\u2013
(0 .1)
\u2013
(0 .1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(33.8)
\u2013
(33.8)
At 31 December 2023
2,278.5
479.4
730.8
17. 5
3,506.2
Accumulated depreciation:
At 1 January 2022
1,356.5
41.2
122.6
13.8
1,534.1
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 1 January 2023
1,417.3
53.3
221.8
13.7
1,7 0 6 .1
Depreciation charge for the year
66.2
12.9
64.2
1.9
145.2
Impairment
\u2013
\u2013
\u2013
0 .1
0.1
Disposals
\u2013
\u2013
(24.9)
(0.2)
(25.1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(10.7)
\u2013
(10.7)
At 31 December 2023
1,483.5
66.2
250.4
15.5
1,815.6
Net book value:
At 31 December 2022
724.0
426.1
517.0
3.5
1,670.6
At 31 December 2023
795.0
413.2
480.4
2.0
1,690.6
The depreciation expense in the Consolidated income statement comprises the following:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charged on property, plant and equipment
167.1
195.6
Depreciation charged on right-of-use assets (note 3.2)
26.9
20.3
Movement on depreciation included in closing inventories
1.6
(7.9)
Total depreciation expense
195.6
208.0
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "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 provided to the Group during the year. The following expenditure has been charged in arriving at operating pro\ufb01t:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Staff costs (note 6.1)
294.0
248.9
Repairs and maintenance expenditure on property, plant and equipment
173.9
110.3
Other operating and administrative expenses
243.8
183.6
Total operating and administrative expenses
711.7
542.8
Auditor\u2019s remuneration
Year ended 31 December
2023 2022
\u00a3\u2019000 \u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements
1,500.0
1,375.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts
40.0
40.0
Total audit fees
1,540.0
1,415.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements
140.0
115.0
Assurance services provided to non-material af\ufb01liates
18.3
18.0
Other services
47.0
46.2
Other assurance services
130.0
65.0
Total non-audit fees
335.3
244.2
Total auditor\u2019s remuneration
1,875.3
1,659.2
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, the audit of certain head of\ufb01ce companies are not required for the Group audit opinion. The audit fee allocation of these companies is included in fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. Other assurance services provided by Deloitte LLP in the current and prior year consist of corporate re\ufb01nancing fees. See the Audit Committee report on page 132 for further details. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-674": { "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 provided to the Group during the year. The following expenditure has been charged in arriving at operating pro\ufb01t:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Staff costs (note 6.1)
294.0
248.9
Repairs and maintenance expenditure on property, plant and equipment
173.9
110.3
Other operating and administrative expenses
243.8
183.6
Total operating and administrative expenses
711.7
542.8
Auditor\u2019s remuneration
Year ended 31 December
2023 2022
\u00a3\u2019000 \u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements
1,500.0
1,375.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts
40.0
40.0
Total audit fees
1,540.0
1,415.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements
140.0
115.0
Assurance services provided to non-material af\ufb01liates
18.3
18.0
Other services
47.0
46.2
Other assurance services
130.0
65.0
Total non-audit fees
335.3
244.2
Total auditor\u2019s remuneration
1,875.3
1,659.2
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, the audit of certain head of\ufb01ce companies are not required for the Group audit opinion. The audit fee allocation of these companies is included in fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts disclosed above. Other assurance services provided by Deloitte LLP in the current and prior year consist of corporate re\ufb01nancing fees. See the Audit Committee report on page 132 for further details. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-653": { "value": "
Auditor\u2019s remuneration
Year ended 31 December
2023 2022
\u00a3\u2019000 \u00a3\u2019000
Audit fees:
Fees payable for the audit of the Group\u2019s Consolidated \ufb01nancial statements
1,500.0
1,375.0
Fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory accounts
40.0
40.0
Total audit fees
1,540.0
1,415.0
Other fees:
Review of the Group\u2019s half-year Condensed consolidated \ufb01nancial statements
140.0
115.0
Assurance services provided to non-material af\ufb01liates
18.3
18.0
Other services
47.0
46.2
Other assurance services
130.0
65.0
Total non-audit fees
335.3
244.2
Total auditor\u2019s remuneration
1,875.3
1,659.2
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, the audit of certain head of\ufb01ce companies are not required for the Group audit
opinion. The audit fee allocation of these companies is included in fees payable for the audit of the Company\u2019s subsidiaries\u2019 statutory
accounts disclosed above.
Other assurance services provided by Deloitte LLP in the current and prior year consist of corporate re\ufb01nancing fees.
See the Audit Committee report on page 132 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-675": { "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. A CGU is the smallest identi\ufb01able group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are identi\ufb01ed consistently from period to period unless there is a change in the period that would impact the Group\u2019s CGUs. The Group\u2019s CGUs are reassessed should any such changes occur. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGU) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each reporting period. If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs 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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic, commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in renewable technologies, 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 estimated future cash flows are 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 what a market participant would pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the Consolidated income statement. Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be allocated on a reasonable and consistent basis. An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual asset is limited to reducing the 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. The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated to them. See note 5.2 for further details on goodwill. CGUs
As at 31 December
2023
Goodwill
Segment name
CGUs contained within segment
\u00a3m
Pellet Production
Pellet Operations
17 7.0
Generation
Drax Power Station
\u2013
Lanark
11.3
Galloway
4 0.1
Cruachan
26.9
OCGTs
\u2013
Daldowie
\u2013
Customers
Drax Energy Solutions
161.4
Opus Energy
\u2013
416.7
The Pellet Production business previously consisted of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill recognised on the acquisition of Pinnacle in 2021 was allocated to the Pellet Production segment due to the segment as a whole being expected to bene\ufb01t from the synergies of the larger, combined Pellet Operations. Reflecting the continued integration and increased interdependence between the Group\u2019s pellet plants across Northern and Southern Operations since acquisition, the Pellet Production business is now considered to be a single CGU. 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. There are no changes to any of the Generation CGUs from the prior year. The OCGT assets are still under construction. Once complete, the three OCGT plants are expected to be operated as a portfolio with signi\ufb01cant interdependence around the decisions, activities and resulting cash inflows. Therefore the Group continues to treat the OCGTs as one CGU. The Customers business has undergone a reorganisation in recent years, which substantially completed during 2023. Certain activities that were previously part of the Opus Energy CGU have transferred to the Drax Energy Solutions CGU. The Customers business is still deemed to consist of two CGUs equivalent to the operating entities within it, Opus Energy and Drax Energy Solutions, however the activities and resulting cash inflows that are attributed to each CGU have changed due to the reorganisation. Principally, the renewables activities, being the purchase and subsequent sale of power from Power Purchase Agreements (PPAs), that were part of the Opus Energy CGU in the prior year are now operated through Drax Energy Solutions and therefore form part of that CGU in the current year. The Opus Energy CGU now consists solely of electricity and gas supply activities. The Opus Energy CGU had \u00a3159.2 million of goodwill allocated to it at 31 December 2022. As the composition of the Opus Energy CGU changed during 2023, the goodwill previously allocated has been reallocated to the CGUs affected by the reorganisation in accordance with IAS 36. This reallocation has been performed using a relative value approach as speci\ufb01ed in IAS 36, resulting in \u00a3144.7 million of goodwill being reallocated to the Drax Energy Solutions CGU, leaving \u00a314.5 million of goodwill remaining within the Opus Energy CGU. During the year, Drax Energy Solutions Limited acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM) for consideration of \u00a39.0 million. This resulted in the recognition of \u00a36.0 million of goodwill. See note 5.1 for further details. BMM installs and maintains electric vehicle charging points. The Drax Energy Solutions CGU provides a full-service energy supply and energy services offering to customers which includes the installation and maintenance of electric vehicle charging points. As such the BMM activities form part of the Drax Energy Solutions CGU. The Drax Energy Solutions CGU had \u00a310.7 million of existing goodwill prior to the reallocation of the Opus Energy CGU goodwill and the BMM acquisition. Subsequent to the reallocation and the acquisition, the Drax Energy Solutions CGU now has goodwill amounting to \u00a3161.4 million (see note 5.2 for further details on goodwill). The Innovation, capital projects and other segment does not have any external cash inflows and therefore does not meet the de\ufb01nition of a CGU. However, as explained above, corporate assets are considered for impairment individually where possible or as part of a CGU, and relevant centrally managed costs are allocated to each CGU. Assessment of indicators of impairment for CGUs to which no goodwill is allocated Full impairment reviews were performed on all CGUs to which goodwill had been allocated (see Impairment review section below). For CGUs to which no goodwill is allocated, impairment reviews are only performed if impairment indicators are identi\ufb01ed. The review of the Group\u2019s CGUs to which no goodwill is allocated did not give rise to any such impairment indicators in the current year. In determining whether impairment indicators existed in respect of these CGUs, the Group considered changes in market prices for commodities, foreign currency exchange rates, changes in macro-economic conditions, potential impacts of climate change and regulatory requirements since the previous reporting date, and their potential impact on the Group\u2019s long-term planning models and future forecast cash flows. In particular, consideration was given to the changes in the economic environment, including interest rates and inflation, and changes in market prices. The market price of certain commodities (e.g. power and gas) have fallen since the prior year but still remain above historical averages. This was not an impairment indicator for the Drax Power Station and OCGT CGUs as they are less sensitive to power price changes due to certain generation income being under a CfD, or generation activities being more dependent on the spread between gas and power prices. Also, a high proportion of their income is not linked to power prices, such as renewable certi\ufb01cates, system support and ancillary services. The Drax Power Station CGU also has a high hedged power position. Gas prices are a key input cost for Daldowie and therefore this CGU has bene\ufb01ted as these prices have reduced during 2023. In considering the economic environment, management concluded that the Drax Power Station, OCGTs and Daldowie CGUs tend to be less sensitive to changes in the economy, as energy is required to power and heat homes and businesses in the UK and waste water treatment is a necessity, and therefore these activities are generally considered essential spend. Interest rates were also considered, including their impact on discount rates. During the current year interest rates have increased slightly, however, the impact on discount rates was not signi\ufb01cant enough to be considered an impairment indicator. Consideration was also given to assumptions regarding biomass generation and biomass prices post March 2027, when current subsidies for biomass generation at Drax Power Station are due to end, and whether that was an indicator of impairment (see the Principal risks and uncertainties section starting on page 94 for further details). Whilst management\u2019s forecasts extend beyond 2027, they indicate that the carrying amount of the Drax Power Station 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 the 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.
Signi\ufb01cant assumptions for value in use
CGUs
calculation
Management\u2019s bases for determining estimates used in value in use calculation
Pellet Operations
\u2022
Production costs
\u2022
Future production costs are estimated based on current year actual
\u2022
Production volumes
production costs plus in\ufb02ation expectations
\u2022
Sales prices
\u2022
Production volumes are estimated based on the current capacity of the
\u2022
Discount rate
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
Lanark, Galloway
\u2022
Power prices
\u2022
Future wholesale energy price estimates are based on market traded power
and Cruachan
\u2022
Sources of stability income
prices for around three years (the period they are liquid), gas market prices as
\u2022
Volume of generation (hydro
a proxy for power for another two years, then the Group\u2019s long-term power
assets only) price forecast, which is prepared using externally provided gas price forecast
\u2022
Discount rate
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
See below for details of the basis used to estimate discount rates
Drax Energy
\u2022
Customer margins
\u2022
Customer margin estimates are based on previously achieved pro\ufb01tability
Solutions and Opus
\u2022
Supply volumes
\u2022
The expectation of future organic volumes is based on past performance
Energy
\u2022
Collection rates
and management\u2019s expectations of market developments
\u2022
Power prices
\u2022
Collection rates are estimated based on historical data and adjusted for
\u2022
Third-party cost estimates
expected changes in future circumstances
\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
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
See below for details of the basis used to estimate discount rates
For the Drax Energy Solutions CGU and Opus Energy CGU, management has projected detailed cash flows based on a period of \ufb01ve years. For all other CGUs, management has projected detailed cash flows based on a period of 15 years. 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\u2019s Generation and Pellet Production businesses operate. 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. Where possible, for relevant commodities, forecasts are based on either contracted prices, particularly for Pellet Operations where the Group has a number of longer term contracts to support the prices used, or observable market curves. Beyond the liquid portion of forward curves, internally constructed price curves are benchmarked against third-party market analysis to validate the reasonableness of the assumptions used. Management also periodically reviews forecasting accuracy and after considering the impact of changes in circumstances and events that could not reasonably be foreseen between the date of the forecast and the forecast period, these reviews support the accuracy of management\u2019s forecasts. This supports management\u2019s ability to forecast reliably over the 15-year periods and the use of a detailed forecast period of longer than \ufb01ve years. Cash flows beyond the \ufb01ve or 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 speci\ufb01c industry and markets in which the CGU operates (taking into account relevant peer data sets). This calculation uses the relevant tax rates to calculate a pre-tax discount rate. Further details on the assessments for each group of CGUs as well as sensitivities for reasonably possible changes in key assumptions are given below. Where reasonably possible changes would result in a material adjustment to the carrying value, these are disclosed as a key source of estimation uncertainty. Pellet Operations The recoverable amount of the Pellet Operations CGU is measured at least annually due to the goodwill allocated to it. The CGU is principally engaged in the production and sale of biomass pellets. Management has projected detailed cash flows based over a period of 15 years. 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. This is 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 impact of changing weather patterns, the impact of decarbonisation and the expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Using a period of only \ufb01ve years for detailed cash flows could materially overstate or understate the value in use of the CGU as the impact of these factors in periods after \ufb01ve years can be signi\ufb01cant. The carrying amount, discount rate and the perpetuity growth rate applied to the Pellet Operations CGU is set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Pellet Operations
1,069.0
10.3%
2%
The pre-tax nominal discount rate of 10.3% (2022: 10.5%) was calculated based on third-party analysis from external specialists that the Group commissioned. The value in use for the Pellet Operations CGU was in excess of its carrying amount. For the Pellet Operations CGU, a reasonably possible increase in production costs of $10 per tonne in the value in use calculation, with no corresponding increase in sales price, would result in a \u00a3105.1 million impairment and a reasonably possible 12% decrease in production volumes would result in a \u00a347. 2 million impairment. Accordingly, reasonably possible changes in assumptions within the value in use calculation could result in a material adjustment to the carrying value of the Pellet Operations CGU. Therefore, the assumptions in the value in use calculation of the Pellet Operations CGU has been identi\ufb01ed as a key source of estimation uncertainty. Drax Energy Solutions and Opus Energy The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured at least annually due to the existence of goodwill allocated to these CGUs. These businesses are principally focused on renewable electricity sales, with Opus Energy also selling gas to some existing customers, and therefore, consideration of climate and environmental impacts are already a key feature of the business models. Management has projected detailed cash flows over 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. The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Drax Energy Solutions
17 7.7
10.4%
2%
Opus Energy
12.0
10.2%
2%
The expected future cash flows of the Drax Energy Solutions CGU and Opus Energy CGU were discounted using a pre-tax nominal discount rate of 10.4% (2022: 10.3%) and 10.2% (2022: 10.3%) respectively, calculated based on third-party analysis from external specialists that the Group commissioned, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s Customers business. The Group believes that these rates reflect the prospects for well-established Customers businesses, reflecting the comparatively long trading record and customer bases these businesses hold. Drax Energy Solutions CGU The value in use of the Drax Energy Solutions CGU was in excess of its carrying amount. A reasonably possible increase in the discount rate to 11.3% combined with factoring in a 1% perpetuity growth rate in the calculation would reduce the headroom by \u00a351.2 million, which would not result in an impairment. Whilst reasonably possible changes in assumptions would reduce the headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Drax Energy Solutions CGU. Opus Energy CGU A full impairment review was carried out on the Opus Energy CGU. The carrying amount of \u00a381.1 million was higher than the calculated value in use and so an impairment charge of \u00a369.1 million was recognised in the Consolidated income statement. The value in use has reduced in the current year due to the strategic decision to offboard the gas portfolio, which also resulted in the loss of some electricity customers who were supplied both gas and electricity. The value in use was also impacted by reduced demand as some customers have changed their behaviour in response to higher energy prices. The Opus Energy CGU\u2019s goodwill of \u00a314.5 million was fully impaired. The Opus Energy head of\ufb01ce property was impaired by \u00a38.9 million down to its recoverable amount of \u00a36.0 million. The remaining \u00a345.7 million impairment was allocated to the remaining non-current assets on a pro rata basis (see the table below for details of this pro rata allocation). A reasonably possible decrease in the discount rate to 9.4% would have reduced the impairment by \u00a31.1 million. No reasonably possible change in assumptions would result in a materially different impairment charge in the year. Whilst reasonably possible changes to assumptions would result in an adjustment to the carrying value of the Opus Energy CGU, they would not result in a material adjustment to its carrying value and so it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1.
Year ended 31 December 2023
Carrying value
Carrying value after
before impairment Impairment charge impairment
\u00a3m \u00a3m \u00a3m
Goodwill (note 5.2)
14.5
(14.5)
\u2013
Freehold land and buildings (note 3.1)
14.9
(8.9)
6.0
Property, plant and equipment (note 3.1)
0.1
(0.1)
\u2013
Intangible assets: customer related assets (note 5.2)
35.6
(31.5)
4 .1
Intangible assets: brand assets (note 5.2)
3.5
(3.0)
0.5
Intangible assets: computer software (note 5.2)
12.5
(11.1)
1.4
Total
81.1
(69.1)
12.0
Lanark, Galloway and Cruachan The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment at least 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. 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. This is to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the electricity generation industry in the models used. These include climate change, changing weather patterns (increased rain fall from storms and drier summer months), the impact of decarbonisation and the continued transition to renewable forms of energy and net zero, the impact of subsidy and support regimes, and the impact of repairs and maintenance expenditure which is not uniform across the lives of the assets. Using a period of only \ufb01ve years for detailed cash flow forecasting could materially overstate or understate the value in use of the CGUs as the impact of these factors in periods after \ufb01ve years can be signi\ufb01cant. The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated Perpetuity
goodwill) Discount growth
CGU \u00a3me rate rate
Lanark
47.4
10.1%
2%
Galloway
172.7
10.1%
2%
Cruachan
251.2
10.1%
2%
The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 10.1% (2022: 8.5%). The discount rates were calculated based on third-party analysis from external specialists that the Group commissioned, 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) were in excess of their carrying amounts. A reasonably possible 1% increase in the discount rate to 11.1% for Galloway and Cruachan would reduce the headroom by \u00a321.1 million and \u00a358.6 million respectively and would not result in an impairment. A reasonably possible decrease in power prices of 10% in each of the value in use calculations would reduce the headroom for Galloway and Cruachan by \u00a329.5 million and \u00a317.0 million respectively but would not result in an impairment. Whilst reasonably possible changes in assumptions for the Galloway and Cruachan CGUs would reduce the headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Galloway or Cruachan CGUs. A reasonably possible 1% increase in the discount rate for Lanark would result in a \u00a31.6 million impairment. A reasonably possible 10% decrease in power prices for Lanark would result in an impairment of \u00a32.5 million. The Lanark CGU is sensitive to reasonably possible changes in the key assumptions. Whilst reasonably possible changes to assumptions would result in an adjustment to the carrying value of the Lanark CGU, they would not result in a material adjustment to its carrying value and so it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1. Drax Power Station, Daldowie and OCGTs For the Drax Power Station, Daldowie and OCGTs CGUs, there were no impairment indicators identi\ufb01ed and none of these CGUs have allocated goodwill. Therefore, value in use calculations to determine the recoverable amount of these CGUs were not required. Impairment of non-current assets The recoverable amount of the Opus Energy head of\ufb01ce property was assessed and an impairment charge of \u00a38.9 million was recognised to reduce the carrying value to its recoverable amount of \u00a36.0 million. The value in use calculation of the Opus Energy CGU resulted in recognising a full impairment of the \u00a314.5 million allocated goodwill and a further \u00a345.7 million impairment charge across the remaining non-current assets. The total impairment charge recognised in the Consolidated income statement in relation to the non-current assets in the Opus Energy CGU was \u00a369.1 million. Other impairments of non-current assets in the year totalled \u00a31.7 million and were charged to the Consolidated income statement. Due to a change in accounting policy in the prior year an impairment charge of \u00a35.7 million was recognised during 2022 on intangible assets relating to Software as a Service (SaaS) costs previously capitalised. An impairment charge of \u00a319.2 million was also recognised on a billing system where the Group had stopped development as it no longer expected future economic bene\ufb01ts would be recovered as an ongoing intangible asset. A legal claim in respect of this was settled during the current year. See notes 2.7 and 5.2 for further details. It is the Group\u2019s policy that any impairments of land or 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 and are subject to depreciation or amortisation charges, the impairment is reflected in the accumulated depreciation or accumulated amortisation of the asset.
Year ended 31 December 2023
Year ended 31 December 2022
Customers SaaS
Opus Energy Other assets Total Daldowie OCGTs billing system assets Total
Impairment \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill \u2013 cost
14.5
\u2013
14.5
\u2013
\u2013
\u2013
\u2013
\u2013
Freehold land and buildings \u2013 cost
1.0
\u2013
1.0
\u2013
0.2
\u2013
\u2013
0.2
Freehold land and buildings \u2013 accumulated
depreciation
7.9
\u2013
7.9
0.5
\u2013
\u2013
\u2013
0.5
Plant and equipment \u2013 accumulated depreciation
0.1
\u2013
0.1
7.5
\u2013
\u2013
\u2013
7.5
Assets under the course of construction \u2013 cost
\u2013
1.7
1.7
\u2013
6.7
\u2013
\u2013
6.7
Intangible assets \u2013 cost: computer software
\u2013
\u2013
\u2013
\u2013
1.7
19.2
\u2013
20.9
Intangible assets \u2013 accumulated amortisation:
Customer related assets: acquired separately
31.5
\u2013
31.5
\u2013
\u2013
\u2013
\u2013
\u2013
Brand assets: acquired separately
3.0
\u2013
3.0
\u2013
\u2013
\u2013
\u2013
\u2013
Computer software: internally generated
11.1
\u2013
11.1
\u2013
\u2013
\u2013
5.7
5.7
Total impairment of non-current assets
69.1
1.7
70.8
8.0
8.6
19.2
5.7
41.5
The total impairment charge for the year of \u00a370.8 million (2022: \u00a341.5 million) is recognised in the impairment of non-current assets line in the Consolidated income statement. The \u00a369.1 million impairment of Opus Energy was treated as an exceptional item (2022: the impairment of SaaS intangible assets and the Customers billing system totalling \u00a324.9 million were treated as exceptional items). See note 2.7 for further details. An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the higher of an asset\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 land that is not depreciated, or if the asset is still under construction and so no depreciation has yet been charged, the impairment charge is recognised within 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.
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
453.8
3
,16 0 .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 1 January 2023
503.3
3,376.7
81.0
308.9
4,269.9
Additions at cost
\u2013
0.4
8.1
500.7
509.2
Acquired in business combinations (see note 5.1)
\u2013
0 .1
\u2013
\u2013
0.1
Impairment
(1.0)
\u2013
\u2013
(1.7)
(2.7)
Disposals
(0.3)
(27.8)
\u2013
\u2013
(28.1)
Movement in reinstatement asset (see note 5.3)
\u2013
22.7
\u2013
\u2013
22.7
Issues to maintenance projects
\u2013
\u2013
(6.5)
\u2013
(6.5)
Transfers to intangibles
\u2013
(0.1)
\u2013
(0.5)
(0.6)
Transfers between PPE categories
0.4
168.0
0.5
(168.9)
\u2013
Effect of changes in foreign exchange rates
(9.5)
(33.8)
\u2013
(4.2)
(47.5)
At 31 December 2023
492.9
3,506.2
83.1
634.3
4,716.5
Accumulated depreciation:
At 1 January 2022
118.2
1,534.1
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 1 January 2023
142.3
1
,70 6 .1
33.5
\u2013
1,881.9
Depreciation charge for the year
19.3
145.2
2.6
\u2013
167.1
Impairment
7.9
0 .1
\u2013
\u2013
8.0
Disposals
(0 .1)
(25.1)
\u2013
\u2013
(25.2)
Issues to maintenance projects
\u2013
\u2013
(0.7)
\u2013
(0.7)
Effect of changes in foreign exchange rates
(2.7)
(10.7)
\u2013
\u2013
(13.4)
At 31 December 2023
166.7
1,815.6
35.4
\u2013
2 ,017.7
Net book value:
At 31 December 2022
361.0
1,670.6
47.5
308.9
2,388.0
At 31 December 2023
326.2
1,690.6
47.7
634.3
2,698.8
Included within the cost of assets under the course of construction are capitalised interest of \u00a313.3 million (2022: \u00a35.2 million) relating to the construction of the three OCGT projects. See note 2.5 for further details of borrowing costs capitalised during the year. See note 2.4 for further details of the Group\u2019s accounting policy and presentation of impairments of non-current assets.
Pellet Total
Biomass Hydro production plant and
plant plant plants Other equipment
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
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 1 January 2023
2 ,141. 3
479.4
738.8
17. 2
3,376.7
Additions at cost
\u2013
\u2013
\u2013
0.4
0.4
Acquired in business combinations (see note 5.1)
\u2013
\u2013
\u2013
0 .1
0 .1
Disposals
\u2013
\u2013
(27.6)
(0.2)
(27.8)
Movement in reinstatement asset (see note 5.3)
20 .1
\u2013
2.6
\u2013
22.7
Transfers between PPE categories
117.1
\u2013
50.9
\u2013
168.0
Transfers to intangibles
\u2013
\u2013
(0 .1)
\u2013
(0 .1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(33.8)
\u2013
(33.8)
At 31 December 2023
2,278.5
479.4
730.8
17. 5
3,506.2
Accumulated depreciation:
At 1 January 2022
1,356.5
41.2
122.6
13.8
1,534.1
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 1 January 2023
1,417.3
53.3
221.8
13.7
1,7 0 6 .1
Depreciation charge for the year
66.2
12.9
64.2
1.9
145.2
Impairment
\u2013
\u2013
\u2013
0 .1
0.1
Disposals
\u2013
\u2013
(24.9)
(0.2)
(25.1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(10.7)
\u2013
(10.7)
At 31 December 2023
1,483.5
66.2
250.4
15.5
1,815.6
Net book value:
At 31 December 2022
724.0
426.1
517.0
3.5
1,670.6
At 31 December 2023
795.0
413.2
480.4
2.0
1,690.6
The depreciation expense in the Consolidated income statement comprises the following:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charged on property, plant and equipment
167.1
195.6
Depreciation charged on right-of-use assets (note 3.2)
26.9
20.3
Movement on depreciation included in closing inventories
1.6
(7.9)
Total depreciation expense
195.6
208.0
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 smaller 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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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 customer base of smaller sized consumers. 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 24 months is the normal period of historical 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 24-month period on which the algorithm is trained and determines whether any change in the provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2023, these factors included, but were not limited to, expectations around future inflation and changes in interest rates and customer pricing. This has not resulted in any additional provision being recognised. 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:
2023
2022
Combined Provision Combined Provision
probability matrix probability matrix
method method Total method method Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
54.9
6.0
60.9
44.4
2.2
46.6
Amounts written off
(44.2)
(5.0)
(49.2)
(39.7)
(2.6)
(42.3)
Net additional amounts provided against
39.9
7. 8
47.7
50.2
6.4
56.6
At 31 December
50.6
8.8
59.4
54.9
6.0
60.9
Gross trade receivables
155.8
239.6
395.4
189.1
148.4
337.5
Expected credit loss provision
(50.6)
(8.8)
(59.4)
(54.9)
(6.0)
(60.9)
Trade receivables
105.2
230.8
336.0
134.2
142.4
276.6
Average expected credit loss %
32%
4%
15%
29%
4%
18%
The provision in the table above relates only 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 \u00a36.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both the Generation and Pellet Production businesses in both the current and prior years. The risk of default within the Generation and Pellet Production businesses is considered to be remote, supported by strong historical collection rates, high credit quality counterparties and short payment terms with timely receipts resulting in negligible aged debt. The economic environment and pressure on energy markets in 2022 resulted in signi\ufb01cant increases to commodity prices, which in turn resulted in higher bills raised to some of the Group\u2019s energy supply customers, particularly those on deemed supply. 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. The higher prices resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected credit loss provision, particularly for smaller customers. Standard variable prices have fallen during 2023, and debt relating to the live customer base has signi\ufb01cantly reduced as a result of this. From October 2022 to March 2023, in response to the signi\ufb01cant increase in energy prices, the UK Government provided support for non-domestic customers through the EBRS. From 1 April 2023 the UK Government changed to providing support for non-domestic customers under the EBDS. These schemes have 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 these schemes. The net charge to the Consolidated income statement in 2023 for impairment losses on \ufb01nancial assets was \u00a332.5 million (2022: \u00a348.0 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a347.3 million (2022: \u00a356.6 million) less a \u00a314.8 million (2022: \u00a38.6 million) bene\ufb01t in the period in respect of the 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 smaller 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:
2023
2022
Estimated gross Lifetime Estimated gross Lifetime
carrying amount expected carrying amount expected
at default credit losses at default credit losses
Probability of default range % \u00a3m \u00a3m \u00a3m \u00a3m
80\u2013100
42 .1
36.7
50.0
40.4
50\u201379
14.3
8.0
16.8
8.9
26\u201349
17.9
5.8
18.2
5.5
0\u201325
81.5
0.1
10 4 .1
0 .1
Total
155.8
50.6
189.1
54.9
The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the ageing pro\ufb01le in 30-day increments of the trade receivables within the Pellet Production and Generation 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 2023
As at 31 December 2022
Estimated Estimated
Lifetime total gross Lifetime total gross
expected carrying amount Expected expected carrying amount Expected
credit losses at default credit loss rate credit losses at default credit loss rate
\u00a3m \u00a3m % \u00a3m \u00a3m %
Accrued income balances not yet due
9.4
382.5
2%
7.6
530.1
1%
Trade receivables days past due:
Balances not yet due
2.1
183.6
1%
1.8
115.0
2%
Between 0\u201330 days
0.9
32.6
3%
0.8
22.1
4%
Between 31\u201360 days
0.7
7.1
9%
0.7
3.3
21%
Between 61\u201390 days
0.5
2.7
19%
0.6
1.5
42%
Over 90 days
4.6
13.6
34%
2.1
6.5
33%
Trade receivables total
8.8
239.6
4%
6.0
148.4
4%
Total
18.2
6 22.1
3%
13.6
678.5
2%
The expected credit loss provision of \u00a318.2 million (2022: \u00a313.6 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.
Computer
Customer-related software and Development Other
assets Brand licences assets intangibles Goodwill Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost and carrying amount:
At 1 January 2022
255.5
11.3
147.2
1.7
0.3
416.3
832.3
Additions at cost \u2013 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 from/(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 1 January 2023
257.6
11.3
129.5
\u2013
0.3
424.2
822.9
Additions at cost \u2013 internally generated
\u2013
\u2013
7.7
\u2013
\u2013
\u2013
7.7
Additions at cost \u2013 acquired separately
\u2013
\u2013
2.2
\u2013
\u2013
\u2013
2.2
Acquired in business combinations
5.0
\u2013
\u2013
\u2013
\u2013
6.0
11.0
Impairment
\u2013
\u2013
\u2013
\u2013
\u2013
(14.5)
(14.5)
Transfers from property, plant
and equipment
\u2013
\u2013
0.6
\u2013
\u2013
\u2013
0.6
Effect of changes in foreign
exchange rates
(1.5)
\u2013
(0.2)
\u2013
\u2013
1.0
(0.7)
At 31 December 2023
261.1
11.3
139.8
\u2013
0.3
416.7
829.2
Accumulated amortisation:
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 1 January 2023
170.6
6.8
79.0
\u2013
\u2013
\u2013
256.4
Charge for the year
17. 2
1.1
11.0
\u2013
0.1
\u2013
29.4
Impairment
31.5
3.0
11.1
\u2013
\u2013
\u2013
45.6
Effect of changes in foreign
exchange rates
(0.3)
\u2013
(0.1)
\u2013
\u2013
\u2013
(0.4)
At 31 December 2023
219.0
10.9
101.0
\u2013
0.1
\u2013
331.0
Net book value:
At 31 December 2022
87.0
4.5
50.5
\u2013
0.3
424.2
566.5
At 31 December 2023
42.1
0.4
38.8
\u2013
0.2
416.7
498.2
The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017 and valued at \u00a311.3 million using a relief-from-royalty method. During the current year the Opus CGU has been tested for impairment and an impairment charge of \u00a33.0 million was allocated to the Opus Energy brand as part of this (see note 2.4 for further details on this impairment assessment). The carrying value of the Opus Energy brand at 31 December 2023 was \u00a30.4 million (2022: \u00a34.5 million) and had a remaining UEL of one year (2022: four years). The UEL of the brand asset was accelerated during the year in line with the Opus Energy customer-related asset. From 1 January 2022, following an agenda decision from the International Financial Reporting Interpretations Committee (IFRIC), the Group applied a new accounting policy for Software as a Service (SaaS) costs. 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 were impaired during 2022, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost in the Consolidated income statement (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in operating and administrative expenses in the Consolidated income statement During the prior year the Group recognised a \u00a319.2 million impairment relating to a new billing system in the Customers business where the Group had stopped development as it no longer expected future economic bene\ufb01ts to be recovered as an ongoing intangible asset. The impairment charge was recognised against cost in the table above, and recorded as an exceptional cost in the Consolidated income statement. A legal claim in respect of this project was settled with the supplier during the current year. This has resulted in a credit to the Consolidated income statement amounting to \u00a313.7 million. This has also been recognised as an exceptional item in the Consolidated income statement (see note 2.7). Following a reorganisation of the Customers business, which included the transfer of certain activities from the Opus Energy CGU to the Drax Energy Solutions CGU, goodwill of \u00a3144.7 million has been reallocated between the two CGUs on a relative fair value approach. Of the \u00a3159.2 million of goodwill allocated to the Opus Energy CGU in the prior year, \u00a3144.7 million has been allocated to the Drax Energy Solutions CGU. The remaining \u00a314.5 million was subsequently impaired as a result of the impairment assessment described in note 2.4. ", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-618": { "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. A CGU is the smallest identi\ufb01able group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are identi\ufb01ed consistently from period to period unless there is a change in the period that would impact the Group\u2019s CGUs. The Group\u2019s CGUs are reassessed should any such changes occur. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGU) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each reporting period. If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs 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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic, commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in renewable technologies, 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 estimated future cash flows are 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 what a market participant would pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the Consolidated income statement. Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be allocated on a reasonable and consistent basis. An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual asset is limited to reducing the 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. The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated to them. See note 5.2 for further details on goodwill. CGUs
As at 31 December
2023
Goodwill
Segment name
CGUs contained within segment
\u00a3m
Pellet Production
Pellet Operations
17 7.0
Generation
Drax Power Station
\u2013
Lanark
11.3
Galloway
4 0.1
Cruachan
26.9
OCGTs
\u2013
Daldowie
\u2013
Customers
Drax Energy Solutions
161.4
Opus Energy
\u2013
416.7
The Pellet Production business previously consisted of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill recognised on the acquisition of Pinnacle in 2021 was allocated to the Pellet Production segment due to the segment as a whole being expected to bene\ufb01t from the synergies of the larger, combined Pellet Operations. Reflecting the continued integration and increased interdependence between the Group\u2019s pellet plants across Northern and Southern Operations since acquisition, the Pellet Production business is now considered to be a single CGU. 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. There are no changes to any of the Generation CGUs from the prior year. The OCGT assets are still under construction. Once complete, the three OCGT plants are expected to be operated as a portfolio with signi\ufb01cant interdependence around the decisions, activities and resulting cash inflows. Therefore the Group continues to treat the OCGTs as one CGU. The Customers business has undergone a reorganisation in recent years, which substantially completed during 2023. Certain activities that were previously part of the Opus Energy CGU have transferred to the Drax Energy Solutions CGU. The Customers business is still deemed to consist of two CGUs equivalent to the operating entities within it, Opus Energy and Drax Energy Solutions, however the activities and resulting cash inflows that are attributed to each CGU have changed due to the reorganisation. Principally, the renewables activities, being the purchase and subsequent sale of power from Power Purchase Agreements (PPAs), that were part of the Opus Energy CGU in the prior year are now operated through Drax Energy Solutions and therefore form part of that CGU in the current year. The Opus Energy CGU now consists solely of electricity and gas supply activities. The Opus Energy CGU had \u00a3159.2 million of goodwill allocated to it at 31 December 2022. As the composition of the Opus Energy CGU changed during 2023, the goodwill previously allocated has been reallocated to the CGUs affected by the reorganisation in accordance with IAS 36. This reallocation has been performed using a relative value approach as speci\ufb01ed in IAS 36, resulting in \u00a3144.7 million of goodwill being reallocated to the Drax Energy Solutions CGU, leaving \u00a314.5 million of goodwill remaining within the Opus Energy CGU. During the year, Drax Energy Solutions Limited acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM) for consideration of \u00a39.0 million. This resulted in the recognition of \u00a36.0 million of goodwill. See note 5.1 for further details. BMM installs and maintains electric vehicle charging points. The Drax Energy Solutions CGU provides a full-service energy supply and energy services offering to customers which includes the installation and maintenance of electric vehicle charging points. As such the BMM activities form part of the Drax Energy Solutions CGU. The Drax Energy Solutions CGU had \u00a310.7 million of existing goodwill prior to the reallocation of the Opus Energy CGU goodwill and the BMM acquisition. Subsequent to the reallocation and the acquisition, the Drax Energy Solutions CGU now has goodwill amounting to \u00a3161.4 million (see note 5.2 for further details on goodwill). The Innovation, capital projects and other segment does not have any external cash inflows and therefore does not meet the de\ufb01nition of a CGU. However, as explained above, corporate assets are considered for impairment individually where possible or as part of a CGU, and relevant centrally managed costs are allocated to each CGU. Assessment of indicators of impairment for CGUs to which no goodwill is allocated Full impairment reviews were performed on all CGUs to which goodwill had been allocated (see Impairment review section below). For CGUs to which no goodwill is allocated, impairment reviews are only performed if impairment indicators are identi\ufb01ed. The review of the Group\u2019s CGUs to which no goodwill is allocated did not give rise to any such impairment indicators in the current year. In determining whether impairment indicators existed in respect of these CGUs, the Group considered changes in market prices for commodities, foreign currency exchange rates, changes in macro-economic conditions, potential impacts of climate change and regulatory requirements since the previous reporting date, and their potential impact on the Group\u2019s long-term planning models and future forecast cash flows. In particular, consideration was given to the changes in the economic environment, including interest rates and inflation, and changes in market prices. The market price of certain commodities (e.g. power and gas) have fallen since the prior year but still remain above historical averages. This was not an impairment indicator for the Drax Power Station and OCGT CGUs as they are less sensitive to power price changes due to certain generation income being under a CfD, or generation activities being more dependent on the spread between gas and power prices. Also, a high proportion of their income is not linked to power prices, such as renewable certi\ufb01cates, system support and ancillary services. The Drax Power Station CGU also has a high hedged power position. Gas prices are a key input cost for Daldowie and therefore this CGU has bene\ufb01ted as these prices have reduced during 2023. In considering the economic environment, management concluded that the Drax Power Station, OCGTs and Daldowie CGUs tend to be less sensitive to changes in the economy, as energy is required to power and heat homes and businesses in the UK and waste water treatment is a necessity, and therefore these activities are generally considered essential spend. Interest rates were also considered, including their impact on discount rates. During the current year interest rates have increased slightly, however, the impact on discount rates was not signi\ufb01cant enough to be considered an impairment indicator. Consideration was also given to assumptions regarding biomass generation and biomass prices post March 2027, when current subsidies for biomass generation at Drax Power Station are due to end, and whether that was an indicator of impairment (see the Principal risks and uncertainties section starting on page 94 for further details). Whilst management\u2019s forecasts extend beyond 2027, they indicate that the carrying amount of the Drax Power Station 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 the 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.
Signi\ufb01cant assumptions for value in use
CGUs
calculation
Management\u2019s bases for determining estimates used in value in use calculation
Pellet Operations
\u2022
Production costs
\u2022
Future production costs are estimated based on current year actual
\u2022
Production volumes
production costs plus in\ufb02ation expectations
\u2022
Sales prices
\u2022
Production volumes are estimated based on the current capacity of the
\u2022
Discount rate
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
Lanark, Galloway
\u2022
Power prices
\u2022
Future wholesale energy price estimates are based on market traded power
and Cruachan
\u2022
Sources of stability income
prices for around three years (the period they are liquid), gas market prices as
\u2022
Volume of generation (hydro
a proxy for power for another two years, then the Group\u2019s long-term power
assets only) price forecast, which is prepared using externally provided gas price forecast
\u2022
Discount rate
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
See below for details of the basis used to estimate discount rates
Drax Energy
\u2022
Customer margins
\u2022
Customer margin estimates are based on previously achieved pro\ufb01tability
Solutions and Opus
\u2022
Supply volumes
\u2022
The expectation of future organic volumes is based on past performance
Energy
\u2022
Collection rates
and management\u2019s expectations of market developments
\u2022
Power prices
\u2022
Collection rates are estimated based on historical data and adjusted for
\u2022
Third-party cost estimates
expected changes in future circumstances
\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
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
See below for details of the basis used to estimate discount rates
For the Drax Energy Solutions CGU and Opus Energy CGU, management has projected detailed cash flows based on a period of \ufb01ve years. For all other CGUs, management has projected detailed cash flows based on a period of 15 years. 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\u2019s Generation and Pellet Production businesses operate. 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. Where possible, for relevant commodities, forecasts are based on either contracted prices, particularly for Pellet Operations where the Group has a number of longer term contracts to support the prices used, or observable market curves. Beyond the liquid portion of forward curves, internally constructed price curves are benchmarked against third-party market analysis to validate the reasonableness of the assumptions used. Management also periodically reviews forecasting accuracy and after considering the impact of changes in circumstances and events that could not reasonably be foreseen between the date of the forecast and the forecast period, these reviews support the accuracy of management\u2019s forecasts. This supports management\u2019s ability to forecast reliably over the 15-year periods and the use of a detailed forecast period of longer than \ufb01ve years. Cash flows beyond the \ufb01ve or 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 speci\ufb01c industry and markets in which the CGU operates (taking into account relevant peer data sets). This calculation uses the relevant tax rates to calculate a pre-tax discount rate. Further details on the assessments for each group of CGUs as well as sensitivities for reasonably possible changes in key assumptions are given below. Where reasonably possible changes would result in a material adjustment to the carrying value, these are disclosed as a key source of estimation uncertainty. Pellet Operations The recoverable amount of the Pellet Operations CGU is measured at least annually due to the goodwill allocated to it. The CGU is principally engaged in the production and sale of biomass pellets. Management has projected detailed cash flows based over a period of 15 years. 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. This is 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 impact of changing weather patterns, the impact of decarbonisation and the expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Using a period of only \ufb01ve years for detailed cash flows could materially overstate or understate the value in use of the CGU as the impact of these factors in periods after \ufb01ve years can be signi\ufb01cant. The carrying amount, discount rate and the perpetuity growth rate applied to the Pellet Operations CGU is set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Pellet Operations
1,069.0
10.3%
2%
The pre-tax nominal discount rate of 10.3% (2022: 10.5%) was calculated based on third-party analysis from external specialists that the Group commissioned. The value in use for the Pellet Operations CGU was in excess of its carrying amount. For the Pellet Operations CGU, a reasonably possible increase in production costs of $10 per tonne in the value in use calculation, with no corresponding increase in sales price, would result in a \u00a3105.1 million impairment and a reasonably possible 12% decrease in production volumes would result in a \u00a347. 2 million impairment. Accordingly, reasonably possible changes in assumptions within the value in use calculation could result in a material adjustment to the carrying value of the Pellet Operations CGU. Therefore, the assumptions in the value in use calculation of the Pellet Operations CGU has been identi\ufb01ed as a key source of estimation uncertainty. Drax Energy Solutions and Opus Energy The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured at least annually due to the existence of goodwill allocated to these CGUs. These businesses are principally focused on renewable electricity sales, with Opus Energy also selling gas to some existing customers, and therefore, consideration of climate and environmental impacts are already a key feature of the business models. Management has projected detailed cash flows over 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. The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Drax Energy Solutions
17 7.7
10.4%
2%
Opus Energy
12.0
10.2%
2%
The expected future cash flows of the Drax Energy Solutions CGU and Opus Energy CGU were discounted using a pre-tax nominal discount rate of 10.4% (2022: 10.3%) and 10.2% (2022: 10.3%) respectively, calculated based on third-party analysis from external specialists that the Group commissioned, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s Customers business. The Group believes that these rates reflect the prospects for well-established Customers businesses, reflecting the comparatively long trading record and customer bases these businesses hold. Drax Energy Solutions CGU The value in use of the Drax Energy Solutions CGU was in excess of its carrying amount. A reasonably possible increase in the discount rate to 11.3% combined with factoring in a 1% perpetuity growth rate in the calculation would reduce the headroom by \u00a351.2 million, which would not result in an impairment. Whilst reasonably possible changes in assumptions would reduce the headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Drax Energy Solutions CGU. Opus Energy CGU A full impairment review was carried out on the Opus Energy CGU. The carrying amount of \u00a381.1 million was higher than the calculated value in use and so an impairment charge of \u00a369.1 million was recognised in the Consolidated income statement. The value in use has reduced in the current year due to the strategic decision to offboard the gas portfolio, which also resulted in the loss of some electricity customers who were supplied both gas and electricity. The value in use was also impacted by reduced demand as some customers have changed their behaviour in response to higher energy prices. The Opus Energy CGU\u2019s goodwill of \u00a314.5 million was fully impaired. The Opus Energy head of\ufb01ce property was impaired by \u00a38.9 million down to its recoverable amount of \u00a36.0 million. The remaining \u00a345.7 million impairment was allocated to the remaining non-current assets on a pro rata basis (see the table below for details of this pro rata allocation). A reasonably possible decrease in the discount rate to 9.4% would have reduced the impairment by \u00a31.1 million. No reasonably possible change in assumptions would result in a materially different impairment charge in the year. Whilst reasonably possible changes to assumptions would result in an adjustment to the carrying value of the Opus Energy CGU, they would not result in a material adjustment to its carrying value and so it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1.
Year ended 31 December 2023
Carrying value
Carrying value after
before impairment Impairment charge impairment
\u00a3m \u00a3m \u00a3m
Goodwill (note 5.2)
14.5
(14.5)
\u2013
Freehold land and buildings (note 3.1)
14.9
(8.9)
6.0
Property, plant and equipment (note 3.1)
0.1
(0.1)
\u2013
Intangible assets: customer related assets (note 5.2)
35.6
(31.5)
4 .1
Intangible assets: brand assets (note 5.2)
3.5
(3.0)
0.5
Intangible assets: computer software (note 5.2)
12.5
(11.1)
1.4
Total
81.1
(69.1)
12.0
Lanark, Galloway and Cruachan The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment at least 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. 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. This is to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the electricity generation industry in the models used. These include climate change, changing weather patterns (increased rain fall from storms and drier summer months), the impact of decarbonisation and the continued transition to renewable forms of energy and net zero, the impact of subsidy and support regimes, and the impact of repairs and maintenance expenditure which is not uniform across the lives of the assets. Using a period of only \ufb01ve years for detailed cash flow forecasting could materially overstate or understate the value in use of the CGUs as the impact of these factors in periods after \ufb01ve years can be signi\ufb01cant. The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated Perpetuity
goodwill) Discount growth
CGU \u00a3me rate rate
Lanark
47.4
10.1%
2%
Galloway
172.7
10.1%
2%
Cruachan
251.2
10.1%
2%
The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 10.1% (2022: 8.5%). The discount rates were calculated based on third-party analysis from external specialists that the Group commissioned, 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) were in excess of their carrying amounts. A reasonably possible 1% increase in the discount rate to 11.1% for Galloway and Cruachan would reduce the headroom by \u00a321.1 million and \u00a358.6 million respectively and would not result in an impairment. A reasonably possible decrease in power prices of 10% in each of the value in use calculations would reduce the headroom for Galloway and Cruachan by \u00a329.5 million and \u00a317.0 million respectively but would not result in an impairment. Whilst reasonably possible changes in assumptions for the Galloway and Cruachan CGUs would reduce the headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Galloway or Cruachan CGUs. A reasonably possible 1% increase in the discount rate for Lanark would result in a \u00a31.6 million impairment. A reasonably possible 10% decrease in power prices for Lanark would result in an impairment of \u00a32.5 million. The Lanark CGU is sensitive to reasonably possible changes in the key assumptions. Whilst reasonably possible changes to assumptions would result in an adjustment to the carrying value of the Lanark CGU, they would not result in a material adjustment to its carrying value and so it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1. Drax Power Station, Daldowie and OCGTs For the Drax Power Station, Daldowie and OCGTs CGUs, there were no impairment indicators identi\ufb01ed and none of these CGUs have allocated goodwill. Therefore, value in use calculations to determine the recoverable amount of these CGUs were not required. Impairment of non-current assets The recoverable amount of the Opus Energy head of\ufb01ce property was assessed and an impairment charge of \u00a38.9 million was recognised to reduce the carrying value to its recoverable amount of \u00a36.0 million. The value in use calculation of the Opus Energy CGU resulted in recognising a full impairment of the \u00a314.5 million allocated goodwill and a further \u00a345.7 million impairment charge across the remaining non-current assets. The total impairment charge recognised in the Consolidated income statement in relation to the non-current assets in the Opus Energy CGU was \u00a369.1 million. Other impairments of non-current assets in the year totalled \u00a31.7 million and were charged to the Consolidated income statement. Due to a change in accounting policy in the prior year an impairment charge of \u00a35.7 million was recognised during 2022 on intangible assets relating to Software as a Service (SaaS) costs previously capitalised. An impairment charge of \u00a319.2 million was also recognised on a billing system where the Group had stopped development as it no longer expected future economic bene\ufb01ts would be recovered as an ongoing intangible asset. A legal claim in respect of this was settled during the current year. See notes 2.7 and 5.2 for further details. It is the Group\u2019s policy that any impairments of land or 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 and are subject to depreciation or amortisation charges, the impairment is reflected in the accumulated depreciation or accumulated amortisation of the asset.
Year ended 31 December 2023
Year ended 31 December 2022
Customers SaaS
Opus Energy Other assets Total Daldowie OCGTs billing system assets Total
Impairment \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill \u2013 cost
14.5
\u2013
14.5
\u2013
\u2013
\u2013
\u2013
\u2013
Freehold land and buildings \u2013 cost
1.0
\u2013
1.0
\u2013
0.2
\u2013
\u2013
0.2
Freehold land and buildings \u2013 accumulated
depreciation
7.9
\u2013
7.9
0.5
\u2013
\u2013
\u2013
0.5
Plant and equipment \u2013 accumulated depreciation
0.1
\u2013
0.1
7.5
\u2013
\u2013
\u2013
7.5
Assets under the course of construction \u2013 cost
\u2013
1.7
1.7
\u2013
6.7
\u2013
\u2013
6.7
Intangible assets \u2013 cost: computer software
\u2013
\u2013
\u2013
\u2013
1.7
19.2
\u2013
20.9
Intangible assets \u2013 accumulated amortisation:
Customer related assets: acquired separately
31.5
\u2013
31.5
\u2013
\u2013
\u2013
\u2013
\u2013
Brand assets: acquired separately
3.0
\u2013
3.0
\u2013
\u2013
\u2013
\u2013
\u2013
Computer software: internally generated
11.1
\u2013
11.1
\u2013
\u2013
\u2013
5.7
5.7
Total impairment of non-current assets
69.1
1.7
70.8
8.0
8.6
19.2
5.7
41.5
The total impairment charge for the year of \u00a370.8 million (2022: \u00a341.5 million) is recognised in the impairment of non-current assets line in the Consolidated income statement. The \u00a369.1 million impairment of Opus Energy was treated as an exceptional item (2022: the impairment of SaaS intangible assets and the Customers billing system totalling \u00a324.9 million were treated as exceptional items). See note 2.7 for further details. 5.1 Business combinations Accounting policy Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related costs are recognised as an expense in the Consolidated income statement in the period that they are incurred. Goodwill is measured as the excess of the: \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. Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment post-acquisition are treated as post-acquisition remuneration. Acquisition of BMM On 31 August 2023, Drax Energy Solutions Limited, a wholly owned subsidiary of the Group, acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM). BMM specialises in the installation and maintenance of electric vehicle charge points and has been the Group\u2019s primary installation partner since 2018. The acquisition strengthens the Group\u2019s end-to-end electric vehicle charging proposition to UK businesses. Total consideration payable was \u00a39.0 million. Following the acquisition the Group repaid borrowings acquired of \u00a31.8 million. There was no contingent or deferred consideration. The Group has a one year measurement period, from the acquisition date, to \ufb01nalise the acquisition accounting. Provisional fair values of the identi\ufb01able assets acquired and liabilities assumed as at 31 August 2023 were as follows:
As at 31 August
2023
\u00a3m
Property, plant and equipment
0.1
Intangible assets
5.0
Right-of-use assets
0.1
Inventories
0.3
Trade and other receivables
1.3
Trade and other payables
(0.6)
Lease liabilities
(0.1)
Deferred tax liabilities
(1.3)
Borrowings
(1.8)
Identi\ufb01able net assets acquired
3.0
Add: Goodwill
6.0
Net assets acquired
9.0
The Group recognised an identi\ufb01able intangible asset on the acquisition date for customer relationships of \u00a35.0 million (see note 5.2 for further details). Goodwill of \u00a36.0 million arose on this transaction. The goodwill relates to future uncontracted revenues expected to be realised and has been allocated to the Drax Energy Solutions CGU. No contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value of \u00a31.3 million. These receivables had a gross contracted value of \u00a31.7 million. A provision of \u00a30.4 million was recognised in relation to expected credit losses. The Group acquired inventories with a gross value of \u00a30.4 million. A provision of \u00a30.1 million was recognised in relation to these inventories. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements . 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 C$11.5 million (\u00a3 7.6 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
\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)
Identi\ufb01able net 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 Intangible assets are not physical in nature but are identi\ufb01able from other assets. Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets other than goodwill can be acquired in business combinations, acquired separately or internally generated. Accounting policy Goodwill is measured as the excess of the: \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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised.
Average UEL
remaining
Method of amortisation (years)
At 31 December 2023
Customer-related assets:
Pinnacle
Straight line
7
Opus Energy
Reducing balance
1
BMM
Straight line
9
Other
Straight line
10
Brand
Straight line
1
Computer software and licences
Straight line
5
Other intangibles
Straight line
4
Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Pellet Operations CGU, the Opus Energy CGU, and the Drax Energy Solutions CGU following the acquisition of BMM. The brand is attributable to the Opus Energy CGU. Details of the impairment assessments relating to these CGUs are included in note 2.4.
Computer
Customer-related software and Development Other
assets Brand licences assets intangibles Goodwill Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost and carrying amount:
At 1 January 2022
255.5
11.3
147.2
1.7
0.3
416.3
832.3
Additions at cost \u2013 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 from/(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 1 January 2023
257.6
11.3
129.5
\u2013
0.3
424.2
822.9
Additions at cost \u2013 internally generated
\u2013
\u2013
7.7
\u2013
\u2013
\u2013
7.7
Additions at cost \u2013 acquired separately
\u2013
\u2013
2.2
\u2013
\u2013
\u2013
2.2
Acquired in business combinations
5.0
\u2013
\u2013
\u2013
\u2013
6.0
11.0
Impairment
\u2013
\u2013
\u2013
\u2013
\u2013
(14.5)
(14.5)
Transfers from property, plant
and equipment
\u2013
\u2013
0.6
\u2013
\u2013
\u2013
0.6
Effect of changes in foreign
exchange rates
(1.5)
\u2013
(0.2)
\u2013
\u2013
1.0
(0.7)
At 31 December 2023
261.1
11.3
139.8
\u2013
0.3
416.7
829.2
Accumulated amortisation:
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 1 January 2023
170.6
6.8
79.0
\u2013
\u2013
\u2013
256.4
Charge for the year
17. 2
1.1
11.0
\u2013
0.1
\u2013
29.4
Impairment
31.5
3.0
11.1
\u2013
\u2013
\u2013
45.6
Effect of changes in foreign
exchange rates
(0.3)
\u2013
(0.1)
\u2013
\u2013
\u2013
(0.4)
At 31 December 2023
219.0
10.9
101.0
\u2013
0.1
\u2013
331.0
Net book value:
At 31 December 2022
87.0
4.5
50.5
\u2013
0.3
424.2
566.5
At 31 December 2023
42.1
0.4
38.8
\u2013
0.2
416.7
498.2
The Group has incurred research and development expenditure of \u00a322.8 million (2022: \u00a312.5 million), which is included within
operating and administrative expenses in the Consolidated income statement.
Customer-related assets
Customer-related assets re\ufb02ects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017,
the acquisition of Pinnacle in April 2021, the Paci\ufb01c BioEnergy sales contracts purchased by Pellet Operations in December 2021,
and the customer asset acquired on acquisition of BMM in August 2023.
The Opus Energy asset had an acquisition date fair value of \u00a3211.0 million re\ufb02ecting the estimated value of the future cash \ufb02ows
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 \ufb02ows were discounted using an asset speci\ufb01c discount rate of
10.7%. The asset had 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 was being amortised on a reducing balance basis to
re\ufb02ect the diminishing rate of contract renewals over time. During the current year the Opus Energy CGU has been tested for
impairment and an impairment charge of \u00a331.5 million was allocated to the Opus Energy customer-related asset as part of this (see
note 2.4 for further details on this impairment assessment). At 31 December 2023, the Opus Energy customer-related asset had a
carrying value of \u00a33.8 million (2022: \u00a347.8 million) and a remaining UEL of approximately one year (2022: \ufb01ve years). The UEL has been
reduced due to increased customer churn rates, in part due to the announced exit and offboarding of gas customers in February 2023.
The Pinnacle asset provided the Group with access to customer bases with contracted cash \ufb02ows. The asset had an acquisition date
fair value of C$62.1 million (\u00a335.9 million) which was estimated based upon a multi-period excess earnings method. This was based
on the present value of the incremental after-tax cash \ufb02ows attributable to the customer-related 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 \ufb02ows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were
assumed as part of the valuation. The cash \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.0%. The asset had an
estimated UEL from acquisition of 10 years, supported by the distribution of value, with around 90% of the value to be derived from
the contracts provided in this period. The Pinnacle customer-related asset is being amortised on a straight-line basis to re\ufb02ect the
even spread of contract maturities over the UEL. At 31 December 2023, the Pinnacle asset had a carrying value of \u00a326.8 million
(2022: \u00a331.5 million) and a remaining UEL of approximately seven years (2022: eight years).
On acquisition of BMM in August 2023 a customer-related asset with a fair value of \u00a35.0 million was recognised re\ufb02ecting the
estimated future cash \ufb02ows from existing customer relationships that were not yet contracted. The fair value was estimated based
upon a multi-period excess earnings method. At 31 December 2023, the BMM asset had a carrying value of \u00a34.8 million and a
remaining UEL of nine years.
The other customer-related assets relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. At
31 December 2023 this asset had a carrying value of \u00a36.7 million (2022: \u00a37.7 million) and a remaining UEL of 10 years (2022: 11 years).
Opus Energy brand
The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017 and valued at \u00a311.3 million using a
relief-from-royalty method. During the current year the Opus CGU has been tested for impairment and an impairment charge of
\u00a33.0 million was allocated to the Opus Energy brand as part of this (see note 2.4 for further details on this impairment assessment).
The carrying value of the Opus Energy brand at 31 December 2023 was \u00a30.4 million (2022: \u00a34.5 million) and had a remaining UEL of one
year (2022: four years). The UEL of the brand asset was accelerated during the year in line with the Opus Energy customer-related asset.
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 UELs ranging
from 2\u201310 years.
From 1 January 2022, following an agenda decision from the International Financial Reporting Interpretations Committee (IFRIC), the
Group applied a new accounting policy for Software as a Service (SaaS) costs. 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 were impaired during 2022, with
the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost in the
Consolidated income statement (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in operating and
administrative expenses in the Consolidated income statement .
As at 31 December 2023, computer software assets under the course of construction amounted to \u00a319.7 million (2022: \u00a318.3 million).
During the prior year the Group recognised a \u00a319.2 million impairment relating to a new billing system in the Customers business
where the Group had stopped development as it no longer expected future economic bene\ufb01ts to be recovered as an ongoing
intangible asset. The impairment charge was recognised against cost in the table above, and recorded as an exceptional cost in the
Consolidated income statement. A legal claim in respect of this project was settled with the supplier during the current year. This has
resulted in a credit to the Consolidated income statement amounting to \u00a313.7 million. This has also been recognised as an exceptional
item in the Consolidated income statement (see note 2.7).
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:
Drax Energy Pellet
Solutions Opus Energy Lanark Galloway Cruachan Production Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill
At 1 January 2023
10.7
159.2
11.3
4 0 .1
26.9
176.0
424.2
Acquisitions
6.0
\u2013
\u2013
\u2013
\u2013
\u2013
6.0
Reallocations
144.7
(144.7)
\u2013
\u2013
\u2013
\u2013
\u2013
Impairment
\u2013
(14.5)
\u2013
\u2013
\u2013
\u2013
(14.5)
Effect of changes in foreign
exchange rates
\u2013
\u2013
\u2013
\u2013
\u2013
1.0
1.0
At 31 December 2023
161.4
\u2013
11.3
4 0.1
26.9
17 7.0
416.7
Following a reorganisation of the Customers business, which included the transfer of certain activities from the Opus Energy CGU
to the Drax Energy Solutions CGU, goodwill of \u00a3144.7 million has been reallocated between the two CGUs on a relative fair value
approach. Of the \u00a3159.2 million of goodwill allocated to the Opus Energy CGU in the prior year, \u00a3144.7 million has been allocated
to the Drax Energy Solutions CGU. The remaining \u00a314.5 million was subsequently impaired as a result of the impairment assessment
described in note 2.4.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-716": { "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. A CGU is the smallest identi\ufb01able group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are identi\ufb01ed consistently from period to period unless there is a change in the period that would impact the Group\u2019s CGUs. The Group\u2019s CGUs are reassessed should any such changes occur. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGU) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each reporting period. If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs 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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic, commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in renewable technologies, 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 estimated future cash flows are 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 what a market participant would pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the Consolidated income statement. Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be allocated on a reasonable and consistent basis. An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual asset is limited to reducing the 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. The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated to them. See note 5.2 for further details on goodwill. An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the higher of an asset\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 land that is not depreciated, or if the asset is still under construction and so no depreciation has yet been charged, the impairment charge is recognised within 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. 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 the year are set out in note 2.4. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-751": { "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. A CGU is the smallest identi\ufb01able group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are identi\ufb01ed consistently from period to period unless there is a change in the period that would impact the Group\u2019s CGUs. The Group\u2019s CGUs are reassessed should any such changes occur. The Group reviews its \ufb01xed assets (or, where appropriate, groups of assets combined into a CGU) whenever there is an indication that an impairment loss may have been suffered. The Group assesses the existence of indicators of impairment at the end of each reporting period. If an indication of potential impairment exists, the recoverable amount of the asset or CGU in question is assessed with reference to the present value of the future cash flows expected to be derived from the continuing use of the asset or CGU (value in use), or the expected price that would be received if the asset or CGU were sold to a market participant (fair value less costs 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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic, commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in renewable technologies, 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 estimated future cash flows are 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 what a market participant would pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the Consolidated income statement. Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be allocated on a reasonable and consistent basis. An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual asset is limited to reducing the 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. The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated to them. See note 5.2 for further details on goodwill. An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the higher of an asset\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 land that is not depreciated, or if the asset is still under construction and so no depreciation has yet been charged, the impairment charge is recognised within 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. 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 the year are set out in note 2.4. 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 smaller 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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-654": { "value": "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 forward hedging activities and as a result the carrying amount of each CGU includes the fair value of those hedges. Assessments of future cash flows consider relevant environmental and climate change factors. In particular, macro-economic, commodity price and third-party cost assumptions reflect considerations in respect of the impact of climate change, growth in renewable technologies, 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 estimated future cash flows are 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 what a market participant would pay, and its value in use. If the recoverable amount is less than the carrying amount in the Consolidated \ufb01nancial statements, an impairment charge is recognised to reduce the carrying amount of the asset or CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the Consolidated income statement. Individual assets are considered for impairment where possible. If individual assets do not generate cash inflows that are largely independent, the recoverable amount is determined for the CGU to which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU on a reasonable and consistent basis, they are included in the carrying amount of the smallest group of CGUs to which they can be allocated on a reasonable and consistent basis. An impairment loss relating to a CGU is allocated \ufb01rst to the carrying amount of any goodwill allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable amount of an individual asset within that CGU is determinable, the impairment loss allocated to the individual asset is limited to reducing the 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. The below table details the Group\u2019s reportable segments, the CGUs within those segments and the value of any goodwill allocated to them. See note 5.2 for further details on goodwill. CGUs
As at 31 December
2023
Goodwill
Segment name
CGUs contained within segment
\u00a3m
Pellet Production
Pellet Operations
17 7.0
Generation
Drax Power Station
\u2013
Lanark
11.3
Galloway
4 0.1
Cruachan
26.9
OCGTs
\u2013
Daldowie
\u2013
Customers
Drax Energy Solutions
161.4
Opus Energy
\u2013
416.7
The Pellet Production business previously consisted of two CGUs \u2013 Northern Operations and Southern Operations. Goodwill recognised on the acquisition of Pinnacle in 2021 was allocated to the Pellet Production segment due to the segment as a whole being expected to bene\ufb01t from the synergies of the larger, combined Pellet Operations. Reflecting the continued integration and increased interdependence between the Group\u2019s pellet plants across Northern and Southern Operations since acquisition, the Pellet Production business is now considered to be a single CGU. 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. There are no changes to any of the Generation CGUs from the prior year. The OCGT assets are still under construction. Once complete, the three OCGT plants are expected to be operated as a portfolio with signi\ufb01cant interdependence around the decisions, activities and resulting cash inflows. Therefore the Group continues to treat the OCGTs as one CGU. The Customers business has undergone a reorganisation in recent years, which substantially completed during 2023. Certain activities that were previously part of the Opus Energy CGU have transferred to the Drax Energy Solutions CGU. The Customers business is still deemed to consist of two CGUs equivalent to the operating entities within it, Opus Energy and Drax Energy Solutions, however the activities and resulting cash inflows that are attributed to each CGU have changed due to the reorganisation. Principally, the renewables activities, being the purchase and subsequent sale of power from Power Purchase Agreements (PPAs), that were part of the Opus Energy CGU in the prior year are now operated through Drax Energy Solutions and therefore form part of that CGU in the current year. The Opus Energy CGU now consists solely of electricity and gas supply activities. The Opus Energy CGU had \u00a3159.2 million of goodwill allocated to it at 31 December 2022. As the composition of the Opus Energy CGU changed during 2023, the goodwill previously allocated has been reallocated to the CGUs affected by the reorganisation in accordance with IAS 36. This reallocation has been performed using a relative value approach as speci\ufb01ed in IAS 36, resulting in \u00a3144.7 million of goodwill being reallocated to the Drax Energy Solutions CGU, leaving \u00a314.5 million of goodwill remaining within the Opus Energy CGU. During the year, Drax Energy Solutions Limited acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM) for consideration of \u00a39.0 million. This resulted in the recognition of \u00a36.0 million of goodwill. See note 5.1 for further details. BMM installs and maintains electric vehicle charging points. The Drax Energy Solutions CGU provides a full-service energy supply and energy services offering to customers which includes the installation and maintenance of electric vehicle charging points. As such the BMM activities form part of the Drax Energy Solutions CGU. The Drax Energy Solutions CGU had \u00a310.7 million of existing goodwill prior to the reallocation of the Opus Energy CGU goodwill and the BMM acquisition. Subsequent to the reallocation and the acquisition, the Drax Energy Solutions CGU now has goodwill amounting to \u00a3161.4 million (see note 5.2 for further details on goodwill). The Innovation, capital projects and other segment does not have any external cash inflows and therefore does not meet the de\ufb01nition of a CGU. However, as explained above, corporate assets are considered for impairment individually where possible or as part of a CGU, and relevant centrally managed costs are allocated to each CGU. Assessment of indicators of impairment for CGUs to which no goodwill is allocated Full impairment reviews were performed on all CGUs to which goodwill had been allocated (see Impairment review section below). For CGUs to which no goodwill is allocated, impairment reviews are only performed if impairment indicators are identi\ufb01ed. The review of the Group\u2019s CGUs to which no goodwill is allocated did not give rise to any such impairment indicators in the current year. In determining whether impairment indicators existed in respect of these CGUs, the Group considered changes in market prices for commodities, foreign currency exchange rates, changes in macro-economic conditions, potential impacts of climate change and regulatory requirements since the previous reporting date, and their potential impact on the Group\u2019s long-term planning models and future forecast cash flows. In particular, consideration was given to the changes in the economic environment, including interest rates and inflation, and changes in market prices. The market price of certain commodities (e.g. power and gas) have fallen since the prior year but still remain above historical averages. This was not an impairment indicator for the Drax Power Station and OCGT CGUs as they are less sensitive to power price changes due to certain generation income being under a CfD, or generation activities being more dependent on the spread between gas and power prices. Also, a high proportion of their income is not linked to power prices, such as renewable certi\ufb01cates, system support and ancillary services. The Drax Power Station CGU also has a high hedged power position. Gas prices are a key input cost for Daldowie and therefore this CGU has bene\ufb01ted as these prices have reduced during 2023. In considering the economic environment, management concluded that the Drax Power Station, OCGTs and Daldowie CGUs tend to be less sensitive to changes in the economy, as energy is required to power and heat homes and businesses in the UK and waste water treatment is a necessity, and therefore these activities are generally considered essential spend. Interest rates were also considered, including their impact on discount rates. During the current year interest rates have increased slightly, however, the impact on discount rates was not signi\ufb01cant enough to be considered an impairment indicator. Consideration was also given to assumptions regarding biomass generation and biomass prices post March 2027, when current subsidies for biomass generation at Drax Power Station are due to end, and whether that was an indicator of impairment (see the Principal risks and uncertainties section starting on page 94 for further details). Whilst management\u2019s forecasts extend beyond 2027, they indicate that the carrying amount of the Drax Power Station 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 the 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.
Signi\ufb01cant assumptions for value in use
CGUs
calculation
Management\u2019s bases for determining estimates used in value in use calculation
Pellet Operations
\u2022
Production costs
\u2022
Future production costs are estimated based on current year actual
\u2022
Production volumes
production costs plus in\ufb02ation expectations
\u2022
Sales prices
\u2022
Production volumes are estimated based on the current capacity of the
\u2022
Discount rate
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
Lanark, Galloway
\u2022
Power prices
\u2022
Future wholesale energy price estimates are based on market traded power
and Cruachan
\u2022
Sources of stability income
prices for around three years (the period they are liquid), gas market prices as
\u2022
Volume of generation (hydro
a proxy for power for another two years, then the Group\u2019s long-term power
assets only) price forecast, which is prepared using externally provided gas price forecast
\u2022
Discount rate
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
See below for details of the basis used to estimate discount rates
Drax Energy
\u2022
Customer margins
\u2022
Customer margin estimates are based on previously achieved pro\ufb01tability
Solutions and Opus
\u2022
Supply volumes
\u2022
The expectation of future organic volumes is based on past performance
Energy
\u2022
Collection rates
and management\u2019s expectations of market developments
\u2022
Power prices
\u2022
Collection rates are estimated based on historical data and adjusted for
\u2022
Third-party cost estimates
expected changes in future circumstances
\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
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
See below for details of the basis used to estimate discount rates
For the Drax Energy Solutions CGU and Opus Energy CGU, management has projected detailed cash flows based on a period of \ufb01ve years. For all other CGUs, management has projected detailed cash flows based on a period of 15 years. 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\u2019s Generation and Pellet Production businesses operate. 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. Where possible, for relevant commodities, forecasts are based on either contracted prices, particularly for Pellet Operations where the Group has a number of longer term contracts to support the prices used, or observable market curves. Beyond the liquid portion of forward curves, internally constructed price curves are benchmarked against third-party market analysis to validate the reasonableness of the assumptions used. Management also periodically reviews forecasting accuracy and after considering the impact of changes in circumstances and events that could not reasonably be foreseen between the date of the forecast and the forecast period, these reviews support the accuracy of management\u2019s forecasts. This supports management\u2019s ability to forecast reliably over the 15-year periods and the use of a detailed forecast period of longer than \ufb01ve years. Cash flows beyond the \ufb01ve or 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 speci\ufb01c industry and markets in which the CGU operates (taking into account relevant peer data sets). This calculation uses the relevant tax rates to calculate a pre-tax discount rate. Further details on the assessments for each group of CGUs as well as sensitivities for reasonably possible changes in key assumptions are given below. Where reasonably possible changes would result in a material adjustment to the carrying value, these are disclosed as a key source of estimation uncertainty. Pellet Operations The recoverable amount of the Pellet Operations CGU is measured at least annually due to the goodwill allocated to it. The CGU is principally engaged in the production and sale of biomass pellets. Management has projected detailed cash flows based over a period of 15 years. 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. This is 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 impact of changing weather patterns, the impact of decarbonisation and the expected growth in the biomass industry as economies transition to more renewable forms of energy and net zero. Using a period of only \ufb01ve years for detailed cash flows could materially overstate or understate the value in use of the CGU as the impact of these factors in periods after \ufb01ve years can be signi\ufb01cant. The carrying amount, discount rate and the perpetuity growth rate applied to the Pellet Operations CGU is set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Pellet Operations
1,069.0
10.3%
2%
The pre-tax nominal discount rate of 10.3% (2022: 10.5%) was calculated based on third-party analysis from external specialists that the Group commissioned. The value in use for the Pellet Operations CGU was in excess of its carrying amount. For the Pellet Operations CGU, a reasonably possible increase in production costs of $10 per tonne in the value in use calculation, with no corresponding increase in sales price, would result in a \u00a3105.1 million impairment and a reasonably possible 12% decrease in production volumes would result in a \u00a347. 2 million impairment. Accordingly, reasonably possible changes in assumptions within the value in use calculation could result in a material adjustment to the carrying value of the Pellet Operations CGU. Therefore, the assumptions in the value in use calculation of the Pellet Operations CGU has been identi\ufb01ed as a key source of estimation uncertainty. Drax Energy Solutions and Opus Energy The recoverable amounts of the Drax Energy Solutions and Opus Energy CGUs are measured at least annually due to the existence of goodwill allocated to these CGUs. These businesses are principally focused on renewable electricity sales, with Opus Energy also selling gas to some existing customers, and therefore, consideration of climate and environmental impacts are already a key feature of the business models. Management has projected detailed cash flows over 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. The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated
goodwill) Discount Perpetuity
CGU \u00a3m rate growth rate
Drax Energy Solutions
17 7.7
10.4%
2%
Opus Energy
12.0
10.2%
2%
The expected future cash flows of the Drax Energy Solutions CGU and Opus Energy CGU were discounted using a pre-tax nominal discount rate of 10.4% (2022: 10.3%) and 10.2% (2022: 10.3%) respectively, calculated based on third-party analysis from external specialists that the Group commissioned, adjusted to the speci\ufb01c circumstances and risk factors affecting the Group\u2019s Customers business. The Group believes that these rates reflect the prospects for well-established Customers businesses, reflecting the comparatively long trading record and customer bases these businesses hold. Drax Energy Solutions CGU The value in use of the Drax Energy Solutions CGU was in excess of its carrying amount. A reasonably possible increase in the discount rate to 11.3% combined with factoring in a 1% perpetuity growth rate in the calculation would reduce the headroom by \u00a351.2 million, which would not result in an impairment. Whilst reasonably possible changes in assumptions would reduce the headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Drax Energy Solutions CGU. Opus Energy CGU A full impairment review was carried out on the Opus Energy CGU. The carrying amount of \u00a381.1 million was higher than the calculated value in use and so an impairment charge of \u00a369.1 million was recognised in the Consolidated income statement. The value in use has reduced in the current year due to the strategic decision to offboard the gas portfolio, which also resulted in the loss of some electricity customers who were supplied both gas and electricity. The value in use was also impacted by reduced demand as some customers have changed their behaviour in response to higher energy prices. The Opus Energy CGU\u2019s goodwill of \u00a314.5 million was fully impaired. The Opus Energy head of\ufb01ce property was impaired by \u00a38.9 million down to its recoverable amount of \u00a36.0 million. The remaining \u00a345.7 million impairment was allocated to the remaining non-current assets on a pro rata basis (see the table below for details of this pro rata allocation). A reasonably possible decrease in the discount rate to 9.4% would have reduced the impairment by \u00a31.1 million. No reasonably possible change in assumptions would result in a materially different impairment charge in the year. Whilst reasonably possible changes to assumptions would result in an adjustment to the carrying value of the Opus Energy CGU, they would not result in a material adjustment to its carrying value and so it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1.
Year ended 31 December 2023
Carrying value
Carrying value after
before impairment Impairment charge impairment
\u00a3m \u00a3m \u00a3m
Goodwill (note 5.2)
14.5
(14.5)
\u2013
Freehold land and buildings (note 3.1)
14.9
(8.9)
6.0
Property, plant and equipment (note 3.1)
0.1
(0.1)
\u2013
Intangible assets: customer related assets (note 5.2)
35.6
(31.5)
4 .1
Intangible assets: brand assets (note 5.2)
3.5
(3.0)
0.5
Intangible assets: computer software (note 5.2)
12.5
(11.1)
1.4
Total
81.1
(69.1)
12.0
Lanark, Galloway and Cruachan The Group tests the Lanark, Galloway and Cruachan CGUs for potential impairment at least 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. 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. This is to align to the Group\u2019s long-term strategic planning, which is relevant to take into account future structural changes forecast within the electricity generation industry in the models used. These include climate change, changing weather patterns (increased rain fall from storms and drier summer months), the impact of decarbonisation and the continued transition to renewable forms of energy and net zero, the impact of subsidy and support regimes, and the impact of repairs and maintenance expenditure which is not uniform across the lives of the assets. Using a period of only \ufb01ve years for detailed cash flow forecasting could materially overstate or understate the value in use of the CGUs as the impact of these factors in periods after \ufb01ve years can be signi\ufb01cant. The carrying amounts, discount rates and the perpetuity growth rates applied to each CGU are set out in the table below:
Carrying
amount
(including
allocated Perpetuity
goodwill) Discount growth
CGU \u00a3me rate rate
Lanark
47.4
10.1%
2%
Galloway
172.7
10.1%
2%
Cruachan
251.2
10.1%
2%
The expected future cash flows of these CGUs were discounted using a pre-tax nominal discount rate of 10.1% (2022: 8.5%). The discount rates were calculated based on third-party analysis from external specialists that the Group commissioned, 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) were in excess of their carrying amounts. A reasonably possible 1% increase in the discount rate to 11.1% for Galloway and Cruachan would reduce the headroom by \u00a321.1 million and \u00a358.6 million respectively and would not result in an impairment. A reasonably possible decrease in power prices of 10% in each of the value in use calculations would reduce the headroom for Galloway and Cruachan by \u00a329.5 million and \u00a317.0 million respectively but would not result in an impairment. Whilst reasonably possible changes in assumptions for the Galloway and Cruachan CGUs would reduce the headroom, they would not result in the recoverable amount being lower than the carrying value. As such the Group does not believe that any reasonably possible changes in the key assumptions would result in an adjustment to the carrying value of the Galloway or Cruachan CGUs. A reasonably possible 1% increase in the discount rate for Lanark would result in a \u00a31.6 million impairment. A reasonably possible 10% decrease in power prices for Lanark would result in an impairment of \u00a32.5 million. The Lanark CGU is sensitive to reasonably possible changes in the key assumptions. Whilst reasonably possible changes to assumptions would result in an adjustment to the carrying value of the Lanark CGU, they would not result in a material adjustment to its carrying value and so it is not considered a key source of estimation uncertainty as de\ufb01ned by IAS 1. Drax Power Station, Daldowie and OCGTs For the Drax Power Station, Daldowie and OCGTs CGUs, there were no impairment indicators identi\ufb01ed and none of these CGUs have allocated goodwill. Therefore, value in use calculations to determine the recoverable amount of these CGUs were not required. Impairment of non-current assets The recoverable amount of the Opus Energy head of\ufb01ce property was assessed and an impairment charge of \u00a38.9 million was recognised to reduce the carrying value to its recoverable amount of \u00a36.0 million. The value in use calculation of the Opus Energy CGU resulted in recognising a full impairment of the \u00a314.5 million allocated goodwill and a further \u00a345.7 million impairment charge across the remaining non-current assets. The total impairment charge recognised in the Consolidated income statement in relation to the non-current assets in the Opus Energy CGU was \u00a369.1 million. Other impairments of non-current assets in the year totalled \u00a31.7 million and were charged to the Consolidated income statement. Due to a change in accounting policy in the prior year an impairment charge of \u00a35.7 million was recognised during 2022 on intangible assets relating to Software as a Service (SaaS) costs previously capitalised. An impairment charge of \u00a319.2 million was also recognised on a billing system where the Group had stopped development as it no longer expected future economic bene\ufb01ts would be recovered as an ongoing intangible asset. A legal claim in respect of this was settled during the current year. See notes 2.7 and 5.2 for further details. It is the Group\u2019s policy that any impairments of land or 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 and are subject to depreciation or amortisation charges, the impairment is reflected in the accumulated depreciation or accumulated amortisation of the asset.
Year ended 31 December 2023
Year ended 31 December 2022
Customers SaaS
Opus Energy Other assets Total Daldowie OCGTs billing system assets Total
Impairment \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill \u2013 cost
14.5
\u2013
14.5
\u2013
\u2013
\u2013
\u2013
\u2013
Freehold land and buildings \u2013 cost
1.0
\u2013
1.0
\u2013
0.2
\u2013
\u2013
0.2
Freehold land and buildings \u2013 accumulated
depreciation
7.9
\u2013
7.9
0.5
\u2013
\u2013
\u2013
0.5
Plant and equipment \u2013 accumulated depreciation
0.1
\u2013
0.1
7.5
\u2013
\u2013
\u2013
7.5
Assets under the course of construction \u2013 cost
\u2013
1.7
1.7
\u2013
6.7
\u2013
\u2013
6.7
Intangible assets \u2013 cost: computer software
\u2013
\u2013
\u2013
\u2013
1.7
19.2
\u2013
20.9
Intangible assets \u2013 accumulated amortisation:
Customer related assets: acquired separately
31.5
\u2013
31.5
\u2013
\u2013
\u2013
\u2013
\u2013
Brand assets: acquired separately
3.0
\u2013
3.0
\u2013
\u2013
\u2013
\u2013
\u2013
Computer software: internally generated
11.1
\u2013
11.1
\u2013
\u2013
\u2013
5.7
5.7
Total impairment of non-current assets
69.1
1.7
70.8
8.0
8.6
19.2
5.7
41.5
The total impairment charge for the year of \u00a370.8 million (2022: \u00a341.5 million) is recognised in the impairment of non-current assets line in the Consolidated income statement. The \u00a369.1 million impairment of Opus Energy was treated as an exceptional item (2022: the impairment of SaaS intangible assets and the Customers billing system totalling \u00a324.9 million were treated as exceptional items). See note 2.7 for further details. 5.2 Goodwill and intangible assets Intangible assets are not physical in nature but are identi\ufb01able from other assets. Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets other than goodwill can be acquired in business combinations, acquired separately or internally generated. Accounting policy Goodwill is measured as the excess of the: \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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised.
Average UEL
remaining
Method of amortisation (years)
At 31 December 2023
Customer-related assets:
Pinnacle
Straight line
7
Opus Energy
Reducing balance
1
BMM
Straight line
9
Other
Straight line
10
Brand
Straight line
1
Computer software and licences
Straight line
5
Other intangibles
Straight line
4
Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Pellet Operations CGU, the Opus Energy CGU, and the Drax Energy Solutions CGU following the acquisition of BMM. The brand is attributable to the Opus Energy CGU. Details of the impairment assessments relating to these CGUs are included in note 2.4.
Computer
Customer-related software and Development Other
assets Brand licences assets intangibles Goodwill Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost and carrying amount:
At 1 January 2022
255.5
11.3
147.2
1.7
0.3
416.3
832.3
Additions at cost \u2013 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 from/(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 1 January 2023
257.6
11.3
129.5
\u2013
0.3
424.2
822.9
Additions at cost \u2013 internally generated
\u2013
\u2013
7.7
\u2013
\u2013
\u2013
7.7
Additions at cost \u2013 acquired separately
\u2013
\u2013
2.2
\u2013
\u2013
\u2013
2.2
Acquired in business combinations
5.0
\u2013
\u2013
\u2013
\u2013
6.0
11.0
Impairment
\u2013
\u2013
\u2013
\u2013
\u2013
(14.5)
(14.5)
Transfers from property, plant
and equipment
\u2013
\u2013
0.6
\u2013
\u2013
\u2013
0.6
Effect of changes in foreign
exchange rates
(1.5)
\u2013
(0.2)
\u2013
\u2013
1.0
(0.7)
At 31 December 2023
261.1
11.3
139.8
\u2013
0.3
416.7
829.2
Accumulated amortisation:
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 1 January 2023
170.6
6.8
79.0
\u2013
\u2013
\u2013
256.4
Charge for the year
17. 2
1.1
11.0
\u2013
0.1
\u2013
29.4
Impairment
31.5
3.0
11.1
\u2013
\u2013
\u2013
45.6
Effect of changes in foreign
exchange rates
(0.3)
\u2013
(0.1)
\u2013
\u2013
\u2013
(0.4)
At 31 December 2023
219.0
10.9
101.0
\u2013
0.1
\u2013
331.0
Net book value:
At 31 December 2022
87.0
4.5
50.5
\u2013
0.3
424.2
566.5
At 31 December 2023
42.1
0.4
38.8
\u2013
0.2
416.7
498.2
The Group has incurred research and development expenditure of \u00a322.8 million (2022: \u00a312.5 million), which is included within operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets re\ufb02ects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017, the acquisition of Pinnacle in April 2021, the Paci\ufb01c BioEnergy sales contracts purchased by Pellet Operations in December 2021, and the customer asset acquired on acquisition of BMM in August 2023. The Opus Energy asset had an acquisition date fair value of \u00a3211.0 million re\ufb02ecting the estimated value of the future cash \ufb02ows 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 \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.7%. The asset had 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 was being amortised on a reducing balance basis to re\ufb02ect the diminishing rate of contract renewals over time. During the current year the Opus Energy CGU has been tested for impairment and an impairment charge of \u00a331.5 million was allocated to the Opus Energy customer-related asset as part of this (see note 2.4 for further details on this impairment assessment). At 31 December 2023, the Opus Energy customer-related asset had a carrying value of \u00a33.8 million (2022: \u00a347.8 million) and a remaining UEL of approximately one year (2022: \ufb01ve years). The UEL has been reduced due to increased customer churn rates, in part due to the announced exit and offboarding of gas customers in February 2023. The Pinnacle asset provided the Group with access to customer bases with contracted cash \ufb02ows. The asset had an acquisition date fair value of C$62.1 million (\u00a335.9 million) which was estimated based upon a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash \ufb02ows attributable to the customer-related 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 \ufb02ows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The cash \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.0%. The asset had an estimated UEL from acquisition of 10 years, supported by the distribution of value, with around 90% of the value to be derived from the contracts provided in this period. The Pinnacle customer-related asset is being amortised on a straight-line basis to re\ufb02ect the even spread of contract maturities over the UEL. At 31 December 2023, the Pinnacle asset had a carrying value of \u00a326.8 million (2022: \u00a331.5 million) and a remaining UEL of approximately seven years (2022: eight years). On acquisition of BMM in August 2023 a customer-related asset with a fair value of \u00a35.0 million was recognised re\ufb02ecting the estimated future cash \ufb02ows from existing customer relationships that were not yet contracted. The fair value was estimated based upon a multi-period excess earnings method. At 31 December 2023, the BMM asset had a carrying value of \u00a34.8 million and a remaining UEL of nine years. The other customer-related assets relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. At 31 December 2023 this asset had a carrying value of \u00a36.7 million (2022: \u00a37.7 million) and a remaining UEL of 10 years (2022: 11 years). Opus Energy brand The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017 and valued at \u00a311.3 million using a relief-from-royalty method. During the current year the Opus CGU has been tested for impairment and an impairment charge of \u00a33.0 million was allocated to the Opus Energy brand as part of this (see note 2.4 for further details on this impairment assessment). The carrying value of the Opus Energy brand at 31 December 2023 was \u00a30.4 million (2022: \u00a34.5 million) and had a remaining UEL of one year (2022: four years). The UEL of the brand asset was accelerated during the year in line with the Opus Energy customer-related asset. 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 UELs ranging from 2\u201310 years. From 1 January 2022, following an agenda decision from the International Financial Reporting Interpretations Committee (IFRIC), the Group applied a new accounting policy for Software as a Service (SaaS) costs. 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 were impaired during 2022, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost in the Consolidated income statement (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in operating and administrative expenses in the Consolidated income statement . As at 31 December 2023, computer software assets under the course of construction amounted to \u00a319.7 million (2022: \u00a318.3 million). During the prior year the Group recognised a \u00a319.2 million impairment relating to a new billing system in the Customers business where the Group had stopped development as it no longer expected future economic bene\ufb01ts to be recovered as an ongoing intangible asset. The impairment charge was recognised against cost in the table above, and recorded as an exceptional cost in the Consolidated income statement. A legal claim in respect of this project was settled with the supplier during the current year. This has resulted in a credit to the Consolidated income statement amounting to \u00a313.7 million. This has also been recognised as an exceptional item in the Consolidated income statement (see note 2.7). 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:
Drax Energy Pellet
Solutions Opus Energy Lanark Galloway Cruachan Production Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill
At 1 January 2023
10.7
159.2
11.3
4 0 .1
26.9
176.0
424.2
Acquisitions
6.0
\u2013
\u2013
\u2013
\u2013
\u2013
6.0
Reallocations
144.7
(144.7)
\u2013
\u2013
\u2013
\u2013
\u2013
Impairment
\u2013
(14.5)
\u2013
\u2013
\u2013
\u2013
(14.5)
Effect of changes in foreign
exchange rates
\u2013
\u2013
\u2013
\u2013
\u2013
1.0
1.0
At 31 December 2023
161.4
\u2013
11.3
4 0.1
26.9
17 7.0
416.7
Following a reorganisation of the Customers business, which included the transfer of certain activities from the Opus Energy CGU to the Drax Energy Solutions CGU, goodwill of \u00a3144.7 million has been reallocated between the two CGUs on a relative fair value approach. Of the \u00a3159.2 million of goodwill allocated to the Opus Energy CGU in the prior year, \u00a3144.7 million has been allocated to the Drax Energy Solutions CGU. The remaining \u00a314.5 million was subsequently impaired as a result of the impairment assessment described in note 2.4.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-717": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has been applied. 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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-705": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has been applied. 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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-691": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has been applied. 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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-676": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has been applied. 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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-655": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has been applied. 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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-620": { "value": "2.5 Net \ufb01nance costs Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). A reconciliation of net \ufb01nance costs is shown in the table below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Interest payable and similar charges:
Interest payable
(108.9)
(75.4)
Unwinding of discount on provisions (note 5.3)
(1.9)
(1.1)
Amortisation of deferred \ufb01nance costs
(4.3)
(6 .1)
Other \ufb01nancing charges
(0.1)
(0.5)
Total interest payable and similar charges included in Adjusted results
(115.2)
(83.1)
Interest receivable:
Interest income on bank deposits
11.0
3.3
Interest income on de\ufb01ned bene\ufb01t pension surplus (note 6.3)
2.1
1.0
Total interest receivable included in Adjusted results
13.1
4.3
Foreign exchange (losses)/gains included in Adjusted results
(14.3)
14.8
Net \ufb01nance costs included in Adjusted results
(116.4)
(64.0)
Certain remeasurements on \ufb01nancing derivatives
4.6
(4.2)
Net \ufb01nance costs included in Total results
(111.8)
(68.2)
Interest payable and similar charges is stated net of \u00a38.1 million (2022: \u00a35.2 million) of capitalised interest within the cost of qualifying assets in property, plant and equipment during the year (see note 3.1). These charges represent fees payable on deferred letters of credit that have been used speci\ufb01cally to \ufb01nance the construction of the qualifying assets and therefore no capitalisation rate has been applied. 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 2023 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-609": { "value": "Net \ufb01nance costs reflect expenses incurred in managing the capital 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 economic lives (see note 5.3), and interest on lease liabilities (see note 3.2). These are offset by interest income that the Group generates through use of short-term cash surpluses, for example through investment in money market funds, and interest income on the Group\u2019s de\ufb01ned bene\ufb01t pension scheme surplus (see note 6.3). 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. 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. Due to the strengthening of sterling during the year, this has resulted in a foreign exchange loss of \u00a317.0 million (2022: gain of \u00a329.0 million) on the retranslation of intercompany loans in the sterling functional currency entity. This loss (2022: gain) is recognised within the Consolidated income statement and within the foreign exchange gains or losses included in Adjusted results line in the table above. Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into the Group\u2019s sterling presentational currency there is a foreign exchange gain (2022: loss) relating to the translation of the foreign subsidiaries\u2019 intercompany loans. This impacts the translation reserve with the movement recognised in other comprehensive income. As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the sterling value of the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2022: losses) on borrowings disclosed in the above tables have been offset by \u00a329.5 million of foreign exchange losses (2022: \u00a362.0 million of gains) 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. 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), euros (EUR) or Canadian dollars (CAD), and the foreign currency debt is also denominated in USD, EUR and CAD (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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at 31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their related hedges. 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. 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. 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, EUR and CAD (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward contracts, to manage exchange risk on foreign currency debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022 Change in fair Amount value of hedged Hedge Amount Amount reclassi\ufb01ed due item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income period used recognised in the income income carrying value hedged being no longer statement/ for measuring OCI statement statement of a non- item affecting expected to balance sheet ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/ \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign Cost of currency \u2013 USD (187. 2) 187. 2 \u2013 sales (34.2) \u2013 \u2013 Inventories Purchases in foreign Cost of currency \u2013 EUR (17.9) 17.9 \u2013 sales 5.9 \u2013 \u2013 Inventories Purchases in foreign Cost of currency \u2013 CAD (0.4) 0.4 \u2013 sales 9.2 \u2013 \u2013 Inventories Foreign currency denominated debt Interest Interest payable payable and and Interest and principal similar similar repayments \u2013 USD (47.5) 47.5 \u2013 charges \u2013 (9.2) \u2013 charges Foreign Foreign exchange exchange (losses)/ (losses)/ \u2013 gains \u2013 (44.7) \u2013 gains Interest Interest payable payable and and Interest and principal similar similar repayments \u2013 EUR 3.1 ( 3.1) \u2013 charges \u2013 2.6 \u2013 charges Foreign Foreign exchange exchange (losses)/ (losses)/ \u2013 gains \u2013 (17.3) \u2013 gains ", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-677": { "value": "2.6 Current and deferred tax The tax charge (2022: credit) 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 2023 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 third-party 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 other comprehensive income or directly in equity, in which case the current and deferred taxes are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity respectively. The Group has utilised the relief available under the Research and Development Expenditure Credit (RDEC) regime. 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 where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 for a breakdown of the net deferred tax asset or liability position for each jurisdiction.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Total tax (charge)/credit comprises:
Current tax
\u2013 UK tax
(186.5)
(66.0)
\u2013 Overseas tax
(1.6)
\u2013
\u2013 Adjustments in respect of prior periods
2.0
1.9
Deferred tax
\u2013 Before impact of tax rate changes
(46.7)
61.9
\u2013 Adjustments in respect of prior periods
0.3
(0.1)
\u2013 Effect of changes in tax rate
(3.0)
6.7
Total tax (charge)/credit
(235.5)
4.4
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Tax (charged)/credited on items recognised in other comprehensive income:
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension surplus
7.2
6 .1
Deferred tax on cash \ufb02ow hedges
(130.7)
(5.6)
Deferred tax on cost of hedging
(1.9)
2.2
Total tax (charge)/credit
(125.4)
2.7
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Tax credited on items released directly from equity:
Current tax on share-based payments
6.9
\u2013
Deferred tax on cost of hedging
9.0
7.2
Deferred tax on cash \ufb02ow hedges
10.9
4.8
Deferred tax on share-based payments
(2.4)
7.4
Total tax credit
24.4
19.4
UK corporation tax is the main income tax applicable on the Group\u2019s taxable pro\ufb01ts and is calculated at 23.5% (2022: 19.0%) of the assessable pro\ufb01t or loss for the year. This follows the rate increase to 25.0% from 1 April 2023 that was included within the Finance Bill 2021. Due to the Group\u2019s overseas operations, the US income tax rate of 21.0% (2022: 21.0%) and the Canadian corporate income tax rate of 27.0% (2022: 27.0%) are also relevant to the Group\u2019s UK corporation tax charge. The effective tax rate for the full year, before the impact of changes in tax rates, is higher than the standard corporation tax rate applicable in the UK, principally due to the introduction of the non-deductible Electricity Generator Levy from 1 January 2023 (see the Electricity Generator Levy section on page 179 for further details). The primary current tax rate bene\ufb01ts arise from research and development credits, UK Patent Box claims and the UK super-deduction introduced in the Finance Act 2021, which allowed 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 Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows:
Year ended 31 December 2023
Year ended 31 December 2022
Exceptional Exceptional
items items
Adjusted and certain Total Adjusted and certain Total
results remeasurements results results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Pro\ufb01t/(loss) before tax
665.2
131.2
796.4
405.4
(327.3)
78 .1
Pro\ufb01t/(loss) before tax multiplied by the rate of
corporation tax in the UK of 23.5% (2022: 19.0%)
156.3
30.8
187.1
77.0
(62.2)
14.8
Effects of:
Adjustments in respect of prior periods
(2.3)
\u2013
(2.3)
(1.8)
\u2013
(1.8)
Expenses not deductible for tax purposes
5.2
6.5
11.7
4.5
\u2013
4.5
Electricity Generator Levy
4 8 .1
\u2013
4 8 .1
\u2013
\u2013
\u2013
Impact of tax rate change
0.6
2.4
3.0
2.9
(9.6)
(6.7)
Share-based payments recognised in equity
8.1
\u2013
8 .1
\u2013
\u2013
\u2013
Difference in overseas tax rates
(0.7)
\u2013
(0.7)
(1.3)
\u2013
(1.3)
UK Patent Box bene\ufb01t
(17. 4)
\u2013
(17.4)
(9.6)
\u2013
(9.6)
Tax effect of RDEC
(0.9)
\u2013
(0.9)
(0.8)
\u2013
(0.8)
UK super-deduction
(1.2)
\u2013
(1.2)
(3.5)
\u2013
(3.5)
Total tax charge/(credit)
195.8
39.7
235.5
67.4
(71.8)
(4.4)
The movements in deferred tax assets and liabilities during each year are shown below.
Accelerated
Financial capital Non-trade Intangible Trade Other Other
instruments allowances losses assets losses liabilities assets Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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
\ufb02ow 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 1 January 2023
124.7
(321.3)
0.5
(12.9)
8 0.1
(33.3)
57.9
(104.3)
(Charged)/credited to the income
statement
(51.2)
9.0
(0.5)
12.3
(21.0)
(0.6)
2.6
(49.4)
Credited to other comprehensive
income in respect of actuarial gains
\u2013
\u2013
\u2013
\u2013
\u2013
7. 2
\u2013
7. 2
Charged to other comprehensive
income in respect of cash \ufb02ow
hedges
(130.7)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(130.7)
Charged to other comprehensive
income in respect of cost of hedging
(1.9)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(1.9)
Credited to equity in respect of cash
\ufb02ow hedges
10.9
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
10.9
Credited to equity in respect of cost
of hedging
9.0
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
9.0
Charged to equity in respect of
share-based payments
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(2.4)
(2.4)
Impact of acquisition
\u2013
\u2013
\u2013
(1.3)
\u2013
\u2013
\u2013
(1.3)
Effect of changes in foreign
exchange rates
\u2013
1.8
\u2013
\u2013
(2.5)
(0.1)
(0.5)
(1.3)
At 31 December 2023
(39.2)
(310.5)
\u2013
(1.9)
56.6
(26.8)
57.6
(264.2)
Deferred tax balances (after offset)
for \ufb01nancial reporting purposes:
Net Canadian deferred tax asset at
31 December 2023
\u2013
(18.8)
\u2013
0.4
16.8
(0.2)
28.2
26.4
Net US deferred tax asset at
31 December 2023
\u2013
(21.9)
\u2013
\u2013
39.8
\u2013
8.6
26.5
Net UK deferred tax liability at
31 December 2023
(39.2)
(269.8)
\u2013
(2.3)
\u2013
(26.6)
20.8
( 317.1)
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)
Deferred tax assets and liabilities are offset where the Group has both a legally enforceable right to offset the recognised amounts and the intention to settle on a net basis, otherwise they are shown separately in the Consolidated balance sheet. Within the above trade losses deferred tax asset of \u00a356.6 million (2022: \u00a380.1 million) there is \u00a339.8 million (2022: \u00a353.0 million) in relation to losses in the US Pellet Production business. The remaining \u00a316.8 million relates to losses of the Canadian Pellet Production business (2022: \u00a327.1 million). On 31 August 2023 the Group acquired BMM Energy Solutions Limited, a UK-based electric vehicle charge point installer (see note 5.1 for further details). A deferred tax liability of \u00a31.3 million has been recognised on customer relationships included within this acquisition, as noted above in the \u2018impact of acquisition\u2019 line. This liability will unwind as the intangible asset is amortised. 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 92. As at 31 December 2023 the Group held \u00a378.8 million (2022: \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. The Group is within scope of the Organisation for Economic Co-operation and Development\u2019s (OECD\u2019s) Global Anti-Base Erosion Rules, which provide for an internationally co-ordinated system of taxation to ensure that large multinational groups pay a minimum level of corporate income tax in countries in which they operate, referred to as Pillar Two. The legislation implementing the rules in the UK was substantively enacted on 20 June 2023 and will apply to the Group from the \ufb01nancial year ending 31 December 2024 onwards. The Group has applied the temporary exemption under IAS 12 in relation to the accounting for deferred taxes arising from the implementation of the Pillar Two rules, so that the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two. Based on an initial review of 2023 and the medium term forecasts up to and including the year ending 31 December 2026, the Group would fall within the Transitional Country by Country Reporting Safe Harbour, such that the expected top up tax payable over this period under the Pillar Two rules is expected to be \u00a3nil. The Group continues to monitor developments in the UK and outside of the UK and will undertake a detailed review in 2024 to ensure ongoing compliance with its administrative obligations under these rules. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-621": { "value": "2.6 Current and deferred tax The tax charge (2022: credit) 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 2023 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 third-party 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 other comprehensive income or directly in equity, in which case the current and deferred taxes are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity respectively. The Group has utilised the relief available under the Research and Development Expenditure Credit (RDEC) regime. 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 where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 for a breakdown of the net deferred tax asset or liability position for each jurisdiction.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Total tax (charge)/credit comprises:
Current tax
\u2013 UK tax
(186.5)
(66.0)
\u2013 Overseas tax
(1.6)
\u2013
\u2013 Adjustments in respect of prior periods
2.0
1.9
Deferred tax
\u2013 Before impact of tax rate changes
(46.7)
61.9
\u2013 Adjustments in respect of prior periods
0.3
(0.1)
\u2013 Effect of changes in tax rate
(3.0)
6.7
Total tax (charge)/credit
(235.5)
4.4
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Tax (charged)/credited on items recognised in other comprehensive income:
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension surplus
7.2
6 .1
Deferred tax on cash \ufb02ow hedges
(130.7)
(5.6)
Deferred tax on cost of hedging
(1.9)
2.2
Total tax (charge)/credit
(125.4)
2.7
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Tax credited on items released directly from equity:
Current tax on share-based payments
6.9
\u2013
Deferred tax on cost of hedging
9.0
7.2
Deferred tax on cash \ufb02ow hedges
10.9
4.8
Deferred tax on share-based payments
(2.4)
7.4
Total tax credit
24.4
19.4
UK corporation tax is the main income tax applicable on the Group\u2019s taxable pro\ufb01ts and is calculated at 23.5% (2022: 19.0%) of the assessable pro\ufb01t or loss for the year. This follows the rate increase to 25.0% from 1 April 2023 that was included within the Finance Bill 2021. Due to the Group\u2019s overseas operations, the US income tax rate of 21.0% (2022: 21.0%) and the Canadian corporate income tax rate of 27.0% (2022: 27.0%) are also relevant to the Group\u2019s UK corporation tax charge. The effective tax rate for the full year, before the impact of changes in tax rates, is higher than the standard corporation tax rate applicable in the UK, principally due to the introduction of the non-deductible Electricity Generator Levy from 1 January 2023 (see the Electricity Generator Levy section on page 179 for further details). The primary current tax rate bene\ufb01ts arise from research and development credits, UK Patent Box claims and the UK super-deduction introduced in the Finance Act 2021, which allowed 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 Group tax charge for the year can be reconciled to the pro\ufb01t before tax as follows:
Year ended 31 December 2023
Year ended 31 December 2022
Exceptional Exceptional
items items
Adjusted and certain Total Adjusted and certain Total
results remeasurements results results remeasurements results
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Pro\ufb01t/(loss) before tax
665.2
131.2
796.4
405.4
(327.3)
78 .1
Pro\ufb01t/(loss) before tax multiplied by the rate of
corporation tax in the UK of 23.5% (2022: 19.0%)
156.3
30.8
187.1
77.0
(62.2)
14.8
Effects of:
Adjustments in respect of prior periods
(2.3)
\u2013
(2.3)
(1.8)
\u2013
(1.8)
Expenses not deductible for tax purposes
5.2
6.5
11.7
4.5
\u2013
4.5
Electricity Generator Levy
4 8 .1
\u2013
4 8 .1
\u2013
\u2013
\u2013
Impact of tax rate change
0.6
2.4
3.0
2.9
(9.6)
(6.7)
Share-based payments recognised in equity
8.1
\u2013
8 .1
\u2013
\u2013
\u2013
Difference in overseas tax rates
(0.7)
\u2013
(0.7)
(1.3)
\u2013
(1.3)
UK Patent Box bene\ufb01t
(17. 4)
\u2013
(17.4)
(9.6)
\u2013
(9.6)
Tax effect of RDEC
(0.9)
\u2013
(0.9)
(0.8)
\u2013
(0.8)
UK super-deduction
(1.2)
\u2013
(1.2)
(3.5)
\u2013
(3.5)
Total tax charge/(credit)
195.8
39.7
235.5
67.4
(71.8)
(4.4)
The movements in deferred tax assets and liabilities during each year are shown below.
Accelerated
Financial capital Non-trade Intangible Trade Other Other
instruments allowances losses assets losses liabilities assets Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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
\ufb02ow 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 1 January 2023
124.7
(321.3)
0.5
(12.9)
8 0.1
(33.3)
57.9
(104.3)
(Charged)/credited to the income
statement
(51.2)
9.0
(0.5)
12.3
(21.0)
(0.6)
2.6
(49.4)
Credited to other comprehensive
income in respect of actuarial gains
\u2013
\u2013
\u2013
\u2013
\u2013
7. 2
\u2013
7. 2
Charged to other comprehensive
income in respect of cash \ufb02ow
hedges
(130.7)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(130.7)
Charged to other comprehensive
income in respect of cost of hedging
(1.9)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(1.9)
Credited to equity in respect of cash
\ufb02ow hedges
10.9
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
10.9
Credited to equity in respect of cost
of hedging
9.0
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
9.0
Charged to equity in respect of
share-based payments
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(2.4)
(2.4)
Impact of acquisition
\u2013
\u2013
\u2013
(1.3)
\u2013
\u2013
\u2013
(1.3)
Effect of changes in foreign
exchange rates
\u2013
1.8
\u2013
\u2013
(2.5)
(0.1)
(0.5)
(1.3)
At 31 December 2023
(39.2)
(310.5)
\u2013
(1.9)
56.6
(26.8)
57.6
(264.2)
Deferred tax balances (after offset)
for \ufb01nancial reporting purposes:
Net Canadian deferred tax asset at
31 December 2023
\u2013
(18.8)
\u2013
0.4
16.8
(0.2)
28.2
26.4
Net US deferred tax asset at
31 December 2023
\u2013
(21.9)
\u2013
\u2013
39.8
\u2013
8.6
26.5
Net UK deferred tax liability at
31 December 2023
(39.2)
(269.8)
\u2013
(2.3)
\u2013
(26.6)
20.8
( 317.1)
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)
Deferred tax assets and liabilities are offset where the Group has both a legally enforceable right to offset the recognised amounts and the intention to settle on a net basis, otherwise they are shown separately in the Consolidated balance sheet. Within the above trade losses deferred tax asset of \u00a356.6 million (2022: \u00a380.1 million) there is \u00a339.8 million (2022: \u00a353.0 million) in relation to losses in the US Pellet Production business. The remaining \u00a316.8 million relates to losses of the Canadian Pellet Production business (2022: \u00a327.1 million). On 31 August 2023 the Group acquired BMM Energy Solutions Limited, a UK-based electric vehicle charge point installer (see note 5.1 for further details). A deferred tax liability of \u00a31.3 million has been recognised on customer relationships included within this acquisition, as noted above in the \u2018impact of acquisition\u2019 line. This liability will unwind as the intangible asset is amortised. 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 92. As at 31 December 2023 the Group held \u00a378.8 million (2022: \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. The Group is within scope of the Organisation for Economic Co-operation and Development\u2019s (OECD\u2019s) Global Anti-Base Erosion Rules, which provide for an internationally co-ordinated system of taxation to ensure that large multinational groups pay a minimum level of corporate income tax in countries in which they operate, referred to as Pillar Two. The legislation implementing the rules in the UK was substantively enacted on 20 June 2023 and will apply to the Group from the \ufb01nancial year ending 31 December 2024 onwards. The Group has applied the temporary exemption under IAS 12 in relation to the accounting for deferred taxes arising from the implementation of the Pillar Two rules, so that the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two. Based on an initial review of 2023 and the medium term forecasts up to and including the year ending 31 December 2026, the Group would fall within the Transitional Country by Country Reporting Safe Harbour, such that the expected top up tax payable over this period under the Pillar Two rules is expected to be \u00a3nil. The Group continues to monitor developments in the UK and outside of the UK and will undertake a detailed review in 2024 to ensure ongoing compliance with its administrative obligations under these rules. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-732": { "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 third-party 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 other comprehensive income or directly in equity, in which case the current and deferred taxes are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity respectively. The Group has utilised the relief available under the Research and Development Expenditure Credit (RDEC) regime. 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 where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-761": { "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 other comprehensive income or directly in equity, in which case the current and deferred taxes are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity respectively. The Group has utilised the relief available under the Research and Development Expenditure Credit (RDEC) regime. 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 where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-752": { "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 other comprehensive income or directly in equity, in which case the current and deferred taxes are recognised in the Consolidated statement of comprehensive income or directly in the Consolidated statement of changes in equity respectively. In accounting for tax, the Group makes assumptions regarding the treatment of items of income and expenditure for tax purposes. The Group believes that these assumptions are reasonable, based on prior experience and consultation with advisers where deemed necessary. These assumptions are consistent with other assumptions used in these Consolidated \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 205 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-692": { "value": "The movements in deferred tax assets and liabilities during each year are shown below.
Accelerated
Financial capital Non-trade Intangible Trade Other Other
instruments allowances losses assets losses liabilities assets Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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
\ufb02ow 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 1 January 2023
124.7
(321.3)
0.5
(12.9)
8 0.1
(33.3)
57.9
(104.3)
(Charged)/credited to the income
statement
(51.2)
9.0
(0.5)
12.3
(21.0)
(0.6)
2.6
(49.4)
Credited to other comprehensive
income in respect of actuarial gains
\u2013
\u2013
\u2013
\u2013
\u2013
7. 2
\u2013
7. 2
Charged to other comprehensive
income in respect of cash \ufb02ow
hedges
(130.7)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(130.7)
Charged to other comprehensive
income in respect of cost of hedging
(1.9)
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(1.9)
Credited to equity in respect of cash
\ufb02ow hedges
10.9
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
10.9
Credited to equity in respect of cost
of hedging
9.0
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
9.0
Charged to equity in respect of
share-based payments
\u2013
\u2013
\u2013
\u2013
\u2013
\u2013
(2.4)
(2.4)
Impact of acquisition
\u2013
\u2013
\u2013
(1.3)
\u2013
\u2013
\u2013
(1.3)
Effect of changes in foreign
exchange rates
\u2013
1.8
\u2013
\u2013
(2.5)
(0.1)
(0.5)
(1.3)
At 31 December 2023
(39.2)
(310.5)
\u2013
(1.9)
56.6
(26.8)
57.6
(264.2)
Deferred tax balances (after offset)
for \ufb01nancial reporting purposes:
Net Canadian deferred tax asset at
31 December 2023
\u2013
(18.8)
\u2013
0.4
16.8
(0.2)
28.2
26.4
Net US deferred tax asset at
31 December 2023
\u2013
(21.9)
\u2013
\u2013
39.8
\u2013
8.6
26.5
Net UK deferred tax liability at
31 December 2023
(39.2)
(269.8)
\u2013
(2.3)
\u2013
(26.6)
20.8
( 317.1)
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)
", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-622": { "value": "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). Net debt excludes the share of borrowings and cash and cash equivalents attributable to non-controlling interests. 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), net of any deferred \ufb01nance costs. Borrowings does not include other \ufb01nancial liabilities such as pension obligations (see note 6.3), trade and other payables (see note 3.7), lease liabilities calculated in accordance with IFRS 16 (see note 3.2) and working capital facilities (such as credit cards and deferred letters of credit) linked directly to speci\ufb01c payables that provide short extension of payment terms of less than 12 months (see note 4.3). The Group does not include balances related to supply chain \ufb01nancing in Net debt as there are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease (see note 3.7). Net debt includes the impact of any cash collateral receipts from counterparties or cash collateral posted to counterparties. The Group does not include lease liabilities, calculated in accordance with IFRS 16, in the de\ufb01nition of Net debt. This re\ufb02ects 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. 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. The Group has also entered a \ufb01xed rate foreign exchange forward to \ufb01x the sterling value of the principal repayment of the Canadian (CAD) denominated debt (see note 4.2). For the purpose of calculating Net debt, USD, EUR and CAD balances are translated at the hedged rate, rather than the rate prevailing at the reporting date, which impacts the carrying amount of the Group\u2019s borrowings. See the APMs glossary and the APMs section within the Basis of preparation for further details on the calculation of Net debt. 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, cash collateral may be required to be paid to the counterparty. When derivative positions are in the money, cash collateral may be received from counterparties. These positions reverse when contracts are settled and the cash collateral is returned. At 31 December 2023, net cash postings of \u00a378.6 million had been made to counterparties (2022: \u00a3234.0 million) to support commodity hedging activity. Cash collateral payments of \u00a398.9 million (2022: \u00a3234.0 million) are recognised in other receivables and \u00a320.3 million (2022: \u00a3nil) of cash collateral receipts are recognised in other payables. The decrease in cash collateral payments is due to the settlement of trades from the prior year as well as a reduction in commodity prices seen in the power, gas and carbon markets. See note 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. The Group\u2019s de\ufb01nition of Net debt includes the impact of cash collateral. In the table below, Net debt excluding collateral is also presented and reconciled to Net debt.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
(1,425.3)
(1,440.9)
Cash and cash equivalents
379.5
238.0
Net cash and borrowings
(1,045.8)
(1,202.9)
NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries
(0.3)
(0.7)
Impact of hedging instruments
(37.8)
(2.4)
Net debt
(1,083.9)
(1,206.0)
Net cash collateral posted
78.6
234.0
Net debt excluding collateral
(1,005.3)
(972.0)
The table below reconciles Net debt in terms of changes in these balances across the year:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Net debt at 1 January
(1,206.0)
(1,10
8 .0)
Increase/(decrease) in owners of the parent company\u2019s share of cash and cash equivalents
146.3
(85.6)
Increase in borrowings
(19.8)
(8.6)
Effect of changes in foreign exchange rates
31.0
(65.8)
Movement in the impact of hedging instruments
(35.4)
62.0
Net debt at 31 December
(1,083.9)
(1,206.0)
A reconciliation of the change in borrowings during the year is set out in the table in note 4.2. As explained in the Basis of preparation, the Group has a long-term target for Net debt to Adjusted EBITDA including EGL of around 2.0 times.
As at 31 December
2023
2022
Adjusted EBITDA including EGL (\u00a3m)
1,009.2
731.0
Adjusted EBITDA excluding EGL (\u00a3m)
1,213.8
731.0
Net debt (\u00a3m)
(1,083.9)
(1,206.0)
Net debt excluding collateral (\u00a3m)
(1,005.3)
(972.0)
Net debt to Adjusted EBITDA including EGL ratio
1.1
1.6
Net debt to Adjusted EBITDA excluding EGL ratio
0.9
1.6
4.2 Borrowings
Accounting policy
The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration received.
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 may be payable to the lender to entitle the Group to draw down
at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment
fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term,
regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and
are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment
fees are recognised on a systematic basis over the period the Group is able to draw down.
Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\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 or losses or interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings
amounts disclosed in the tables below exclude any impact of hedging instruments.
Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt
instrument are signi\ufb01cantly modi\ufb01ed, the existing liability is derecognised and a new liability based on the modi\ufb01ed terms is recognised
at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modi\ufb01cation and post-
modi\ufb01cation is recognised in the Consolidated income statement.
The Group\u2019s net borrowings at each reporting date were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Non-current secured borrowings at amortised cost:
2.625% loan notes \u20ac250m
215.7
219.8
6.625% loan notes $500m
391.5
412.8
UK infrastructure private placement facilities (2019)
251.4
372.5
UK infrastructure private placement facilities (2020)
184.7
207.9
CAD term facility
117. 8
183.6
Current secured borrowings at amortised cost:
UK infrastructure private placement facilities (2019)
122.5
\u2013
UK infrastructure private placement facilities (2020)
21.7
\u2013
Current unsecured borrowings at amortised cost:
Uncommitted short-term loan facility \u20ac50m
\u2013
44.3
Margin facility
120.0
\u2013
Total borrowings
1,425.3
1,440.9
Current
264.2
44.3
Non-current
1,161.1
1,396.6
(1)
(2)
(3)
(4)
(5)
(3)
(4)
(6)
(7)
(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 6.1%.
(3) These comprise committed facilities totalling \u00a3375.0 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%.
(4) These comprise committed facilities totalling \u00a398.0 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 2.6%.
(5) This facility matures in 2026 and has a customary margin rate over the Canadian Dollar Offered Rate (CDOR). The Group has used a foreign currency forward contract to
hedge the 2026 principal repayment on the loan at a \ufb01xed amount in sterling. The average \ufb01xed interest rate on this facility is 7.1%.
(6) This is an uncommitted short-term facility with a maturity term of one month. The average \ufb01xed interest rate for this facility while it was drawn during 2022 was 2.4%.
(7) This is a short-term margin facility with a current repayment date of July 2024. The interest rate on the current outstanding amount of \u00a3120.0 million is \ufb01xed to maturity
at 7.1% .
In the prior year, the Group secured a new \u00a3200.0 million committed liquidity facility with banks within its lending group. This facility
provided an additional source of liquidity to the Group\u2019s existing undrawn RCFs. The Group did not draw on this facility in 2023 and
it matured on 31 December 2023. The Group also has a \u20ac50.0 million uncommitted facility to support optimisation of generation
and associated cash collateral postings. This facility was undrawn as at 31 December 2023 (2022: fully drawn).
In September 2023, the Group secured a new uncommitted \u00a3200.0 million short-term facility with the main purpose of supporting
cash collateral margin requirements of the Group\u2019s exchange-based commodity trading. It is expected that utilisation of this facility
will change based on cash collateral margin requirements. As at 31 December 2023, \u00a3120.0 million is outstanding under the facility
with a maturity date in July 2024.
In November 2023, the Group agreed with lenders of the CAD term facility to exercise the extension option within the facility
to extend the \ufb01nal maturity date from January 2024 to January 2026. As part of this extension, the Group chose to repay
C$100.0 million (\u00a36 0 .1 million) of the outstanding loan, reducing the outstanding principal value to C$200.0 million (\u00a3118.5 million)
as at 31 December 2023.
The CAD term facility had floating interest rates linked to the Canadian dollar offered rate (CDOR). As part of the extension, the Group
agreed with lenders to transition the floating rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment
spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA)
spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This
amendment will become active in the \ufb01rst interest period starting in January 2024.
The Group has a committed \u00a3300.0 million RCF and C$10.0 million RCF. No cash was drawn on either facility as at 31 December 2023
or 31 December 2022. The Group has never drawn cash on the \u00a3300.0 million RCF since its inception in 2020. In January 2024, the
Group agreed with lenders of the \u00a3300.0 million RCF to exercise the extension option within the facility to extend the \ufb01nal maturity
date from January 2025 to January 2026. Subsequent to the reporting date, in January 2024, the C$10.0 million RCF has matured.
See note 2.7 for further details on the Group\u2019s cash and committed facilities.
Subsequent to the reporting date and prior to the signing date of the Consolidated \ufb01nancial statements, \u00a3122.5 million of the 2019
UK infrastructure private placement facility has been repaid, as well as \u20ac25.0 million (\u00a321.7 million) of the 2020 UK infrastructure
private placement facility. Both of these amounts are included within current borrowings in the table above.
On 22 February 2024, the Group signed a new secured committed term loan facility with \ufb01ve banks for \u00a3208.5 million (sterling
equivalent). This comprised of three euro denominated tranches totalling \u20ac135.0 million due to mature in 2027 and a further two
tranches of \u20ac50.0 million and \u00a350.0 million due to mature in 2029. The three tranches totalling \u20ac135.0 million due to mature in 2027
contain options to extend for up to a further two years, subject to lender approval.
The term loan facility includes an option to establish an incremental facility for up to \u00a350.0 million under the same terms and
conditions as the other tranches of the Term Loan. Interest on the term loans is set at a margin over EURIBOR or SONIA. On 27
February 2024, the Group established an additional \u00a350.0 million facility under this option with a tenor maturity date in 2027 with
options to extend for a further two years, subject to lender approval, and with interest set at a margin over SONIA. The Group expects
to draw the term loan facilities within three months from the signing date.
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 North American subsidiaries.
The weighted average interest rate payable, at the reporting date, on the Group\u2019s borrowings was 4.79% (2022: 4.14%).
Reconciliation of borrowings
The table below shows the movement in borrowings during the current and prior year:
Year ended 31 December 2023
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \u00a3m
Borrowings at 1 January
1,449.8
(8.9)
1,440.9
Cash movements:
Repayment of uncommitted short-term loan facility
(43.4)
\u2013
(43.4)
Extension of existing facilities
\u2013
(0.2)
(0.2)
Drawdown of margin facility loan
140.0
\u2013
140.0
Repayment of CAD term facility
(60.1)
\u2013
(6 0 .1)
Repayment of margin facility loan
(20.0)
\u2013
(20.0)
Borrowings acquired in business combinations (note 5.1)
1.8
\u2013
1.8
Repayment of borrowings acquired in business combinations
(1.8)
\u2013
(1.8)
Non-cash movements:
Amortisation of deferred \ufb01nance costs (note 2.5)
\u2013
4.3
4.3
Amortisation of USD loan note premium
(0.4)
\u2013
(0.4)
Extension of existing facilities
\u2013
(0.4)
(0.4)
Effect of changes in foreign exchange rates
(35.4)
\u2013
(35.4)
Borrowings at 31 December
1,430.5
(5.2)
1,425.3
Year ended 31 December 2022
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \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)
Drawdown of facilities
188.5
\u2013
188.5
Repayment of facilities
(145.0)
\u2013
(145.0)
Non-cash movements:
Indexation of index-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
As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the sterling value of the principal repayment
of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2022: losses) on borrowings disclosed
in the above tables have been offset by \u00a329.5 million of foreign exchange losses (2022: \u00a362.0 million of gains) 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.
Compliance with loan covenants
The Group has customary \ufb01nancial covenants, principally in relation to consolidated Adjusted EBITDA and the consolidated net
leverage ratio. The consolidated net leverage ratio broadly equates to a Net debt to Adjusted EBITDA calculation (see note 2.7), and
is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements
(1)
. The Group also has conditions
placed on its dividend payments as a result of the \ufb01nancing facilities. 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 for the foreseeable
future, including the \ufb01ve-year viability period. See the Viability statement on page 92 for further details on the scenarios considered.
(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.
Letters of credit and surety bonds As at 31 December 2023, the Group had issued letters of credit totalling \u00a3180.3 million (2022: \u00a385.9 million) of which \u00a314.5 million (2022: \u00a354.5 million) were utilised to cover commodity trading collateral requirements and \u00a3120.0 million (2022: \u00a3nil) were utilised to cover the Margin Facility described above. As at 31 December 2023, the Group had surety bonds with a number of insurers totalling \u00a3119.0 million (2022: \u00a3202.0 million) of which \u00a370.0 million (2022: \u00a3165.0 million) were utilised to cover commodity trading collateral requirements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-656": { "value": "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, cash collateral may be required to be paid to the counterparty. When derivative positions are in the money, cash collateral may be received from counterparties. These positions reverse when contracts are settled and the cash collateral is returned. At 31 December 2023, net cash postings of \u00a378.6 million had been made to counterparties (2022: \u00a3234.0 million) to support commodity hedging activity. Cash collateral payments of \u00a398.9 million (2022: \u00a3234.0 million) are recognised in other receivables and \u00a320.3 million (2022: \u00a3nil) of cash collateral receipts are recognised in other payables. The decrease in cash collateral payments is due to the settlement of trades from the prior year as well as a reduction in commodity prices seen in the power, gas and carbon markets. See note 4.3 for details on collateral requirements the Group has met through its available non-cash credit facilities. The Group\u2019s de\ufb01nition of Net debt includes the impact of cash collateral. In the table below, Net debt excluding collateral is also presented and reconciled to Net debt.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
(1,425.3)
(1,440.9)
Cash and cash equivalents
379.5
238.0
Net cash and borrowings
(1,045.8)
(1,202.9)
NCI\u2019s share of cash and cash equivalents in non-wholly owned subsidiaries
(0.3)
(0.7)
Impact of hedging instruments
(37.8)
(2.4)
Net debt
(1,083.9)
(1,206.0)
Net cash collateral posted
78.6
234.0
Net debt excluding collateral
(1,005.3)
(972.0)
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 deposit available cash in low-risk bank accounts or short-term deposit accounts.
As at 31 December
2023 2022
\u00a3m \u00a3m
Cash at bank
77.5
102.1
Short-term deposits
130.9
19.5
Money market funds
171.1
116.4
Total cash and cash equivalents
379.5
238.0
Prices in power and commodity markets have reduced in 2023 compared to 2022, but remain elevated compared to historical norms. 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 mark-to-market positions reduce, or contracts are settled, and the collateral is returned. The Group actively manages its liquidity requirements. This includes managing collateral associated with the hedging of power and other commodities, as well as other contractual arrangements. Under certain arrangements the Group is able to use non-cash collateral, such as letters of credit and surety bonds, that may otherwise have required cash collateral. The Group has had a net cash inflow of \u00a3155.4 million from collateral during the year, as trades have matured and mark-to-market positions have reduced (2022: \u00a3406.8 million outflow). As at 31 December 2023, the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) recognised in payables, and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments recognised in receivables. The Group had also utilised \u00a314.5 million (2022: \u00a354.5 million) of letters of credit and \u00a370.0 million (2022: \u00a3165.0 million) of surety bonds to cover commodity trading collateral requirements. Letters of credit and surety bonds utilised at the reporting date have reduced the requirement for cash collateral payments, which has increased the amount by which receivables have decreased. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-623": { "value": "2.8 Earnings per share Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to the weighted average number of ordinary shares outstanding in the year. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the parent company (pro\ufb01t or loss after tax, excluding amounts attributable to non-controlling interests) by the weighted average number of ordinary shares that were outstanding during the year. Diluted EPS demonstrates the impact of all outstanding share options that would vest on their future maturity dates if the conditions at the end of the reporting period were the same as those at the end of the vesting period (such as those to be issued under employee share schemes \u2013 see note 6.2), and the options were exercised and treated as ordinary shares as at the reporting date. Repurchased shares of 40.3 million (2022: 13.8 million) held in the treasury shares reserve are not included in the weighted average calculation of shares. See note 2.11 for details of the shares repurchased in the current year as part of the \u00a3150 million share buyback programme and note 4.4 for further details on the treasury shares reserve. For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact.
Year ended 31 December
2023
2022
Number of shares (millions):
Weighted average number of ordinary shares for the purposes of calculating Basic earnings per share
393.8
400.4
Effect of dilutive potential ordinary shares under share plans
9.3
14.0
Weighted average number of ordinary shares for the purposes of calculating Diluted earnings per share
4 03.1
414.4
Year ended 31 December
2023
2022
Adjusted results
Total results
Adjusted results
Total results
Earnings per share attributable to owners of the parent company
Earnings \u2013 pro\ufb01t after tax (\u00a3m)
470.7
562.2
340.6
85.1
Earnings per share \u2013 Basic (pence)
119.6
142.8
85.1
21.3
Earnings per share \u2013 Diluted (pence)
116.8
139.5
82.2
20.5
", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-733": { "value": "Earnings per share (EPS) represents the amount of earnings (post-tax pro\ufb01t or losses) attributable to the weighted average number of ordinary shares outstanding in the year. Basic EPS is calculated by dividing the Group\u2019s earnings attributable to owners of the parent company (pro\ufb01t or loss after tax, excluding amounts attributable to non-controlling interests) by the weighted average number of ordinary shares that were outstanding during the year. Diluted EPS demonstrates the impact of all outstanding share options that would vest on their future maturity dates if the conditions at the end of the reporting period were the same as those at the end of the vesting period (such as those to be issued under employee share schemes \u2013 see note 6.2), and the options were exercised and treated as ordinary shares as at the reporting date. Repurchased shares of 40.3 million (2022: 13.8 million) held in the treasury shares reserve are not included in the weighted average calculation of shares. See note 2.11 for details of the shares repurchased in the current year as part of the \u00a3150 million share buyback programme and note 4.4 for further details on the treasury shares reserve. For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-718": { "value": "Repurchased shares of 40.3 million (2022: 13.8 million) held in the treasury shares reserve are not included in the weighted average calculation of shares. See note 2.11 for details of the shares repurchased in the current year as part of the \u00a3150 million share buyback programme and note 4.4 for further details on the treasury shares reserve. For the purpose of calculating diluted EPS, the weighted average calculation of shares excludes any share options that would have an anti-dilutive impact. 2.11 Share buyback programme On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme commenced on 18 May 2023 and concluded on 15 September 2023. The shares were acquired at an average price of 567.5 pence per share, with prices ranging from 521.6 pence to 637.7 pence. In total the Group repurchased 26.5 million ordinary shares at a total net cost of \u00a3149.2 million. These shares are held in a separate treasury shares reserve awaiting reissue or cancellation and have no voting rights attached to them. See note 4.4 for a reconciliation of the movement in the treasury shares reserve.
Capital
redemption Translation Merger Treasury shares Total other
reserve reserve reserve reserve reserves
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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 1 January 2023
1.5
85.8
710.8
(50.4)
747.7
Exchange differences on translation of foreign operations
\u2013
(10.3)
\u2013
\u2013
(10.3)
Repurchase of own shares (see note 2.11)
\u2013
\u2013
\u2013
(149.2)
(149.2)
At 31 December 2023
1.5
75.5
710.8
(199.6)
588.2
The capital redemption and treasury shares reserves arose when the Group completed previous share buyback programmes. A further share buyback at a net cost of \u00a3149.2 million has taken place during the year (see note 2.11). The 40.3 million (2022: 13.8 million) shares held in the treasury shares reserve have no voting rights attached to them. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-678": { "value": "2.9 Dividends
Year ended 31 December
2023 2022
Pence per share \u00a3m \u00a3m
Amounts recognised as distributions to equity holders in the year (based on the number
of shares outstanding at the record date):
Interim dividend for the year ended 31 December 2023 paid on 3 October 2023
9.2
35.7
\u2013
Final dividend for the year ended 31 December 2022 paid on 19 May 2023
12 . 6
50.6
\u2013
Interim dividend for the year ended 31 December 2022 paid on 7 October 2022
8.4
\u2013
33.7
Final dividend for the year ended 31 December 2021 paid on 13 May 2022
11.3
\u2013
45.2
Total distributions
86.3
78.9
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 2023 of 1 3.9 pence per share (equivalent to approximately \u00a353 .5 million) payable on 17 May 2024. The \ufb01nal dividend has not been included as a liability as at 31 December 2023. This would bring total dividends payable in respect of the 2023 \ufb01nancial year to approximately \u00a389.2 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-709": { "value": "0.092", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "fact-708": { "value": "0.126", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "fact-706": { "value": "0.139", "decimals": 3, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "fact-707": { "value": "53500000", "decimals": -5, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-624": { "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
2023 2022
\u00a3m \u00a3m
At 1 January
193.8
198.3
Pro\ufb01t for the year attributable to the owners of the parent company
562.2
85.1
Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3)
(28.8)
(24.4)
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6)
7. 2
6 .1
Tax on share-based payments (note 2.6)
4.5
7.4
Equity dividends paid (note 2.9)
(86.3)
(78.9)
Movements in equity associated with share-based payments
13.4
9.5
Acquisition of NCI without a change in control (note 4.5)
\u2013
(9.3)
Gain on equity investments
0.4
\u2013
At 31 December
666.4
193.8
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, set out on pages 275 to 281 of these Annual report and accounts, disclose the basis of the parent company\u2019s distributable reserves. 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 \u00a3379.5 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 that can be made in any given year. The Group expects to be able to make dividend payments, in line with its policy, within these conditions for the foreseeable future. See note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. 2.11 Share buyback programme On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme commenced on 18 May 2023 and concluded on 15 September 2023. The shares were acquired at an average price of 567.5 pence per share, with prices ranging from 521.6 pence to 637.7 pence. In total the Group repurchased 26.5 million ordinary shares at a total net cost of \u00a3149.2 million. These shares are held in a separate treasury shares reserve awaiting reissue or cancellation and have no voting rights attached to them. See note 4.4 for a reconciliation of the movement in the treasury shares reserve.
This section gives further information on the operating assets the Group uses to generate revenue and the short-term assets and
liabilities, managed during day-to-day operations, that comprise the Group\u2019s working capital balances.
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
2023 2022
\u00a3m \u00a3m
Issued and fully paid:
424,923,406 ordinary shares of 11
16
\u204429 pence each (2022: 414,872,491)
49.1
47.9
The movement in allotted and fully paid share capital of the Company during the year was as follows:
Year ended 31 December
2023 2022
(number) (number)
At 1 January
414,872,491
413,068,027
Issued under employee share schemes
10,050,915
1,804,464
At 31 December
424,923,406
414,872,491
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 buyback programme
On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme
was concluded on 15 September 2023. The shares purchased by the Group have not been cancelled and so continue to be included
in the issued shares in the above table. See note 2.11 for further details on the share buyback programme.
Share premium
The share premium account reflects amounts received in respect of issued share capital that exceeds the nominal value of the shares
issued, net of incremental transaction costs and tax, that are directly attributable to the issue of new shares. Movements in the share
premium reserve during the year reflect amounts received above the nominal value on the issue of shares under employee share
schemes.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
433.3
432.2
Issue of share capital
7.9
1.1
At 31 December
441.2
433.3
Other reserves
Capital
redemption Translation Merger Treasury shares Total other
reserve reserve reserve reserve reserves
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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 1 January 2023
1.5
85.8
710.8
(50.4)
747.7
Exchange differences on translation of foreign operations
\u2013
(10.3)
\u2013
\u2013
(10.3)
Repurchase of own shares (see note 2.11)
\u2013
\u2013
\u2013
(149.2)
(149.2)
At 31 December 2023
1.5
75.5
710.8
(199.6)
588.2
The capital redemption and treasury shares reserves arose when the Group completed previous share buyback programmes. A further
share buyback at a net cost of \u00a3149.2 million has taken place during the year (see note 2.11). The 40.3 million (2022: 13.8 million)
shares held in the treasury shares reserve have no voting rights attached to them.
Exchange differences relating to the translation of the net assets of the Group\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.
Hedge reserve and Cost of hedging reserve
Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-657": { "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
2023 2022
\u00a3m \u00a3m
At 1 January
193.8
198.3
Pro\ufb01t for the year attributable to the owners of the parent company
562.2
85.1
Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3)
(28.8)
(24.4)
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6)
7. 2
6 .1
Tax on share-based payments (note 2.6)
4.5
7.4
Equity dividends paid (note 2.9)
(86.3)
(78.9)
Movements in equity associated with share-based payments
13.4
9.5
Acquisition of NCI without a change in control (note 4.5)
\u2013
(9.3)
Gain on equity investments
0.4
\u2013
At 31 December
666.4
193.8
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, set out on pages 275 to 281 of these Annual report and accounts, disclose the basis of the parent company\u2019s distributable reserves. 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 \u00a3379.5 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 that can be made in any given year. The Group expects to be able to make dividend payments, in line with its policy, within these conditions for the foreseeable future. See note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. 2.11 Share buyback programme On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme commenced on 18 May 2023 and concluded on 15 September 2023. The shares were acquired at an average price of 567.5 pence per share, with prices ranging from 521.6 pence to 637.7 pence. In total the Group repurchased 26.5 million ordinary shares at a total net cost of \u00a3149.2 million. These shares are held in a separate treasury shares reserve awaiting reissue or cancellation and have no voting rights attached to them. See note 4.4 for a reconciliation of the movement in the treasury shares reserve. Other reserves
Capital
redemption Translation Merger Treasury shares Total other
reserve reserve reserve reserve reserves
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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 1 January 2023
1.5
85.8
710.8
(50.4)
747.7
Exchange differences on translation of foreign operations
\u2013
(10.3)
\u2013
\u2013
(10.3)
Repurchase of own shares (see note 2.11)
\u2013
\u2013
\u2013
(149.2)
(149.2)
At 31 December 2023
1.5
75.5
710.8
(199.6)
588.2
The capital redemption and treasury shares reserves arose when the Group completed previous share buyback programmes. A further share buyback at a net cost of \u00a3149.2 million has taken place during the year (see note 2.11). The 40.3 million (2022: 13.8 million) shares held in the treasury shares reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\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. Hedge reserve and Cost of hedging reserve Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-719": { "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
2023 2022
\u00a3m \u00a3m
At 1 January
193.8
198.3
Pro\ufb01t for the year attributable to the owners of the parent company
562.2
85.1
Remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 6.3)
(28.8)
(24.4)
Deferred tax on remeasurement of de\ufb01ned bene\ufb01t pension scheme (note 2.6)
7. 2
6 .1
Tax on share-based payments (note 2.6)
4.5
7.4
Equity dividends paid (note 2.9)
(86.3)
(78.9)
Movements in equity associated with share-based payments
13.4
9.5
Acquisition of NCI without a change in control (note 4.5)
\u2013
(9.3)
Gain on equity investments
0.4
\u2013
At 31 December
666.4
193.8
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, set out on pages 275 to 281 of these Annual report and accounts, disclose the basis of the parent company\u2019s distributable reserves. 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 \u00a3379.5 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 that can be made in any given year. The Group expects to be able to make dividend payments, in line with its policy, within these conditions for the foreseeable future. See note 4.2 for further details on the covenants relating to the \ufb01nancing facilities. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfRetainedProfits", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-602": { "value": "This section gives further information on the operating assets the Group uses to generate revenue and the short-term assets and liabilities, managed during day-to-day operations, that comprise the Group\u2019s working capital balances. 3.1 Property, plant and equipment This note shows the cost, accumulated 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 and accumulated impairment losses, if required, charged to date. Property, plant and equipment assets are initially measured at cost. Cost comprises: the purchase price (after deducting trade discounts and rebates); any directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and 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 available for use and over its useful economic life (UEL). Where relevant, this is limited to the estimated decommissioning date of the site where the asset is located. The Group constructs many of its assets as part of long-term development projects. Assets that are under the course of construction are not depreciated until they are ready for use in the manner intended by management. The table below shows the weighted average remaining UELs of the main categories of assets held at the reporting date:
Average UEL
remaining
2023
(years)
Freehold buildings
22
Plant and equipment
Electricity generation assets:
Drax Power Station plant
15
Hydro plants (including pumped storage)
38
Pellet production plant
7
Other plant, machinery and equipment
13
Reinstatement asset
16
Plant spare parts
16
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 2023 is \u00a335.6 million (2022: \u00a337.5 million). Section 3: Operating assets and working capital
An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the
higher of an asset\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 land that is not depreciated, or if the asset is still under construction and so no depreciation has yet been charged,
the impairment charge is recognised within 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.
Pellet production plant includes the US and Canada 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.
Plant spare parts can be used within maintenance projects which are operating in nature (in addition to capital maintenance projects).
In this instance the net book value of the part is transferred from the property, plant and equipment balance and recognised as an
expense in the Consolidated income statement within operating and administrative expenses. These issues are reflected in the issues
to maintenance projects line in the table below.
Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying amounts of existing assets or
recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic
bene\ufb01ts associated with the expenditure will \ufb02ow 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 as a minimum at the end of each reporting period, taking into account regulatory
changes, climate change (see note 3.8 for further details) and commercial and technological obsolescence, as well as normal wear and
tear. Residual values are based on prices prevailing at the reporting date. Any changes to estimated UELs or residual values are applied
prospectively.
At each reporting date the Group reviews its property, plant and equipment to determine whether there is any indication that these
assets may be impaired. The Group\u2019s accounting policy in respect of impairment, along with details of the impairment review
conducted during the year are set out in note 2.4.
During the year, the Group has capitalised \u00a318.3 million (2022: \u00a319.1 million) of costs relating to the UK BECCS project at Drax Power
Station resulting in a total amount of \u00a342.8 million capitalised in relation to this project as at 31 December 2023 (2022: \u00a324.5 million).
The capitalisation of development project costs has been classi\ufb01ed as a critical accounting judgement due to the judgements required
in determining whether costs incurred meet the criteria to be capitalised or not, and should expectations around development projects
change then the amounts capitalised may need to be impaired.
The Group has also continued construction of the three OCGT projects that have obtained Capacity Market contracts. The amount
capitalised to date relating to these projects totals \u00a3323.5 million (2022: \u00a3134.9 million). Of this, \u00a3188.6 million (2022: \u00a390.2 million)
was capitalised during the year.
The Group\u2019s total commitment for future capital expenditure is disclosed in note 7.7.
Signi\ufb01cant estimation uncertainty
As disclosed on page 180, 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 biomass and BECCS, the Group will continue to assess any potential impact of these developments on the
UEL of Drax Power Station.
The rate of change in these areas increases the risk that the UEL of Drax Power Station will be updated in the future as new
information becomes available. As such, a change in UELs in relation to Drax Power Station\u2019s 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 that are currently limited to 2039 were to
increase by a further 10 years, the annual depreciation charge would decrease by approximately \u00a316.6 million. If the assumed end
of station life of 2039 were to decrease by 10 years to 2029 the annual depreciation charge would be increased by approximately
\u00a372.9 million.
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
453.8
3
,16 0 .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 1 January 2023
503.3
3,376.7
81.0
308.9
4,269.9
Additions at cost
\u2013
0.4
8.1
500.7
509.2
Acquired in business combinations (see note 5.1)
\u2013
0 .1
\u2013
\u2013
0.1
Impairment
(1.0)
\u2013
\u2013
(1.7)
(2.7)
Disposals
(0.3)
(27.8)
\u2013
\u2013
(28.1)
Movement in reinstatement asset (see note 5.3)
\u2013
22.7
\u2013
\u2013
22.7
Issues to maintenance projects
\u2013
\u2013
(6.5)
\u2013
(6.5)
Transfers to intangibles
\u2013
(0.1)
\u2013
(0.5)
(0.6)
Transfers between PPE categories
0.4
168.0
0.5
(168.9)
\u2013
Effect of changes in foreign exchange rates
(9.5)
(33.8)
\u2013
(4.2)
(47.5)
At 31 December 2023
492.9
3,506.2
83.1
634.3
4,716.5
Accumulated depreciation:
At 1 January 2022
118.2
1,534.1
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 1 January 2023
142.3
1
,70 6 .1
33.5
\u2013
1,881.9
Depreciation charge for the year
19.3
145.2
2.6
\u2013
167.1
Impairment
7.9
0 .1
\u2013
\u2013
8.0
Disposals
(0 .1)
(25.1)
\u2013
\u2013
(25.2)
Issues to maintenance projects
\u2013
\u2013
(0.7)
\u2013
(0.7)
Effect of changes in foreign exchange rates
(2.7)
(10.7)
\u2013
\u2013
(13.4)
At 31 December 2023
166.7
1,815.6
35.4
\u2013
2 ,017.7
Net book value:
At 31 December 2022
361.0
1,670.6
47.5
308.9
2,388.0
At 31 December 2023
326.2
1,690.6
47.7
634.3
2,698.8
Included within the cost of assets under the course of construction are capitalised interest of \u00a313.3 million (2022: \u00a35.2 million) relating
to the construction of the three OCGT projects. See note 2.5 for further details of borrowing costs capitalised during the year.
See note 2.4 for further details of the Group\u2019s accounting policy and presentation of impairments of non-current assets.
Pellet Total
Biomass Hydro production plant and
plant plant plants Other equipment
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
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 1 January 2023
2 ,141. 3
479.4
738.8
17. 2
3,376.7
Additions at cost
\u2013
\u2013
\u2013
0.4
0.4
Acquired in business combinations (see note 5.1)
\u2013
\u2013
\u2013
0 .1
0 .1
Disposals
\u2013
\u2013
(27.6)
(0.2)
(27.8)
Movement in reinstatement asset (see note 5.3)
20 .1
\u2013
2.6
\u2013
22.7
Transfers between PPE categories
117.1
\u2013
50.9
\u2013
168.0
Transfers to intangibles
\u2013
\u2013
(0 .1)
\u2013
(0 .1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(33.8)
\u2013
(33.8)
At 31 December 2023
2,278.5
479.4
730.8
17. 5
3,506.2
Accumulated depreciation:
At 1 January 2022
1,356.5
41.2
122.6
13.8
1,534.1
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 1 January 2023
1,417.3
53.3
221.8
13.7
1,7 0 6 .1
Depreciation charge for the year
66.2
12.9
64.2
1.9
145.2
Impairment
\u2013
\u2013
\u2013
0 .1
0.1
Disposals
\u2013
\u2013
(24.9)
(0.2)
(25.1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(10.7)
\u2013
(10.7)
At 31 December 2023
1,483.5
66.2
250.4
15.5
1,815.6
Net book value:
At 31 December 2022
724.0
426.1
517.0
3.5
1,670.6
At 31 December 2023
795.0
413.2
480.4
2.0
1,690.6
The depreciation expense in the Consolidated income statement comprises the following:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charged on property, plant and equipment
167.1
195.6
Depreciation charged on right-of-use assets (note 3.2)
26.9
20.3
Movement on depreciation included in closing inventories
1.6
(7.9)
Total depreciation expense
195.6
208.0
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 reasonably certain 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.
Lease remeasurements, lease modi\ufb01cations, and disposals of leased assets are included within other movements in the table below.
Right-of-use assets
Land and Plant and
buildings equipment Rail cars Vessels Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
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 1 January 2023
30.4
24.8
33.7
90.8
179.7
Additions at cost
9.9
5.6
0.6
\u2013
16 .1
Acquired in business combinations (note 5.1)
\u2013
0.1
\u2013
\u2013
0 .1
Other movements
(1.1)
(3.2)
(4.6)
(0.4)
(9.3)
Effect of changes in foreign exchange rates
(0.5)
(0.5)
(1.3)
(2.9)
(5.2)
At 31 December 2023
38.7
26.8
28.4
87.5
181.4
Accumulated depreciation:
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 1 January 2023
11.5
10.6
10.6
8.7
41.4
Depreciation charge for the year
6.7
6.6
5.0
8.6
26.9
Other movements
(0.3)
(3.3)
(4.3)
0.3
( 7.6)
Effect of changes in foreign exchange rates
(0.2)
(0.3)
(0.5)
(0.5)
(1.5)
At 31 December 2023
17.7
13.6
10.8
17.1
59.2
Net book value:
At 31 December 2022
18.9
14.2
23.1
82.1
138.3
At 31 December 2023
21.0
13.2
17.6
70.4
122.2
Lease liabilities
Year ended 31 December
2023 2022
Carrying amount: \u00a3m \u00a3m
At 1 January
153.1
125.9
Additions
16 .1
30.2
Acquired in business combinations (note 5.1)
0.1
\u2013
Interest charge for the year
7. 2
6.8
Payments
(33.0)
(24.8)
Other movements
(1.0)
3.4
Effect of changes in foreign exchange rates
(6.7)
11.6
At 31 December
135.8
153.1
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 \u00a30.3 million during the year (2022: \u00a30.1 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
2023 2022
\u00a3m \u00a3m
Within one year
33.4
30.3
Within one to two years
28.6
26.7
Within two to \ufb01ve years
52.5
64.3
After \ufb01ve years
57. 0
72.0
Total gross lease liabilities
171.5
193.3
Effect of discounting
(35.7)
(40.2)
Lease liabilities recognised in the Consolidated balance sheet
135.8
153.1
Current
25.1
22.7
Non-current
110.7
130.4
The Group recognised the following charges relating to leases in the Consolidated income statement:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Expense relating to short-term leases
0.3
0.1
Interest charge for the year
7. 2
6.8
Depreciation charge for the year
26.9
20.3
3.3 Renewable certi\ufb01cate assets
The Group earns renewable certi\ufb01cate assets, including Renewables Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees
of Origin (REGOs), which are accredited by the Of\ufb01ce for Gas and Electricity Markets (Ofgem), as a result of generating electricity using
biomass at Drax Power Station and generating renewable energy at the Group\u2019s hydro plants. The Group\u2019s ROCs and REGOs are sold
bilaterally to counterparties, including external suppliers, and also internally for utilisation by the Customers business.
This note sets out the value of renewable 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 a by-product of renewable generation and is deducted from the cost of generation.
This is recognised in the Consolidated income statement as a reduction to cost of sales.
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.
ROC and REGO valuations are comprised of the expected value to be obtained in a sales transaction with a third-party supplier at the
point of generation. If the Group has already agreed sales contracts covering the renewable 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. This estimate is made using various sources of information including recently achieved sales
prices, ongoing sales negotiations and published forecasted prices from external third parties.
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
Compliance Period (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 in the market. Any impairment loss on these assets is recognised in the
Consolidated income statement in the period incurred within cost of sales.
Year ended 31 December
2023 2022
Carrying amount: \u00a3m \u00a3m
At 1 January
187. 8
301.4
Earned from generation
749.7
652.5
Purchased from third parties
673.8
486.3
Utilised by the Customers business
(435.7)
( 39 4 .1)
Sold to third parties
(883.4)
(858.3)
At 31 December
292.2
187.8
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, other fuels and
consumables held at the reporting date.
Accounting policy
The Group\u2019s inventories are valued at the lower of cost and net realisable value. The costs of items of inventory are determined using
weighted average costs.
The cost of purchased inventories includes all direct costs incurred in bringing the raw material or 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.
Biomass 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. Instead, this
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 inventories includes all direct costs as well as conversion costs including labour, direct overheads and
an allocation of indirect overheads, including depreciation. The cost of inventories includes other costs incurred in bringing the
inventories to their existing condition and location.
Costs that do not contribute to bringing inventories to their present condition and location, such as storage and administration
overheads, are excluded from the cost of inventories and expensed as incurred. Abnormal amounts of wasted materials, labour
or other production costs are also excluded from the cost of inventories.
The valuation of \ufb01bre inventory involves estimations of 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
2023 2022
\u00a3m \u00a3m
Biomass \u2013 \ufb01nished goods
266.0
294.5
Biomass \u2013 \ufb01bre and other raw materials
20.0
16.5
Other fuels and consumables
42.4
37.1
Total inventories
328.4
34 8.1
Total inventories of \u00a3328.4 million (2022: \u00a3348.1 million) are stated net of a provision of \u00a33.4 million (2022: \u00a35.1 million).
The cost of inventories recognised as an expense in the Consolidated income statement in the year ended 31 December 2023 was
\u00a31,745.4 million (2022: \u00a31,587.9 million). This includes the value of write downs of inventory in the year.
3.5 Trade and other receivables and contract assets
Trade receivables represents amounts owed by customers for goods or services provided that they 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. Prepayments represent amounts paid in respect of goods or services not yet
received. Other receivables include collateral posted in relation to the Groups commodity and treasury trading activities, and other
amounts for goods or services provided that have been invoiced for but not yet paid that do not fall under trade receivables.
Contingent consideration relates to amounts receivable dependent on certain triggers in respect of the option to develop the
Damhead Creek 2 land disposed of as part of the sale of the CCGT generation portfolio in 2021.
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 this facility 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 from the Consolidated balance sheet at the point of sale, which is
shortly after the initial recognition of the receivable balance, as the signi\ufb01cant risks and rewards of ownership are deemed to have
been transferred. Due to the short period between recognising the receivables and them being derecognised, 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 2023, the receivables sold under this facility were \u00a3400.0 million (2022: \u00a3400.0 million). Refer to note 4.3 for
further information about the facility.
The UK Government introduced the Energy Bills Discount Scheme (EBDS) running from 1 April 2023 to 31 March 2024. Under this
scheme, energy supplied to eligible non-domestic customers in this period has a discount applied. The discount provided can then
be claimed back from the UK Government by the supplier. 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, or accrued income if not yet claimed at the
reporting date.
The EBDS replaced the Energy Bill Relief Scheme (EBRS) which supported non-domestic customers between 1 October 2022 and
31 March 2023 by capping their energy tariffs. Amounts recognised under the EBDS are signi\ufb01cantly smaller than under the EBRS
due to the reduced level of support provided, and lower market prices in the period since its introduction.
See note 2.2 for details of amounts relating to EBDS and EBRS within the Consolidated income statement.
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).
As at 31 December
2023 2022
\u00a3m \u00a3m
Amounts falling due within one year:
Trade receivables
336.0
276.6
Accrued income
420.7
522.5
Prepayments
77.2
127.7
Other receivables
133.8
272.8
Contingent consideration
9.2
27.4
Total trade and other receivables and contract assets
976.9
1, 227.0
At 31 December 2023, the Group had no amounts receivable from signi\ufb01cant counterparties which represented 10% or more of total
trade receivables and accrued income (2022: no signi\ufb01cant counterparty).
Of total trade receivables and accrued income at 31 December 2023, \u00a3558.9 million (2022: \u00a3587.0 million) relates to the Customers
business, \u00a3172.3 million (2022: \u00a3168.0 million) relates to the Generation business, and \u00a325.5 million (2022: \u00a344.1 million) relates to the
Pellet Production business.
Accrued income includes contract assets which relate to amounts for goods or services provided under customer contracts, where
the entitlement to consideration is contingent on something other than the passage of time. The Group has recognised a contract
asset for any services provided where the Group does not yet have the unconditional right to receive payment and the condition is
not solely the passage of time. Any amount previously recognised as a contract asset is reclassi\ufb01ed to trade receivables at the point
at which all the performance obligations have been met and it is invoiced to the customer, usually in the following \ufb01nancial period.
Contract assets at 31 December 2023 were \u00a34.1 million (2022: \u00a320.0 million).
Included in the prepayments balance is an amount of \u00a31.9 million (2022: \u00a32.4 million) relating to the prepayment of a service contract
for services due to be received after more than one year. Prepayments also includes \u00a321.1 million (2022: \u00a329.8 million) relating to
broker fees paid which have been capitalised as contract costs, of which \u00a38.6 million (2022: \u00a314.2 million) are due to be received after
more than one year. See note 3.6 for further details.
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 \u00a39.2 million (2022: \u00a327.4 million). This has reduced by \u00a318.2 million during the year as a result of updated
inputs to the fair value calculation. The charge is an exceptional item within the Consolidated income statement, as described in note
7.1. 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.
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 smaller
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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is
unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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 customer base of smaller sized consumers.
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 24 months is the normal period of historical 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 24-month period on which the algorithm is trained and determines whether any change in the provision
is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2023, these factors included,
but were not limited to, expectations around future inflation and changes in interest rates and customer pricing. This has not resulted
in any additional provision being recognised.
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:
2023
2022
Combined Provision Combined Provision
probability matrix probability matrix
method method Total method method Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
54.9
6.0
60.9
44.4
2.2
46.6
Amounts written off
(44.2)
(5.0)
(49.2)
(39.7)
(2.6)
(42.3)
Net additional amounts provided against
39.9
7. 8
47.7
50.2
6.4
56.6
At 31 December
50.6
8.8
59.4
54.9
6.0
60.9
Gross trade receivables
155.8
239.6
395.4
189.1
148.4
337.5
Expected credit loss provision
(50.6)
(8.8)
(59.4)
(54.9)
(6.0)
(60.9)
Trade receivables
105.2
230.8
336.0
134.2
142.4
276.6
Average expected credit loss %
32%
4%
15%
29%
4%
18%
The provision in the table above relates only 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 \u00a36.0 million.
The provision matrix method has resulted in a \u00a3nil provision applied to both the Generation and Pellet Production businesses in both
the current and prior years.
The risk of default within the Generation and Pellet Production businesses is considered to be remote, supported by strong historical
collection rates, high credit quality counterparties and short payment terms with timely receipts resulting in negligible aged debt.
The economic environment and pressure on energy markets in 2022 resulted in signi\ufb01cant increases to commodity prices, which in
turn resulted in higher bills raised to some of the Group\u2019s energy supply customers, particularly those on deemed supply. 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. The higher prices resulted in an increase in the total gross value
of trade receivables and thus increased the value of the expected credit loss provision, particularly for smaller customers.
Standard variable prices have fallen during 2023, and debt relating to the live customer base has signi\ufb01cantly reduced as a result of this.
From October 2022 to March 2023, in response to the signi\ufb01cant increase in energy prices, the UK Government provided support for
non-domestic customers through the EBRS. From 1 April 2023 the UK Government changed to providing support for non-domestic
customers under the EBDS. These schemes have 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 these schemes.
The net charge to the Consolidated income statement in 2023 for impairment losses on \ufb01nancial assets was \u00a332.5 million (2022: \u00a348.0 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a347.3 million (2022: \u00a356.6 million) less a \u00a314.8 million (2022: \u00a38.6 million) bene\ufb01t in the period in respect of the 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 smaller 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:
2023
2022
Estimated gross Lifetime Estimated gross Lifetime
carrying amount expected carrying amount expected
at default credit losses at default credit losses
Probability of default range % \u00a3m \u00a3m \u00a3m \u00a3m
80\u2013100
42 .1
36.7
50.0
40.4
50\u201379
14.3
8.0
16.8
8.9
26\u201349
17.9
5.8
18.2
5.5
0\u201325
81.5
0.1
10 4 .1
0 .1
Total
155.8
50.6
189.1
54.9
The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the ageing pro\ufb01le in 30-day increments of the trade receivables within the Pellet Production and Generation 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 2023
As at 31 December 2022
Estimated Estimated
Lifetime total gross Lifetime total gross
expected carrying amount Expected expected carrying amount Expected
credit losses at default credit loss rate credit losses at default credit loss rate
\u00a3m \u00a3m % \u00a3m \u00a3m %
Accrued income balances not yet due
9.4
382.5
2%
7.6
530.1
1%
Trade receivables days past due:
Balances not yet due
2.1
183.6
1%
1.8
115.0
2%
Between 0\u201330 days
0.9
32.6
3%
0.8
22.1
4%
Between 31\u201360 days
0.7
7.1
9%
0.7
3.3
21%
Between 61\u201390 days
0.5
2.7
19%
0.6
1.5
42%
Over 90 days
4.6
13.6
34%
2.1
6.5
33%
Trade receivables total
8.8
239.6
4%
6.0
148.4
4%
Total
18.2
6 22.1
3%
13.6
678.5
2%
The expected credit loss provision of \u00a318.2 million (2022: \u00a313.6 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
2023 2022
\u00a3m \u00a3m
At 1 January
29.8
23.7
Additions
17.6
30.7
Amortisation
(26.3)
(24.6)
At 31 December
21.1
29.8
3.7 Trade and other payables and contract liabilities Trade and other payables represents amounts the Group owes to its suppliers for trade purchases and ongoing costs, taxes and social security amounts due in relation to the Group\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 represents 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 \ufb01nancial liabilities that are initially measured at fair value. Trade and other payables are subsequently measured at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expire. If the terms of a \ufb01nancial liability are signi\ufb01cantly modi\ufb01ed, the existing \ufb01nancial liability is derecognised and a new \ufb01nancial liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the \ufb01nancial liability based on the terms pre-modi\ufb01cation and post-modi\ufb01cation is recognised in the Consolidated income statement.
As at 31 December
2023 2022
\u00a3m \u00a3m
Trade payables
145.2
152.9
Fuel accruals
71.4
107.7
Energy supply accruals
5 87.4
511.4
Other accruals
306.6
370.9
Other payables
389.6
351.0
Contract liabilities
39.4
34.0
Total trade and other payables and contract liabilities
1,539.6
1,527.9
Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying amounts of trade and other payables approximates their fair values, due to their short-term nature. The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring, under which certain suppliers can obtain early access to payments from a bank and the Group pays the bank based on the original payment terms. The Group has assessed the supply chain \ufb01nance arrangement, considering the nature and speci\ufb01c terms of the arrangement and has determined that it is appropriate for the amount to continue to be recognised within trade payables. This conclusion is based on the fact that there are no changes to the Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease. Trade payables includes \u00a348.6 million (2022: \u00a353.9 million) relating to supply chain \ufb01nance. Cash flows relating to supply chain \ufb01nance are included within Net cash from operating activities. See note 4.3 for further details. 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 from trade payables 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. Other payables includes \u00a3225.1 million (2022: \u00a3214.5 million) due under other payment facilities of which \u00a3224.7 million (2022: \u00a3181.2 million) related to deferred letters of credit and \u00a30.4 million (2022: \u00a333.3 million) related to credit cards. Of the total deferred letters of credit, \u00a3155.1 million (2022: \u00a3133.8 million) were utilised for capital expenditure and \u00a369.6 million (2022: \u00a347.4 million) were utilised for trade payables. See note 4.3 for further details. The Group does not include trade and other payables and contract liabilities in its de\ufb01nition of borrowings or Net debt where they are linked to a speci\ufb01c payable and give an extension in payment terms of less than 12 months (see note 2.7). Energy supply accruals includes \u00a3444.4 million (2022: \u00a3315.0 million) in relation to the Group\u2019s obligation to deliver renewable certi\ufb01cates arising from activities in the Customers business. The increase is due to the higher value of renewable certi\ufb01cates compared to the prior year. The remaining balance principally comprises third-party grid charge accruals of \u00a375.1 million (2022: \u00a3108.5 million) and Feed-in-Tariff accruals of \u00a319.4 million (2022: \u00a346.8 million)
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. The reconciliation of opening to closing
contract liabilities is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
34.0
14.6
Revenue recognised in the year that was included in the contract liability at the start of the period
(28.5)
(6.6)
Additions as a result of cash received from customers in the period not yet recognised in revenue
33.9
26.0
At 31 December
39.4
34.0
3.8 Climate change
Climate change, and tackling it, is closely linked to the Group\u2019s purpose, as set out in the Strategic report on pages 1 to 107. The
Sustainable development report, starting on page 42, sets out how the Group\u2019s ambition is to be climate positive and the TCFD
disclosures, starting on page 78, set out the Group\u2019s approach to managing climate risks and opportunities, including scenario analysis.
The Group aims to be a leader in the UK\u2019s transition to net zero and its strategy is aligned to this purpose. Climate change is factored
into short, medium and long-term forecasts and estimates used by the Group. In the Viability statement on page 92 and TCFD report
on page 78, quantitative risk analysis on the Group\u2019s operational Generation and Pellet Production assets indicates that asset exposure
to impacts arising from physical climate-related risks currently remains low.
Climate change and the transition to net zero have been considered in the preparation of these Consolidated \ufb01nancial statements.
The impact of future climate change regulation could have a material impact on the currently reported amounts of the Group\u2019s assets
and liabilities. In preparing these \ufb01nancial statements, the following climate change related risks have been considered:
Area
Description
Page reference
Critical judgements and Impairment of assets, UELs of property, plant and equipment and capitalisation of 179
key sources development project costs are all sensitive to climate change. For capitalisation of
of estimation development costs these costs may not be recoverable if there is a change in the
uncertainty Government\u2019s approach to combatting climate change which means that the
development of BECCS does not progress. However, the Group considers that the only
way to hit current UK Government targets for greenhouse gas removals is through
having at least one BECCS unit at Drax Power Station by 2030.
Impairment of assets and UELs of property, plant and equipment are detailed separately
below.
Impairment of assets
The Group\u2019s expectations around the impacts of climate change, and in particular the
195
requirements of the UK Government\u2019s commitment to reach net zero by 2050, are
integral to the forecasts used in the Group\u2019s impairment analysis. For example, the
forward power price curves used take into account expectations regarding the impact of
climate change and the changing mix of generating assets on the UK power system. This
could lead to lower average power prices as the proportion of intermittent renewables
increases, but this would be tempered by increased structural volatility, meaning a need
for biomass and other dispatchable generation.
Government and societal responses to climate change are still developing, and therefore
\ufb01nancial statements cannot capture all potential future scenarios. This presents
uncertainty around future cash\ufb02ows from an IAS 36 perspective. Sensitivities modelled,
including those around biomass acceptability and changes in regulation, seek to capture
and assess some of these potential scenarios.
Sensitivities modelled in the impairment testing also included operational outages at
both the generation and pellet production facilities, which could be caused by extreme
weather conditions as a result of climate change or other factors.
In
2023,
the Opus business within the Customers segment announced it was exiting the
gas supply market, to support the Group\u2019s ambition to decarbonise, in line with the Scorecard target described in the TCFD report on page 78. This has been re\ufb02ected in the
forecasts prepared for this CGU and was a contributing factor towards the impairment of
the assets relating to the Opus Energy CGU during 2023, as described in note 2.4.
Area
Description
Page reference
Impairment of assets The impact of climate change on the OCGT assets has also been considered. Whilst there
(continued) is a risk of legislative change relating to unabated gas, the assets\u2019 carrying values are
underpinned by long-term, Government-backed contracts. When they are operational
these assets will be amongst the newest on the system and management believes that
there will continue to be a place in the generation mix in the UK for dispatchable thermal
generation over the medium term, to support energy security and manage volatility from
intermittent renewables. The Group continues to consider options for these assets.
Climate change could have an impact on weather patterns and the supply of renewable
energy generation, affecting energy prices. Sensitivities for these scenarios were run on
the hydro assets and did not lead to indicators of impairment.
The incorporation of a shadow carbon price into investment decisions in the Generation
business, as described on page 51, modi\ufb01es the returns from a project based on the cost
of carbon, which provides an additional sensitivity before investments are made.
Going concern and As above, forecast power prices and potential operational outages are also incorporated 177 for going
viability into the going concern and viability assessments. concern and
92 for viability
Fixed asset UELs
The potential impact of climate change is one of the factors assessed in determining how
213
long the Group anticipates both new and existing assets to operate for. For example, the
OCGT assets under development will be given a UEL in line with the Group\u2019s expectations
around the UK\u2019s transition to a net zero position by 2050.
As outlined in the key sources of estimation uncertainty section, UELs at Drax Power
Station may be lengthened or shortened as a result of future decisions, that may be
directly or indirectly linked to climate change. Were UELs to be shortened by 10 years,
and in particular if a decision not to develop UK BECCS at the site were taken, the impact
on the annual depreciation charge would be an increase of approximately \u00a372.9 million.
Decommissioning As described in note 5.3, the decommissioning provision in relation to Drax Power Station 239
provisions was reassessed during 2023 with support of a third-party expert. The analysis
speci\ufb01cally considered potential impacts of climate change, both physical and
transitional, extending over the medium term, and concluded that direct effects were
unlikely to have a signi\ufb01cant impact over this time horizon.
If Drax Power Station closed sooner than indicated by its current UEL, for reasons
explained above, then the decommissioning provision would increase as the cash
out\ufb02ows would occur earlier, however, this would not have a material impact on the
provision.
Contingent Future regulatory changes in relation to the type of assets which can be built in the UK, 253
consideration in response to climate change, could lead to the project at Damhead Creek 2 not
progressing as currently assumed. This could lead to an adverse impact on the fair value
of the contingent consideration which the Group has recognised.
", "dimensions": { "concept": "draxgroupplc:DisclosureOfOperatingAssetsAndWorkingCapital", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-625": { "value": "3.1 Property, plant and equipment This note shows the cost, accumulated 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 and accumulated impairment losses, if required, charged to date. Property, plant and equipment assets are initially measured at cost. Cost comprises: the purchase price (after deducting trade discounts and rebates); any directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and 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 available for use and over its useful economic life (UEL). Where relevant, this is limited to the estimated decommissioning date of the site where the asset is located. The Group constructs many of its assets as part of long-term development projects. Assets that are under the course of construction are not depreciated until they are ready for use in the manner intended by management. The table below shows the weighted average remaining UELs of the main categories of assets held at the reporting date:
Average UEL
remaining
2023
(years)
Freehold buildings
22
Plant and equipment
Electricity generation assets:
Drax Power Station plant
15
Hydro plants (including pumped storage)
38
Pellet production plant
7
Other plant, machinery and equipment
13
Reinstatement asset
16
Plant spare parts
16
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 2023 is \u00a335.6 million (2022: \u00a337.5 million). An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the higher of an asset\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 land that is not depreciated, or if the asset is still under construction and so no depreciation has yet been charged, the impairment charge is recognised within 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. Pellet production plant includes the US and Canada 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. Plant spare parts can be used within maintenance projects which are operating in nature (in addition to capital maintenance projects). In this instance the net book value of the part is transferred from the property, plant and equipment balance and recognised as an expense in the Consolidated income statement within operating and administrative expenses. These issues are reflected in the issues to maintenance projects line in the table below. Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying amounts of existing assets or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will \ufb02ow 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 as a minimum at the end of each reporting period, taking into account regulatory changes, climate change (see note 3.8 for further details) and commercial and technological obsolescence, as well as normal wear and tear. Residual values are based on prices prevailing at the reporting date. Any changes to estimated UELs or residual values are applied prospectively. At each reporting date the Group reviews its property, plant and equipment to determine whether there is any indication that these assets may be impaired. The Group\u2019s accounting policy in respect of impairment, along with details of the impairment review conducted during the year are set out in note 2.4. During the year, the Group has capitalised \u00a318.3 million (2022: \u00a319.1 million) of costs relating to the UK BECCS project at Drax Power Station resulting in a total amount of \u00a342.8 million capitalised in relation to this project as at 31 December 2023 (2022: \u00a324.5 million). The capitalisation of development project costs has been classi\ufb01ed as a critical accounting judgement due to the judgements required in determining whether costs incurred meet the criteria to be capitalised or not, and should expectations around development projects change then the amounts capitalised may need to be impaired. The Group has also continued construction of the three OCGT projects that have obtained Capacity Market contracts. The amount capitalised to date relating to these projects totals \u00a3323.5 million (2022: \u00a3134.9 million). Of this, \u00a3188.6 million (2022: \u00a390.2 million) was capitalised during the year. The Group\u2019s total commitment for future capital expenditure is disclosed in note 7.7. Signi\ufb01cant estimation uncertainty As disclosed on page 180, 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 biomass and BECCS, the Group will continue to assess any potential impact of these developments on the UEL of Drax Power Station. The rate of change in these areas increases the risk that the UEL of Drax Power Station will be updated in the future as new information becomes available. As such, a change in UELs in relation to Drax Power Station\u2019s 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 that are currently limited to 2039 were to increase by a further 10 years, the annual depreciation charge would decrease by approximately \u00a316.6 million. If the assumed end of station life of 2039 were to decrease by 10 years to 2029 the annual depreciation charge would be increased by approximately \u00a372.9 million.
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
453.8
3
,16 0 .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 1 January 2023
503.3
3,376.7
81.0
308.9
4,269.9
Additions at cost
\u2013
0.4
8.1
500.7
509.2
Acquired in business combinations (see note 5.1)
\u2013
0 .1
\u2013
\u2013
0.1
Impairment
(1.0)
\u2013
\u2013
(1.7)
(2.7)
Disposals
(0.3)
(27.8)
\u2013
\u2013
(28.1)
Movement in reinstatement asset (see note 5.3)
\u2013
22.7
\u2013
\u2013
22.7
Issues to maintenance projects
\u2013
\u2013
(6.5)
\u2013
(6.5)
Transfers to intangibles
\u2013
(0.1)
\u2013
(0.5)
(0.6)
Transfers between PPE categories
0.4
168.0
0.5
(168.9)
\u2013
Effect of changes in foreign exchange rates
(9.5)
(33.8)
\u2013
(4.2)
(47.5)
At 31 December 2023
492.9
3,506.2
83.1
634.3
4,716.5
Accumulated depreciation:
At 1 January 2022
118.2
1,534.1
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 1 January 2023
142.3
1
,70 6 .1
33.5
\u2013
1,881.9
Depreciation charge for the year
19.3
145.2
2.6
\u2013
167.1
Impairment
7.9
0 .1
\u2013
\u2013
8.0
Disposals
(0 .1)
(25.1)
\u2013
\u2013
(25.2)
Issues to maintenance projects
\u2013
\u2013
(0.7)
\u2013
(0.7)
Effect of changes in foreign exchange rates
(2.7)
(10.7)
\u2013
\u2013
(13.4)
At 31 December 2023
166.7
1,815.6
35.4
\u2013
2 ,017.7
Net book value:
At 31 December 2022
361.0
1,670.6
47.5
308.9
2,388.0
At 31 December 2023
326.2
1,690.6
47.7
634.3
2,698.8
Included within the cost of assets under the course of construction are capitalised interest of \u00a313.3 million (2022: \u00a35.2 million) relating to the construction of the three OCGT projects. See note 2.5 for further details of borrowing costs capitalised during the year. See note 2.4 for further details of the Group\u2019s accounting policy and presentation of impairments of non-current assets.
Pellet Total
Biomass Hydro production plant and
plant plant plants Other equipment
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
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 1 January 2023
2 ,141. 3
479.4
738.8
17. 2
3,376.7
Additions at cost
\u2013
\u2013
\u2013
0.4
0.4
Acquired in business combinations (see note 5.1)
\u2013
\u2013
\u2013
0 .1
0 .1
Disposals
\u2013
\u2013
(27.6)
(0.2)
(27.8)
Movement in reinstatement asset (see note 5.3)
20 .1
\u2013
2.6
\u2013
22.7
Transfers between PPE categories
117.1
\u2013
50.9
\u2013
168.0
Transfers to intangibles
\u2013
\u2013
(0 .1)
\u2013
(0 .1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(33.8)
\u2013
(33.8)
At 31 December 2023
2,278.5
479.4
730.8
17. 5
3,506.2
Accumulated depreciation:
At 1 January 2022
1,356.5
41.2
122.6
13.8
1,534.1
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 1 January 2023
1,417.3
53.3
221.8
13.7
1,7 0 6 .1
Depreciation charge for the year
66.2
12.9
64.2
1.9
145.2
Impairment
\u2013
\u2013
\u2013
0 .1
0.1
Disposals
\u2013
\u2013
(24.9)
(0.2)
(25.1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(10.7)
\u2013
(10.7)
At 31 December 2023
1,483.5
66.2
250.4
15.5
1,815.6
Net book value:
At 31 December 2022
724.0
426.1
517.0
3.5
1,670.6
At 31 December 2023
795.0
413.2
480.4
2.0
1,690.6
The depreciation expense in the Consolidated income statement comprises the following:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charged on property, plant and equipment
167.1
195.6
Depreciation charged on right-of-use assets (note 3.2)
26.9
20.3
Movement on depreciation included in closing inventories
1.6
(7.9)
Total depreciation expense
195.6
208.0
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-734": { "value": "
Accounting policy
Property, plant and equipment is stated at net book value, which is its cost less any accumulated depreciation and accumulated
impairment losses, if required, charged to date. Property, plant and equipment assets are initially measured at cost.
Cost comprises: the purchase price (after deducting trade discounts and rebates); any directly attributable costs of bringing the asset
to the location and condition necessary for it to be capable of operating in the manner intended by management; and 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 available for use and over its useful economic life
(UEL). Where relevant, this is limited to the estimated decommissioning date of the site where the asset is located.
The Group constructs many of its assets as part of long-term development projects. Assets that are under the course of construction
are not depreciated until they are ready for use in the manner intended by management.
The table below shows the weighted average remaining UELs of the main categories of assets held at the reporting date:
Average UEL
remaining
2023
(years)
Freehold buildings
22
Plant and equipment
Electricity generation assets:
Drax Power Station plant
15
Hydro plants (including pumped storage)
38
Pellet production plant
7
Other plant, machinery and equipment
13
Reinstatement asset
16
Plant spare parts
16
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 2023 is \u00a335.6 million (2022: \u00a337.5 million).
An impairment charge is recognised immediately if the net book value of an asset exceeds its recoverable amount, which is the higher of an asset\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 land that is not depreciated, or if the asset is still under construction and so no depreciation has yet been charged, the impairment charge is recognised within 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. Pellet production plant includes the US and Canada 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. Plant spare parts can be used within maintenance projects which are operating in nature (in addition to capital maintenance projects). In this instance the net book value of the part is transferred from the property, plant and equipment balance and recognised as an expense in the Consolidated income statement within operating and administrative expenses. These issues are reflected in the issues to maintenance projects line in the table below. Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying amounts of existing assets or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will \ufb02ow 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 as a minimum at the end of each reporting period, taking into account regulatory changes, climate change (see note 3.8 for further details) and commercial and technological obsolescence, as well as normal wear and tear. Residual values are based on prices prevailing at the reporting date. Any changes to estimated UELs or residual values are applied prospectively. At each reporting date the Group reviews its property, plant and equipment to determine whether there is any indication that these assets may be impaired. The Group\u2019s accounting policy in respect of impairment, along with details of the impairment review conducted during the year are set out in note 2.4. During the year, the Group has capitalised \u00a318.3 million (2022: \u00a319.1 million) of costs relating to the UK BECCS project at Drax Power Station resulting in a total amount of \u00a342.8 million capitalised in relation to this project as at 31 December 2023 (2022: \u00a324.5 million). The capitalisation of development project costs has been classi\ufb01ed as a critical accounting judgement due to the judgements required in determining whether costs incurred meet the criteria to be capitalised or not, and should expectations around development projects change then the amounts capitalised may need to be impaired. The Group has also continued construction of the three OCGT projects that have obtained Capacity Market contracts. The amount capitalised to date relating to these projects totals \u00a3323.5 million (2022: \u00a3134.9 million). Of this, \u00a3188.6 million (2022: \u00a390.2 million) was capitalised during the year. 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-710": { "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 available for use and over its useful economic life (UEL). Plant spare parts are depreciated over the remaining UEL of the relevant power station or plant.
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
453.8
3
,16 0 .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 1 January 2023
503.3
3,376.7
81.0
308.9
4,269.9
Additions at cost
\u2013
0.4
8.1
500.7
509.2
Acquired in business combinations (see note 5.1)
\u2013
0 .1
\u2013
\u2013
0.1
Impairment
(1.0)
\u2013
\u2013
(1.7)
(2.7)
Disposals
(0.3)
(27.8)
\u2013
\u2013
(28.1)
Movement in reinstatement asset (see note 5.3)
\u2013
22.7
\u2013
\u2013
22.7
Issues to maintenance projects
\u2013
\u2013
(6.5)
\u2013
(6.5)
Transfers to intangibles
\u2013
(0.1)
\u2013
(0.5)
(0.6)
Transfers between PPE categories
0.4
168.0
0.5
(168.9)
\u2013
Effect of changes in foreign exchange rates
(9.5)
(33.8)
\u2013
(4.2)
(47.5)
At 31 December 2023
492.9
3,506.2
83.1
634.3
4,716.5
Accumulated depreciation:
At 1 January 2022
118.2
1,534.1
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 1 January 2023
142.3
1
,70 6 .1
33.5
\u2013
1,881.9
Depreciation charge for the year
19.3
145.2
2.6
\u2013
167.1
Impairment
7.9
0 .1
\u2013
\u2013
8.0
Disposals
(0 .1)
(25.1)
\u2013
\u2013
(25.2)
Issues to maintenance projects
\u2013
\u2013
(0.7)
\u2013
(0.7)
Effect of changes in foreign exchange rates
(2.7)
(10.7)
\u2013
\u2013
(13.4)
At 31 December 2023
166.7
1,815.6
35.4
\u2013
2 ,017.7
Net book value:
At 31 December 2022
361.0
1,670.6
47.5
308.9
2,388.0
At 31 December 2023
326.2
1,690.6
47.7
634.3
2,698.8
Included within the cost of assets under the course of construction are capitalised interest of \u00a313.3 million (2022: \u00a35.2 million) relating to the construction of the three OCGT projects. See note 2.5 for further details of borrowing costs capitalised during the year. See note 2.4 for further details of the Group\u2019s accounting policy and presentation of impairments of non-current assets.
Pellet Total
Biomass Hydro production plant and
plant plant plants Other equipment
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
At 1 January 2022
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 1 January 2023
2 ,141. 3
479.4
738.8
17. 2
3,376.7
Additions at cost
\u2013
\u2013
\u2013
0.4
0.4
Acquired in business combinations (see note 5.1)
\u2013
\u2013
\u2013
0 .1
0 .1
Disposals
\u2013
\u2013
(27.6)
(0.2)
(27.8)
Movement in reinstatement asset (see note 5.3)
20 .1
\u2013
2.6
\u2013
22.7
Transfers between PPE categories
117.1
\u2013
50.9
\u2013
168.0
Transfers to intangibles
\u2013
\u2013
(0 .1)
\u2013
(0 .1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(33.8)
\u2013
(33.8)
At 31 December 2023
2,278.5
479.4
730.8
17. 5
3,506.2
Accumulated depreciation:
At 1 January 2022
1,356.5
41.2
122.6
13.8
1,534.1
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 1 January 2023
1,417.3
53.3
221.8
13.7
1,7 0 6 .1
Depreciation charge for the year
66.2
12.9
64.2
1.9
145.2
Impairment
\u2013
\u2013
\u2013
0 .1
0.1
Disposals
\u2013
\u2013
(24.9)
(0.2)
(25.1)
Effect of changes in foreign exchange rates
\u2013
\u2013
(10.7)
\u2013
(10.7)
At 31 December 2023
1,483.5
66.2
250.4
15.5
1,815.6
Net book value:
At 31 December 2022
724.0
426.1
517.0
3.5
1,670.6
At 31 December 2023
795.0
413.2
480.4
2.0
1,690.6
The depreciation expense in the Consolidated income statement comprises the following:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charged on property, plant and equipment
167.1
195.6
Depreciation charged on right-of-use assets (note 3.2)
26.9
20.3
Movement on depreciation included in closing inventories
1.6
(7.9)
Total depreciation expense
195.6
208.0
Right-of-use assets
Land and Plant and
buildings equipment Rail cars Vessels Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
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 1 January 2023
30.4
24.8
33.7
90.8
179.7
Additions at cost
9.9
5.6
0.6
\u2013
16 .1
Acquired in business combinations (note 5.1)
\u2013
0.1
\u2013
\u2013
0 .1
Other movements
(1.1)
(3.2)
(4.6)
(0.4)
(9.3)
Effect of changes in foreign exchange rates
(0.5)
(0.5)
(1.3)
(2.9)
(5.2)
At 31 December 2023
38.7
26.8
28.4
87.5
181.4
Accumulated depreciation:
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 1 January 2023
11.5
10.6
10.6
8.7
41.4
Depreciation charge for the year
6.7
6.6
5.0
8.6
26.9
Other movements
(0.3)
(3.3)
(4.3)
0.3
( 7.6)
Effect of changes in foreign exchange rates
(0.2)
(0.3)
(0.5)
(0.5)
(1.5)
At 31 December 2023
17.7
13.6
10.8
17.1
59.2
Net book value:
At 31 December 2022
18.9
14.2
23.1
82.1
138.3
At 31 December 2023
21.0
13.2
17.6
70.4
122.2
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Expense relating to short-term leases
0.3
0.1
Interest charge for the year
7. 2
6.8
Depreciation charge for the year
26.9
20.3
The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised.
Average UEL
remaining
Method of amortisation (years)
At 31 December 2023
Customer-related assets:
Pinnacle
Straight line
7
Opus Energy
Reducing balance
1
BMM
Straight line
9
Other
Straight line
10
Brand
Straight line
1
Computer software and licences
Straight line
5
Other intangibles
Straight line
4
Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Pellet Operations CGU, the Opus Energy CGU, and the Drax Energy Solutions CGU following the acquisition of BMM. The brand is attributable to the Opus Energy CGU. Details of the impairment assessments relating to these CGUs are included in note 2.4.
Computer
Customer-related software and Development Other
assets Brand licences assets intangibles Goodwill Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost and carrying amount:
At 1 January 2022
255.5
11.3
147.2
1.7
0.3
416.3
832.3
Additions at cost \u2013 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 from/(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 1 January 2023
257.6
11.3
129.5
\u2013
0.3
424.2
822.9
Additions at cost \u2013 internally generated
\u2013
\u2013
7.7
\u2013
\u2013
\u2013
7.7
Additions at cost \u2013 acquired separately
\u2013
\u2013
2.2
\u2013
\u2013
\u2013
2.2
Acquired in business combinations
5.0
\u2013
\u2013
\u2013
\u2013
6.0
11.0
Impairment
\u2013
\u2013
\u2013
\u2013
\u2013
(14.5)
(14.5)
Transfers from property, plant
and equipment
\u2013
\u2013
0.6
\u2013
\u2013
\u2013
0.6
Effect of changes in foreign
exchange rates
(1.5)
\u2013
(0.2)
\u2013
\u2013
1.0
(0.7)
At 31 December 2023
261.1
11.3
139.8
\u2013
0.3
416.7
829.2
Accumulated amortisation:
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 1 January 2023
170.6
6.8
79.0
\u2013
\u2013
\u2013
256.4
Charge for the year
17. 2
1.1
11.0
\u2013
0.1
\u2013
29.4
Impairment
31.5
3.0
11.1
\u2013
\u2013
\u2013
45.6
Effect of changes in foreign
exchange rates
(0.3)
\u2013
(0.1)
\u2013
\u2013
\u2013
(0.4)
At 31 December 2023
219.0
10.9
101.0
\u2013
0.1
\u2013
331.0
Net book value:
At 31 December 2022
87.0
4.5
50.5
\u2013
0.3
424.2
566.5
At 31 December 2023
42.1
0.4
38.8
\u2013
0.2
416.7
498.2
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-753": { "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 available for use and over its useful economic life (UEL). Where relevant, this is limited to the estimated decommissioning date of the site where the asset is located. Assets that are under the course of construction are not depreciated until they are ready for use in the manner intended by management. Plant spare parts are depreciated over the remaining UEL of the relevant power station or plant. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-762": { "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 manner intended by management. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForConstructionInProgressExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-754": { "value": "Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying amounts of existing assets or recognised as separate assets, as appropriate, if the recognition criteria are met; namely, when it is probable that future economic bene\ufb01ts associated with the expenditure will \ufb02ow 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-693": { "value": "Included within the cost of assets under the course of construction are capitalised interest of \u00a313.3 million (2022: \u00a35.2 million) relating to the construction of the three OCGT projects. See note 2.5 for further details of borrowing costs capitalised during the year. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. Loan commitment fees may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\u2019s discretion, such as a revolving credit facility (RCF), are recognised on a systematic basis over the life of the facility. Reconciliation of borrowings The table below shows the movement in borrowings during the current and prior year:
Year ended 31 December 2023
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \u00a3m
Borrowings at 1 January
1,449.8
(8.9)
1,440.9
Cash movements:
Repayment of uncommitted short-term loan facility
(43.4)
\u2013
(43.4)
Extension of existing facilities
\u2013
(0.2)
(0.2)
Drawdown of margin facility loan
140.0
\u2013
140.0
Repayment of CAD term facility
(60.1)
\u2013
(6 0 .1)
Repayment of margin facility loan
(20.0)
\u2013
(20.0)
Borrowings acquired in business combinations (note 5.1)
1.8
\u2013
1.8
Repayment of borrowings acquired in business combinations
(1.8)
\u2013
(1.8)
Non-cash movements:
Amortisation of deferred \ufb01nance costs (note 2.5)
\u2013
4.3
4.3
Amortisation of USD loan note premium
(0.4)
\u2013
(0.4)
Extension of existing facilities
\u2013
(0.4)
(0.4)
Effect of changes in foreign exchange rates
(35.4)
\u2013
(35.4)
Borrowings at 31 December
1,430.5
(5.2)
1,425.3
Year ended 31 December 2022
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \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)
Drawdown of facilities
188.5
\u2013
188.5
Repayment of facilities
(145.0)
\u2013
(145.0)
Non-cash movements:
Indexation of index-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
As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the sterling value of the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2022: losses) on borrowings disclosed in the above tables have been offset by \u00a329.5 million of foreign exchange losses (2022: \u00a362.0 million of gains) 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-626": { "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 reasonably certain 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. Lease remeasurements, lease modi\ufb01cations, and disposals of leased assets are included within other movements in the table below. Right-of-use assets
Land and Plant and
buildings equipment Rail cars Vessels Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
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 1 January 2023
30.4
24.8
33.7
90.8
179.7
Additions at cost
9.9
5.6
0.6
\u2013
16 .1
Acquired in business combinations (note 5.1)
\u2013
0.1
\u2013
\u2013
0 .1
Other movements
(1.1)
(3.2)
(4.6)
(0.4)
(9.3)
Effect of changes in foreign exchange rates
(0.5)
(0.5)
(1.3)
(2.9)
(5.2)
At 31 December 2023
38.7
26.8
28.4
87.5
181.4
Accumulated depreciation:
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 1 January 2023
11.5
10.6
10.6
8.7
41.4
Depreciation charge for the year
6.7
6.6
5.0
8.6
26.9
Other movements
(0.3)
(3.3)
(4.3)
0.3
( 7.6)
Effect of changes in foreign exchange rates
(0.2)
(0.3)
(0.5)
(0.5)
(1.5)
At 31 December 2023
17.7
13.6
10.8
17.1
59.2
Net book value:
At 31 December 2022
18.9
14.2
23.1
82.1
138.3
At 31 December 2023
21.0
13.2
17.6
70.4
122.2
Lease liabilities
Year ended 31 December
2023 2022
Carrying amount: \u00a3m \u00a3m
At 1 January
153.1
125.9
Additions
16 .1
30.2
Acquired in business combinations (note 5.1)
0.1
\u2013
Interest charge for the year
7. 2
6.8
Payments
(33.0)
(24.8)
Other movements
(1.0)
3.4
Effect of changes in foreign exchange rates
(6.7)
11.6
At 31 December
135.8
153.1
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 \u00a30.3 million during the year (2022: \u00a30.1 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
2023 2022
\u00a3m \u00a3m
Within one year
33.4
30.3
Within one to two years
28.6
26.7
Within two to \ufb01ve years
52.5
64.3
After \ufb01ve years
57. 0
72.0
Total gross lease liabilities
171.5
193.3
Effect of discounting
(35.7)
(40.2)
Lease liabilities recognised in the Consolidated balance sheet
135.8
153.1
Current
25.1
22.7
Non-current
110.7
130.4
The Group recognised the following charges relating to leases in the Consolidated income statement:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Expense relating to short-term leases
0.3
0.1
Interest charge for the year
7. 2
6.8
Depreciation charge for the year
26.9
20.3
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-735": { "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 reasonably certain 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-658": { "value": "Right-of-use assets
Land and Plant and
buildings equipment Rail cars Vessels Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost:
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 1 January 2023
30.4
24.8
33.7
90.8
179.7
Additions at cost
9.9
5.6
0.6
\u2013
16 .1
Acquired in business combinations (note 5.1)
\u2013
0.1
\u2013
\u2013
0 .1
Other movements
(1.1)
(3.2)
(4.6)
(0.4)
(9.3)
Effect of changes in foreign exchange rates
(0.5)
(0.5)
(1.3)
(2.9)
(5.2)
At 31 December 2023
38.7
26.8
28.4
87.5
181.4
Accumulated depreciation:
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 1 January 2023
11.5
10.6
10.6
8.7
41.4
Depreciation charge for the year
6.7
6.6
5.0
8.6
26.9
Other movements
(0.3)
(3.3)
(4.3)
0.3
( 7.6)
Effect of changes in foreign exchange rates
(0.2)
(0.3)
(0.5)
(0.5)
(1.5)
At 31 December 2023
17.7
13.6
10.8
17.1
59.2
Net book value:
At 31 December 2022
18.9
14.2
23.1
82.1
138.3
At 31 December 2023
21.0
13.2
17.6
70.4
122.2
", "dimensions": { "concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-659": { "value": "3.3 Renewable certi\ufb01cate assets The Group earns renewable certi\ufb01cate assets, including Renewables Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origin (REGOs), which are accredited by the Of\ufb01ce for Gas and Electricity Markets (Ofgem), as a result of generating electricity using biomass at Drax Power Station and generating renewable energy at the Group\u2019s hydro plants. The Group\u2019s ROCs and REGOs are sold bilaterally to counterparties, including external suppliers, and also internally for utilisation by the Customers business. This note sets out the value of renewable 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 a by-product of renewable generation and is deducted from the cost of generation. This is recognised in the Consolidated income statement as a reduction to cost of sales. 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. ROC and REGO valuations are comprised of the expected value to be obtained in a sales transaction with a third-party supplier at the point of generation. If the Group has already agreed sales contracts covering the renewable 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. This estimate is made using various sources of information including recently achieved sales prices, ongoing sales negotiations and published forecasted prices from external third parties. 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 Compliance Period (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 in the market. Any impairment loss on these assets is recognised in the Consolidated income statement in the period incurred within cost of sales.
Year ended 31 December
2023 2022
Carrying amount: \u00a3m \u00a3m
At 1 January
187. 8
301.4
Earned from generation
749.7
652.5
Purchased from third parties
673.8
486.3
Utilised by the Customers business
(435.7)
( 39 4 .1)
Sold to third parties
(883.4)
(858.3)
At 31 December
292.2
187.8
Recognition of revenue from the sale of renewable certi\ufb01cates is described in further detail in note 2.2.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-627": { "value": "3.3 Renewable certi\ufb01cate assets The Group earns renewable certi\ufb01cate assets, including Renewables Obligation Certi\ufb01cates (ROCs) and Renewable Energy Guarantees of Origin (REGOs), which are accredited by the Of\ufb01ce for Gas and Electricity Markets (Ofgem), as a result of generating electricity using biomass at Drax Power Station and generating renewable energy at the Group\u2019s hydro plants. The Group\u2019s ROCs and REGOs are sold bilaterally to counterparties, including external suppliers, and also internally for utilisation by the Customers business. This note sets out the value of renewable 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 a by-product of renewable generation and is deducted from the cost of generation. This is recognised in the Consolidated income statement as a reduction to cost of sales. 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. ROC and REGO valuations are comprised of the expected value to be obtained in a sales transaction with a third-party supplier at the point of generation. If the Group has already agreed sales contracts covering the renewable 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. This estimate is made using various sources of information including recently achieved sales prices, ongoing sales negotiations and published forecasted prices from external third parties. 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 Compliance Period (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 in the market. Any impairment loss on these assets is recognised in the Consolidated income statement in the period incurred within cost of sales.
Year ended 31 December
2023 2022
Carrying amount: \u00a3m \u00a3m
At 1 January
187. 8
301.4
Earned from generation
749.7
652.5
Purchased from third parties
673.8
486.3
Utilised by the Customers business
(435.7)
( 39 4 .1)
Sold to third parties
(883.4)
(858.3)
At 31 December
292.2
187.8
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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-628": { "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, other fuels and consumables held at the reporting date. Accounting policy The Group\u2019s inventories are valued at the lower of cost and net realisable value. The costs of items of inventory are determined using weighted average costs. The cost of purchased inventories includes all direct costs incurred in bringing the raw material or 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. Biomass 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. Instead, this 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 inventories includes all direct costs as well as conversion costs including labour, direct overheads and an allocation of indirect overheads, including depreciation. The cost of inventories includes other costs incurred in bringing the inventories to their existing condition and location. Costs that do not contribute to bringing inventories to their present condition and location, such as storage and administration overheads, are excluded from the cost of inventories and expensed as incurred. Abnormal amounts of wasted materials, labour or other production costs are also excluded from the cost of inventories. The valuation of \ufb01bre inventory involves estimations of 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
2023 2022
\u00a3m \u00a3m
Biomass \u2013 \ufb01nished goods
266.0
294.5
Biomass \u2013 \ufb01bre and other raw materials
20.0
16.5
Other fuels and consumables
42.4
37.1
Total inventories
328.4
34 8.1
Total inventories of \u00a3328.4 million (2022: \u00a3348.1 million) are stated net of a provision of \u00a33.4 million (2022: \u00a35.1 million). The cost of inventories recognised as an expense in the Consolidated income statement in the year ended 31 December 2023 was \u00a31,745.4 million (2022: \u00a31,587.9 million). This includes the value of write downs of inventory in the year. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-736": { "value": "Accounting policy The Group\u2019s inventories are valued at the lower of cost and net realisable value. The costs of items of inventory are determined using weighted average costs. The cost of purchased inventories includes all direct costs incurred in bringing the raw material or 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. Biomass 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. Instead, this 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 inventories includes all direct costs as well as conversion costs including labour, direct overheads and an allocation of indirect overheads, including depreciation. The cost of inventories includes other costs incurred in bringing the inventories to their existing condition and location. Costs that do not contribute to bringing inventories to their present condition and location, such as storage and administration overheads, are excluded from the cost of inventories and expensed as incurred. Abnormal amounts of wasted materials, labour or other production costs are also excluded from the cost of inventories. The valuation of \ufb01bre inventory involves estimations of 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-629": { "value": "3.5 Trade and other receivables and contract assets Trade receivables represents amounts owed by customers for goods or services provided that they 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. Prepayments represent amounts paid in respect of goods or services not yet received. Other receivables include collateral posted in relation to the Groups commodity and treasury trading activities, and other amounts for goods or services provided that have been invoiced for but not yet paid that do not fall under trade receivables. Contingent consideration relates to amounts receivable dependent on certain triggers in respect of the option to develop the Damhead Creek 2 land disposed of as part of the sale of the CCGT generation portfolio in 2021. 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 this facility 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 from the Consolidated balance sheet at the point of sale, which is shortly after the initial recognition of the receivable balance, as the signi\ufb01cant risks and rewards of ownership are deemed to have been transferred. Due to the short period between recognising the receivables and them being derecognised, 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 2023, the receivables sold under this facility were \u00a3400.0 million (2022: \u00a3400.0 million). Refer to note 4.3 for further information about the facility. The UK Government introduced the Energy Bills Discount Scheme (EBDS) running from 1 April 2023 to 31 March 2024. Under this scheme, energy supplied to eligible non-domestic customers in this period has a discount applied. The discount provided can then be claimed back from the UK Government by the supplier. 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, or accrued income if not yet claimed at the reporting date. The EBDS replaced the Energy Bill Relief Scheme (EBRS) which supported non-domestic customers between 1 October 2022 and 31 March 2023 by capping their energy tariffs. Amounts recognised under the EBDS are signi\ufb01cantly smaller than under the EBRS due to the reduced level of support provided, and lower market prices in the period since its introduction. See note 2.2 for details of amounts relating to EBDS and EBRS within the Consolidated income statement. 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).
As at 31 December
2023 2022
\u00a3m \u00a3m
Amounts falling due within one year:
Trade receivables
336.0
276.6
Accrued income
420.7
522.5
Prepayments
77.2
127.7
Other receivables
133.8
272.8
Contingent consideration
9.2
27.4
Total trade and other receivables and contract assets
976.9
1, 227.0
At 31 December 2023, the Group had no amounts receivable from signi\ufb01cant counterparties which represented 10% or more of total trade receivables and accrued income (2022: no signi\ufb01cant counterparty). Of total trade receivables and accrued income at 31 December 2023, \u00a3558.9 million (2022: \u00a3587.0 million) relates to the Customers business, \u00a3172.3 million (2022: \u00a3168.0 million) relates to the Generation business, and \u00a325.5 million (2022: \u00a344.1 million) relates to the Pellet Production business. Accrued income includes contract assets which relate to amounts for goods or services provided under customer contracts, where the entitlement to consideration is contingent on something other than the passage of time. The Group has recognised a contract asset for any services provided where the Group does not yet have the unconditional right to receive payment and the condition is not solely the passage of time. Any amount previously recognised as a contract asset is reclassi\ufb01ed to trade receivables at the point at which all the performance obligations have been met and it is invoiced to the customer, usually in the following \ufb01nancial period. Contract assets at 31 December 2023 were \u00a34.1 million (2022: \u00a320.0 million). Included in the prepayments balance is an amount of \u00a31.9 million (2022: \u00a32.4 million) relating to the prepayment of a service contract for services due to be received after more than one year. Prepayments also includes \u00a321.1 million (2022: \u00a329.8 million) relating to broker fees paid which have been capitalised as contract costs, of which \u00a38.6 million (2022: \u00a314.2 million) are due to be received after more than one year. See note 3.6 for further details. 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 \u00a39.2 million (2022: \u00a327.4 million). This has reduced by \u00a318.2 million during the year as a result of updated inputs to the fair value calculation. The charge is an exceptional item within the Consolidated income statement, as described in note 7.1. 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. 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 smaller 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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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 customer base of smaller sized consumers. 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 24 months is the normal period of historical 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 24-month period on which the algorithm is trained and determines whether any change in the provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2023, these factors included, but were not limited to, expectations around future inflation and changes in interest rates and customer pricing. This has not resulted in any additional provision being recognised. 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:
2023
2022
Combined Provision Combined Provision
probability matrix probability matrix
method method Total method method Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
54.9
6.0
60.9
44.4
2.2
46.6
Amounts written off
(44.2)
(5.0)
(49.2)
(39.7)
(2.6)
(42.3)
Net additional amounts provided against
39.9
7. 8
47.7
50.2
6.4
56.6
At 31 December
50.6
8.8
59.4
54.9
6.0
60.9
Gross trade receivables
155.8
239.6
395.4
189.1
148.4
337.5
Expected credit loss provision
(50.6)
(8.8)
(59.4)
(54.9)
(6.0)
(60.9)
Trade receivables
105.2
230.8
336.0
134.2
142.4
276.6
Average expected credit loss %
32%
4%
15%
29%
4%
18%
The provision in the table above relates only 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 \u00a36.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both the Generation and Pellet Production businesses in both the current and prior years. The risk of default within the Generation and Pellet Production businesses is considered to be remote, supported by strong historical collection rates, high credit quality counterparties and short payment terms with timely receipts resulting in negligible aged debt. The economic environment and pressure on energy markets in 2022 resulted in signi\ufb01cant increases to commodity prices, which in turn resulted in higher bills raised to some of the Group\u2019s energy supply customers, particularly those on deemed supply. 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. The higher prices resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected credit loss provision, particularly for smaller customers. Standard variable prices have fallen during 2023, and debt relating to the live customer base has signi\ufb01cantly reduced as a result of this. From October 2022 to March 2023, in response to the signi\ufb01cant increase in energy prices, the UK Government provided support for non-domestic customers through the EBRS. From 1 April 2023 the UK Government changed to providing support for non-domestic customers under the EBDS. These schemes have 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 these schemes. The net charge to the Consolidated income statement in 2023 for impairment losses on \ufb01nancial assets was \u00a332.5 million (2022: \u00a348.0 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a347.3 million (2022: \u00a356.6 million) less a \u00a314.8 million (2022: \u00a38.6 million) bene\ufb01t in the period in respect of the 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 smaller 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:
2023
2022
Estimated gross Lifetime Estimated gross Lifetime
carrying amount expected carrying amount expected
at default credit losses at default credit losses
Probability of default range % \u00a3m \u00a3m \u00a3m \u00a3m
80\u2013100
42 .1
36.7
50.0
40.4
50\u201379
14.3
8.0
16.8
8.9
26\u201349
17.9
5.8
18.2
5.5
0\u201325
81.5
0.1
10 4 .1
0 .1
Total
155.8
50.6
189.1
54.9
The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the ageing pro\ufb01le in 30-day increments of the trade receivables within the Pellet Production and Generation 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 2023
As at 31 December 2022
Estimated Estimated
Lifetime total gross Lifetime total gross
expected carrying amount Expected expected carrying amount Expected
credit losses at default credit loss rate credit losses at default credit loss rate
\u00a3m \u00a3m % \u00a3m \u00a3m %
Accrued income balances not yet due
9.4
382.5
2%
7.6
530.1
1%
Trade receivables days past due:
Balances not yet due
2.1
183.6
1%
1.8
115.0
2%
Between 0\u201330 days
0.9
32.6
3%
0.8
22.1
4%
Between 31\u201360 days
0.7
7.1
9%
0.7
3.3
21%
Between 61\u201390 days
0.5
2.7
19%
0.6
1.5
42%
Over 90 days
4.6
13.6
34%
2.1
6.5
33%
Trade receivables total
8.8
239.6
4%
6.0
148.4
4%
Total
18.2
6 22.1
3%
13.6
678.5
2%
The expected credit loss provision of \u00a318.2 million (2022: \u00a313.6 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-737": { "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 this facility 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 from the Consolidated balance sheet at the point of sale, which is shortly after the initial recognition of the receivable balance, as the signi\ufb01cant risks and rewards of ownership are deemed to have been transferred. Due to the short period between recognising the receivables and them being derecognised, 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 2023, the receivables sold under this facility were \u00a3400.0 million (2022: \u00a3400.0 million). Refer to note 4.3 for further information about the facility. The UK Government introduced the Energy Bills Discount Scheme (EBDS) running from 1 April 2023 to 31 March 2024. Under this scheme, energy supplied to eligible non-domestic customers in this period has a discount applied. The discount provided can then be claimed back from the UK Government by the supplier. 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, or accrued income if not yet claimed at the reporting date. The EBDS replaced the Energy Bill Relief Scheme (EBRS) which supported non-domestic customers between 1 October 2022 and 31 March 2023 by capping their energy tariffs. Amounts recognised under the EBDS are signi\ufb01cantly smaller than under the EBRS due to the reduced level of support provided, and lower market prices in the period since its introduction. See note 2.2 for details of amounts relating to EBDS and EBRS within the Consolidated income statement. 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). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-660": { "value": "
As at 31 December
2023 2022
\u00a3m \u00a3m
Amounts falling due within one year:
Trade receivables
336.0
276.6
Accrued income
420.7
522.5
Prepayments
77.2
127.7
Other receivables
133.8
272.8
Contingent consideration
9.2
27.4
Total trade and other receivables and contract assets
976.9
1, 227.0
Included in the prepayments balance is an amount of \u00a31.9 million (2022: \u00a32.4 million) relating to the prepayment of a service contract for services due to be received after more than one year. Prepayments also includes \u00a321.1 million (2022: \u00a329.8 million) relating to broker fees paid which have been capitalised as contract costs, of which \u00a38.6 million (2022: \u00a314.2 million) are due to be received after more than one year. See note 3.6 for further details. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-661": { "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 smaller 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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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 customer base of smaller sized consumers. 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 24 months is the normal period of historical 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 24-month period on which the algorithm is trained and determines whether any change in the provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2023, these factors included, but were not limited to, expectations around future inflation and changes in interest rates and customer pricing. This has not resulted in any additional provision being recognised. 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:
2023
2022
Combined Provision Combined Provision
probability matrix probability matrix
method method Total method method Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
54.9
6.0
60.9
44.4
2.2
46.6
Amounts written off
(44.2)
(5.0)
(49.2)
(39.7)
(2.6)
(42.3)
Net additional amounts provided against
39.9
7. 8
47.7
50.2
6.4
56.6
At 31 December
50.6
8.8
59.4
54.9
6.0
60.9
Gross trade receivables
155.8
239.6
395.4
189.1
148.4
337.5
Expected credit loss provision
(50.6)
(8.8)
(59.4)
(54.9)
(6.0)
(60.9)
Trade receivables
105.2
230.8
336.0
134.2
142.4
276.6
Average expected credit loss %
32%
4%
15%
29%
4%
18%
The provision in the table above relates only 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 \u00a36.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both the Generation and Pellet Production businesses in both the current and prior years. The risk of default within the Generation and Pellet Production businesses is considered to be remote, supported by strong historical collection rates, high credit quality counterparties and short payment terms with timely receipts resulting in negligible aged debt. The economic environment and pressure on energy markets in 2022 resulted in signi\ufb01cant increases to commodity prices, which in turn resulted in higher bills raised to some of the Group\u2019s energy supply customers, particularly those on deemed supply. 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. The higher prices resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected credit loss provision, particularly for smaller customers. Standard variable prices have fallen during 2023, and debt relating to the live customer base has signi\ufb01cantly reduced as a result of this. From October 2022 to March 2023, in response to the signi\ufb01cant increase in energy prices, the UK Government provided support for non-domestic customers through the EBRS. From 1 April 2023 the UK Government changed to providing support for non-domestic customers under the EBDS. These schemes have 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 these schemes. The net charge to the Consolidated income statement in 2023 for impairment losses on \ufb01nancial assets was \u00a332.5 million (2022: \u00a348.0 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a347.3 million (2022: \u00a356.6 million) less a \u00a314.8 million (2022: \u00a38.6 million) bene\ufb01t in the period in respect of the 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 smaller 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:
2023
2022
Estimated gross Lifetime Estimated gross Lifetime
carrying amount expected carrying amount expected
at default credit losses at default credit losses
Probability of default range % \u00a3m \u00a3m \u00a3m \u00a3m
80\u2013100
42 .1
36.7
50.0
40.4
50\u201379
14.3
8.0
16.8
8.9
26\u201349
17.9
5.8
18.2
5.5
0\u201325
81.5
0.1
10 4 .1
0 .1
Total
155.8
50.6
189.1
54.9
The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the ageing pro\ufb01le in 30-day increments of the trade receivables within the Pellet Production and Generation 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 2023
As at 31 December 2022
Estimated Estimated
Lifetime total gross Lifetime total gross
expected carrying amount Expected expected carrying amount Expected
credit losses at default credit loss rate credit losses at default credit loss rate
\u00a3m \u00a3m % \u00a3m \u00a3m %
Accrued income balances not yet due
9.4
382.5
2%
7.6
530.1
1%
Trade receivables days past due:
Balances not yet due
2.1
183.6
1%
1.8
115.0
2%
Between 0\u201330 days
0.9
32.6
3%
0.8
22.1
4%
Between 31\u201360 days
0.7
7.1
9%
0.7
3.3
21%
Between 61\u201390 days
0.5
2.7
19%
0.6
1.5
42%
Over 90 days
4.6
13.6
34%
2.1
6.5
33%
Trade receivables total
8.8
239.6
4%
6.0
148.4
4%
Total
18.2
6 22.1
3%
13.6
678.5
2%
The expected credit loss provision of \u00a318.2 million (2022: \u00a313.6 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-738": { "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 smaller 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 more 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 an outstanding balance. The Group considers a \ufb01nancial asset to be in default when the full amount due from a debtor is unlikely to be received in full, or when contractual payments are 90 days past due. The Group writes off a \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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-597": { "value": "Combined probability method The Group uses a machine learning algorithm to calculate expected credit losses for its customer base of smaller sized consumers. 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 24 months is the normal period of historical 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 24-month period on which the algorithm is trained and determines whether any change in the provision is required as a result of speci\ufb01c factors or forward-looking macro-economic conditions. At 31 December 2023, these factors included, but were not limited to, expectations around future inflation and changes in interest rates and customer pricing. This has not resulted in any additional provision being recognised. 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:
2023
2022
Combined Provision Combined Provision
probability matrix probability matrix
method method Total method method Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January
54.9
6.0
60.9
44.4
2.2
46.6
Amounts written off
(44.2)
(5.0)
(49.2)
(39.7)
(2.6)
(42.3)
Net additional amounts provided against
39.9
7. 8
47.7
50.2
6.4
56.6
At 31 December
50.6
8.8
59.4
54.9
6.0
60.9
Gross trade receivables
155.8
239.6
395.4
189.1
148.4
337.5
Expected credit loss provision
(50.6)
(8.8)
(59.4)
(54.9)
(6.0)
(60.9)
Trade receivables
105.2
230.8
336.0
134.2
142.4
276.6
Average expected credit loss %
32%
4%
15%
29%
4%
18%
The provision in the table above relates only 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 \u00a36.0 million. The provision matrix method has resulted in a \u00a3nil provision applied to both the Generation and Pellet Production businesses in both the current and prior years. The risk of default within the Generation and Pellet Production businesses is considered to be remote, supported by strong historical collection rates, high credit quality counterparties and short payment terms with timely receipts resulting in negligible aged debt. The economic environment and pressure on energy markets in 2022 resulted in signi\ufb01cant increases to commodity prices, which in turn resulted in higher bills raised to some of the Group\u2019s energy supply customers, particularly those on deemed supply. 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. The higher prices resulted in an increase in the total gross value of trade receivables and thus increased the value of the expected credit loss provision, particularly for smaller customers. Standard variable prices have fallen during 2023, and debt relating to the live customer base has signi\ufb01cantly reduced as a result of this. From October 2022 to March 2023, in response to the signi\ufb01cant increase in energy prices, the UK Government provided support for non-domestic customers through the EBRS. From 1 April 2023 the UK Government changed to providing support for non-domestic customers under the EBDS. These schemes have 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 these schemes.
The net charge to the Consolidated income statement in 2023 for impairment losses on \ufb01nancial assets was \u00a332.5 million
(2022: \u00a348.0 million). This is the net of the additional amounts provided against in relation to trade receivables of \u00a347.3 million
(2022: \u00a356.6 million) less a \u00a314.8 million (2022: \u00a38.6 million) bene\ufb01t in the period in respect of the 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 smaller 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:
2023
2022
Estimated gross Lifetime Estimated gross Lifetime
carrying amount expected carrying amount expected
at default credit losses at default credit losses
Probability of default range % \u00a3m \u00a3m \u00a3m \u00a3m
80\u2013100
42 .1
36.7
50.0
40.4
50\u201379
14.3
8.0
16.8
8.9
26\u201349
17.9
5.8
18.2
5.5
0\u201325
81.5
0.1
10 4 .1
0 .1
Total
155.8
50.6
189.1
54.9
The value of provisions calculated using the Group\u2019s provision matrix method is set out below. This shows the ageing pro\ufb01le in 30-day
increments of the trade receivables within the Pellet Production and Generation 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 2023
As at 31 December 2022
Estimated Estimated
Lifetime total gross Lifetime total gross
expected carrying amount Expected expected carrying amount Expected
credit losses at default credit loss rate credit losses at default credit loss rate
\u00a3m \u00a3m % \u00a3m \u00a3m %
Accrued income balances not yet due
9.4
382.5
2%
7.6
530.1
1%
Trade receivables days past due:
Balances not yet due
2.1
183.6
1%
1.8
115.0
2%
Between 0\u201330 days
0.9
32.6
3%
0.8
22.1
4%
Between 31\u201360 days
0.7
7.1
9%
0.7
3.3
21%
Between 61\u201390 days
0.5
2.7
19%
0.6
1.5
42%
Over 90 days
4.6
13.6
34%
2.1
6.5
33%
Trade receivables total
8.8
239.6
4%
6.0
148.4
4%
Total
18.2
6 22.1
3%
13.6
678.5
2%
The expected credit loss provision of \u00a318.2 million (2022: \u00a313.6 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 and Pellet Production assets at the end of their 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 UELs of the Group\u2019s generation assets and pellet plants, 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, with the capitalisation shown in the movement in reinstatement asset line in note 3.1 and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges in the Consolidated income statement. 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. Other provisions include a provision in respect of dilapidation costs for leased of\ufb01ces and rail cars.
Decommissioning Restructuring Other
provision provision provisions Total
\u00a3m \u00a3m \u00a3m \u00a3m
Carrying amount:
At 1 January 2023
44.0
12.7
1.9
58.6
Additional provision charged to PPE (note 3.1)
22.7
\u2013
\u2013
22.7
Transfer between provision categories
1.2
\u2013
(1.2)
\u2013
Charged/(credited) to pro\ufb01t or loss:
Additional provision recognised
\u2013
\u2013
0.3
0.3
Utilised
(1.4)
(2.8)
\u2013
(4.2)
Released
\u2013
\u2013
(0.5)
(0.5)
Unwinding of discount
1.9
\u2013
\u2013
1.9
At 31 December 2023
68.4
9.9
0.5
78.8
Current
5.1
1.3
0.2
6.6
Non-current
63.3
8.6
0.3
72.2
Decommissioning provisions are made in respect of Drax Power Station (\u00a364.5 million) and certain pellet plants (\u00a33.9 million). The decommissioning provision in respect of Drax Power Station is based on the assumption that the initial decommissioning work, relating to coal operations, will be completed between 2024 and 2026, with the remainder beginning at the end of station life, which is currently estimated to be 2039. The decommissioning provision relating to certain pellet plants is based on the assumption that the decommissioning and reinstatement will take place at the end of the expected UEL of each site, which are estimated to be between 2027 and 2040. The provisions have been estimated using existing technology at current prices based upon specialist, third-party advice, updated on a triennial basis as a minimum, but more regularly when deemed appropriate due to changes that might signi\ufb01cantly impact the estimated cost, such as changes in prices, or changes in expected decommissioning plans. The most recent update for the Drax Power Station and pellet plant provisions took place in December 2023. The cost of the Drax Power Station decommissioning is estimated, based on the midpoint of the range calculated by the third-party experts, to be \u00a393.6 million at current prices. An inflation curve was then applied to estimate the separate elements of the decommissioning cost at the dates that they are expected to occur. These values were then discounted to calculate the present value of the provision to be recognised. The discount rates used are nominal risk-free rates that reflect the duration of the liabilities. These discount rates are 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 average discount rates used for the Group\u2019s decommissioning provisions range from 3.02%\u20135.03% (2022: 4.05%). The additional provision recognised in the year is predominantly due to the change in the assumptions around the timing and method of the decommissioning at Drax Power Station. It was previously assumed the decommissioning would all take place at the end of the station life in 2039. Due to the UK BECCS development project, certain parts of the site will be required to be decommissioned before the end of station life, which has resulted in an increase in the provision due to the higher estimated costs of decommissioning work taking place around a live power station. The timing of these costs being earlier has also resulted in an increase to the provision once the changes in assumptions around inflation and discounting are factored in. The Drax Power Station 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 estimated cost of decommissioning Drax Power Station based on specialist, third-party advice using existing technology at current prices had a range of \u00a365.5 million to \u00a3121.6 million. Applying inflation and discounting assumptions consistent with those applied to the provision recognised would result in an estimated provision range of \u00a345.3 million to \u00a38 4.1 million. An increase of 100 basis points in the inflation and discount rates used would result in a \u00a39.6 million (2022: \u00a39.5 million) increase and a \u00a37.9 million (2022: \u00a37.0 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 extrapolated from these amounts. 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. The costs being estimated are also several years in the future. All of these factors increase the estimation uncertainty of the decommissioning provision. The impact of climate change, both physical and transitional, extending over the medium term, was also considered by the third party when determining the provision. The Group has concluded that climate change is unlikely to have a signi\ufb01cant impact on the future decommissioning costs, however this risk will continue to be reassessed and the impact of any changes will be reflected in the valuation. The restructuring provision includes 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 following cessation of operating. At the request of the UK Government, the Group 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 network from October 2022 until the end of March 2023, which delayed the formal closure of the coal units and resulted in the utilisation of certain amounts of the restructuring provision also being delayed. This has not materially impacted the expected costs. The formal closure of the coal units commenced at the end of the winter contingency service in March 2023. The amount of the restructuring provision utilised in the year predominantly relates to engineering and redundancy costs. Of the \u00a39.9 million remaining at 31 December 2023, \u00a38.9 million relates to engineering works, of which \u00a30.7 million is expected to be utilised in 2024 with the remaining amounts expected to be utilised in the period from 2025 to 2027. A further \u00a30.6 million relates to redundancy costs, which are expected to be utilised in 2024, and the remaining \u00a30.4 million relates to other costs, which are expected to be utilised in the period from 2025 to 2027. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-630": { "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
2023 2022
\u00a3m \u00a3m
At 1 January
29.8
23.7
Additions
17.6
30.7
Amortisation
(26.3)
(24.6)
At 31 December
21.1
29.8
", "dimensions": { "concept": "draxgroupplc:DisclosureOfContractCosts", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-662": { "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
2023 2022
\u00a3m \u00a3m
At 1 January
29.8
23.7
Additions
17.6
30.7
Amortisation
(26.3)
(24.6)
At 31 December
21.1
29.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-739": { "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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-755": { "value": "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": "ifrs-full:DescriptionOfAccountingPolicyForCustomerAcquisitionCostsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-631": { "value": "
3.7 Trade and other payables and contract liabilities
Trade and other payables represents amounts the Group owes to its suppliers for trade purchases and ongoing costs, taxes and social
security amounts due in relation to the Group\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 represents 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 \ufb01nancial liabilities that are initially measured at fair value. Trade and other payables are subsequently
measured at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the contractual
obligations are discharged, cancelled or expire. If the terms of a \ufb01nancial liability are signi\ufb01cantly modi\ufb01ed, the existing \ufb01nancial liability
is derecognised and a new \ufb01nancial liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the
carrying value of the \ufb01nancial liability based on the terms pre-modi\ufb01cation and post-modi\ufb01cation is recognised in the Consolidated
income statement.
As at 31 December
2023 2022
\u00a3m \u00a3m
Trade payables
145.2
152.9
Fuel accruals
71.4
107.7
Energy supply accruals
5 87.4
511.4
Other accruals
306.6
370.9
Other payables
389.6
351.0
Contract liabilities
39.4
34.0
Total trade and other payables and contract liabilities
1,539.6
1,527.9
Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying amounts of trade and other payables
approximates their fair values, due to their short-term nature.
The Group facilitates a supply chain \ufb01nance scheme, a form of reverse factoring, under which certain suppliers can obtain early access
to payments from a bank and the Group pays the bank based on the original payment terms. The Group has assessed the supply chain
\ufb01nance arrangement, considering the nature and speci\ufb01c terms of the arrangement and has determined that it is appropriate for the
amount to continue to be recognised within trade payables. This conclusion is based on the fact that there are no changes to the
Group\u2019s payment terms under this arrangement, nor would there be if the arrangement was to cease. Trade payables includes
\u00a348.6 million (2022: \u00a353.9 million) relating to supply chain \ufb01nance. Cash flows relating to supply chain \ufb01nance are included within
Net cash from operating activities. See note 4.3 for further details.
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 from trade payables 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. Other payables includes \u00a3225.1 million (2022: \u00a3214.5 million) due under other payment facilities of which
\u00a3224.7 million (2022: \u00a3181.2 million) related to deferred letters of credit and \u00a30.4 million (2022: \u00a333.3 million) related to credit cards.
Of the total deferred letters of credit, \u00a3155.1 million (2022: \u00a3133.8 million) were utilised for capital expenditure and \u00a369.6 million
(2022: \u00a347.4 million) were utilised for trade payables. See note 4.3 for further details.
The Group does not include trade and other payables and contract liabilities in its de\ufb01nition of borrowings or Net debt where they
are linked to a speci\ufb01c payable and give an extension in payment terms of less than 12 months (see note 2.7).
Energy supply accruals includes \u00a3444.4 million (2022: \u00a3315.0 million) in relation to the Group\u2019s obligation to deliver renewable
certi\ufb01cates arising from activities in the Customers business. The increase is due to the higher value of renewable certi\ufb01cates
compared to the prior year. The remaining balance principally comprises third-party grid charge accruals of \u00a375.1 million
(2022: \u00a3108.5 million) and Feed-in-Tariff accruals of \u00a319.4 million (2022: \u00a346.8 million).
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. The reconciliation of opening to closing contract liabilities is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
34.0
14.6
Revenue recognised in the year that was included in the contract liability at the start of the period
(28.5)
(6.6)
Additions as a result of cash received from customers in the period not yet recognised in revenue
33.9
26.0
At 31 December
39.4
34.0
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-740": { "value": "Accounting policy Trade and other payables are \ufb01nancial liabilities that are initially measured at fair value. Trade and other payables are subsequently measured at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expire. If the terms of a \ufb01nancial liability are signi\ufb01cantly modi\ufb01ed, the existing \ufb01nancial liability is derecognised and a new \ufb01nancial liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the \ufb01nancial liability based on the terms pre-modi\ufb01cation and post-modi\ufb01cation is recognised in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-679": { "value": "
As at 31 December
2023 2022
\u00a3m \u00a3m
Trade payables
145.2
152.9
Fuel accruals
71.4
107.7
Energy supply accruals
5 87.4
511.4
Other accruals
306.6
370.9
Other payables
389.6
351.0
Contract liabilities
39.4
34.0
Total trade and other payables and contract liabilities
1,539.6
1,527.9
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 from trade payables 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. Other payables includes \u00a3225.1 million (2022: \u00a3214.5 million) due under other payment facilities of which \u00a3224.7 million (2022: \u00a3181.2 million) related to deferred letters of credit and \u00a30.4 million (2022: \u00a333.3 million) related to credit cards. Of the total deferred letters of credit, \u00a3155.1 million (2022: \u00a3133.8 million) were utilised for capital expenditure and \u00a369.6 million (2022: \u00a347.4 million) were utilised for trade payables. See note 4.3 for further details. Energy supply accruals includes \u00a3444.4 million (2022: \u00a3315.0 million) in relation to the Group\u2019s obligation to deliver renewable certi\ufb01cates arising from activities in the Customers business. The increase is due to the higher value of renewable certi\ufb01cates compared to the prior year. The remaining balance principally comprises third-party grid charge accruals of \u00a375.1 million (2022: \u00a3108.5 million) and Feed-in-Tariff accruals of \u00a319.4 million (2022: \u00a346.8 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-680": { "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. The reconciliation of opening to closing contract liabilities is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
34.0
14.6
Revenue recognised in the year that was included in the contract liability at the start of the period
(28.5)
(6.6)
Additions as a result of cash received from customers in the period not yet recognised in revenue
33.9
26.0
At 31 December
39.4
34.0
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-632": { "value": "3.8 Climate change Climate change, and tackling it, is closely linked to the Group\u2019s purpose, as set out in the Strategic report on pages 1 to 107. The Sustainable development report, starting on page 42, sets out how the Group\u2019s ambition is to be climate positive and the TCFD disclosures, starting on page 78, set out the Group\u2019s approach to managing climate risks and opportunities, including scenario analysis. The Group aims to be a leader in the UK\u2019s transition to net zero and its strategy is aligned to this purpose. Climate change is factored into short, medium and long-term forecasts and estimates used by the Group. In the Viability statement on page 92 and TCFD report on page 78, quantitative risk analysis on the Group\u2019s operational Generation and Pellet Production assets indicates that asset exposure to impacts arising from physical climate-related risks currently remains low. Climate change and the transition to net zero have been considered in the preparation of these Consolidated \ufb01nancial statements. The impact of future climate change regulation could have a material impact on the currently reported amounts of the Group\u2019s assets and liabilities. In preparing these \ufb01nancial statements, the following climate change related risks have been considered:
Area
Description
Page reference
Critical judgements and Impairment of assets, UELs of property, plant and equipment and capitalisation of 179
key sources development project costs are all sensitive to climate change. For capitalisation of
of estimation development costs these costs may not be recoverable if there is a change in the
uncertainty Government\u2019s approach to combatting climate change which means that the
development of BECCS does not progress. However, the Group considers that the only
way to hit current UK Government targets for greenhouse gas removals is through
having at least one BECCS unit at Drax Power Station by 2030.
Impairment of assets and UELs of property, plant and equipment are detailed separately
below.
Impairment of assets
The Group\u2019s expectations around the impacts of climate change, and in particular the
195
requirements of the UK Government\u2019s commitment to reach net zero by 2050, are
integral to the forecasts used in the Group\u2019s impairment analysis. For example, the
forward power price curves used take into account expectations regarding the impact of
climate change and the changing mix of generating assets on the UK power system. This
could lead to lower average power prices as the proportion of intermittent renewables
increases, but this would be tempered by increased structural volatility, meaning a need
for biomass and other dispatchable generation.
Government and societal responses to climate change are still developing, and therefore
\ufb01nancial statements cannot capture all potential future scenarios. This presents
uncertainty around future cash\ufb02ows from an IAS 36 perspective. Sensitivities modelled,
including those around biomass acceptability and changes in regulation, seek to capture
and assess some of these potential scenarios.
Sensitivities modelled in the impairment testing also included operational outages at
both the generation and pellet production facilities, which could be caused by extreme
weather conditions as a result of climate change or other factors.
In
2023,
the Opus business within the Customers segment announced it was exiting the
gas supply market, to support the Group\u2019s ambition to decarbonise, in line with the Scorecard target described in the TCFD report on page 78. This has been re\ufb02ected in the
forecasts prepared for this CGU and was a contributing factor towards the impairment of
the assets relating to the Opus Energy CGU during 2023, as described in note 2.4.
Area
Description
Page reference
Impairment of assets The impact of climate change on the OCGT assets has also been considered. Whilst there
(continued) is a risk of legislative change relating to unabated gas, the assets\u2019 carrying values are
underpinned by long-term, Government-backed contracts. When they are operational
these assets will be amongst the newest on the system and management believes that
there will continue to be a place in the generation mix in the UK for dispatchable thermal
generation over the medium term, to support energy security and manage volatility from
intermittent renewables. The Group continues to consider options for these assets.
Climate change could have an impact on weather patterns and the supply of renewable
energy generation, affecting energy prices. Sensitivities for these scenarios were run on
the hydro assets and did not lead to indicators of impairment.
The incorporation of a shadow carbon price into investment decisions in the Generation
business, as described on page 51, modi\ufb01es the returns from a project based on the cost
of carbon, which provides an additional sensitivity before investments are made.
Going concern and As above, forecast power prices and potential operational outages are also incorporated 177 for going
viability into the going concern and viability assessments. concern and
92 for viability
Fixed asset UELs
The potential impact of climate change is one of the factors assessed in determining how
213
long the Group anticipates both new and existing assets to operate for. For example, the
OCGT assets under development will be given a UEL in line with the Group\u2019s expectations
around the UK\u2019s transition to a net zero position by 2050.
As outlined in the key sources of estimation uncertainty section, UELs at Drax Power
Station may be lengthened or shortened as a result of future decisions, that may be
directly or indirectly linked to climate change. Were UELs to be shortened by 10 years,
and in particular if a decision not to develop UK BECCS at the site were taken, the impact
on the annual depreciation charge would be an increase of approximately \u00a372.9 million.
Decommissioning As described in note 5.3, the decommissioning provision in relation to Drax Power Station 239
provisions was reassessed during 2023 with support of a third-party expert. The analysis
speci\ufb01cally considered potential impacts of climate change, both physical and
transitional, extending over the medium term, and concluded that direct effects were
unlikely to have a signi\ufb01cant impact over this time horizon.
If Drax Power Station closed sooner than indicated by its current UEL, for reasons
explained above, then the decommissioning provision would increase as the cash
out\ufb02ows would occur earlier, however, this would not have a material impact on the
provision.
Contingent Future regulatory changes in relation to the type of assets which can be built in the UK, 253
consideration in response to climate change, could lead to the project at Damhead Creek 2 not
progressing as currently assumed. This could lead to an adverse impact on the fair value
of the contingent consideration which the Group has recognised.
", "dimensions": { "concept": "draxgroupplc:DisclosureOfClimateChange", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-603": { "value": "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 deposit available cash in low-risk bank accounts or short-term deposit accounts.
As at 31 December
2023 2022
\u00a3m \u00a3m
Cash at bank
77.5
102.1
Short-term deposits
130.9
19.5
Money market funds
171.1
116.4
Total cash and cash equivalents
379.5
238.0
4.2 Borrowings Accounting policy The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration received. 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 may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\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 or losses or interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings amounts disclosed in the tables below exclude any impact of hedging instruments. Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt instrument are signi\ufb01cantly modi\ufb01ed, the existing liability is derecognised and a new liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modi\ufb01cation and post- modi\ufb01cation is recognised in the Consolidated income statement. Section 4: Financing and capital structure The Group\u2019s net borrowings at each reporting date were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Non-current secured borrowings at amortised cost:
2.625% loan notes \u20ac250m
215.7
219.8
6.625% loan notes $500m
391.5
412.8
UK infrastructure private placement facilities (2019)
251.4
372.5
UK infrastructure private placement facilities (2020)
184.7
207.9
CAD term facility
117. 8
183.6
Current secured borrowings at amortised cost:
UK infrastructure private placement facilities (2019)
122.5
\u2013
UK infrastructure private placement facilities (2020)
21.7
\u2013
Current unsecured borrowings at amortised cost:
Uncommitted short-term loan facility \u20ac50m
\u2013
44.3
Margin facility
120.0
\u2013
Total borrowings
1,425.3
1,440.9
Current
264.2
44.3
Non-current
1,161.1
1,396.6
(1) (2) (3) (4) (5) (3) (4) (6) (7) (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 6.1%. (3) These comprise committed facilities totalling \u00a3375.0 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%. (4) These comprise committed facilities totalling \u00a398.0 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 2.6%. (5) This facility matures in 2026 and has a customary margin rate over the Canadian Dollar Offered Rate (CDOR). The Group has used a foreign currency forward contract to hedge the 2026 principal repayment on the loan at a \ufb01xed amount in sterling. The average \ufb01xed interest rate on this facility is 7.1%. (6) This is an uncommitted short-term facility with a maturity term of one month. The average \ufb01xed interest rate for this facility while it was drawn during 2022 was 2.4%. (7) This is a short-term margin facility with a current repayment date of July 2024. The interest rate on the current outstanding amount of \u00a3120.0 million is \ufb01xed to maturity at 7.1% . In the prior year, the Group secured a new \u00a3200.0 million committed liquidity facility with banks within its lending group. This facility provided an additional source of liquidity to the Group\u2019s existing undrawn RCFs. The Group did not draw on this facility in 2023 and it matured on 31 December 2023. The Group also has a \u20ac50.0 million uncommitted facility to support optimisation of generation and associated cash collateral postings. This facility was undrawn as at 31 December 2023 (2022: fully drawn). In September 2023, the Group secured a new uncommitted \u00a3200.0 million short-term facility with the main purpose of supporting cash collateral margin requirements of the Group\u2019s exchange-based commodity trading. It is expected that utilisation of this facility will change based on cash collateral margin requirements. As at 31 December 2023, \u00a3120.0 million is outstanding under the facility with a maturity date in July 2024. In November 2023, the Group agreed with lenders of the CAD term facility to exercise the extension option within the facility to extend the \ufb01nal maturity date from January 2024 to January 2026. As part of this extension, the Group chose to repay C$100.0 million (\u00a36 0 .1 million) of the outstanding loan, reducing the outstanding principal value to C$200.0 million (\u00a3118.5 million) as at 31 December 2023. The CAD term facility had floating interest rates linked to the Canadian dollar offered rate (CDOR). As part of the extension, the Group agreed with lenders to transition the floating rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. The Group has a committed \u00a3300.0 million RCF and C$10.0 million RCF. No cash was drawn on either facility as at 31 December 2023 or 31 December 2022. The Group has never drawn cash on the \u00a3300.0 million RCF since its inception in 2020. In January 2024, the Group agreed with lenders of the \u00a3300.0 million RCF to exercise the extension option within the facility to extend the \ufb01nal maturity date from January 2025 to January 2026. Subsequent to the reporting date, in January 2024, the C$10.0 million RCF has matured. See note 2.7 for further details on the Group\u2019s cash and committed facilities. Subsequent to the reporting date and prior to the signing date of the Consolidated \ufb01nancial statements, \u00a3122.5 million of the 2019 UK infrastructure private placement facility has been repaid, as well as \u20ac25.0 million (\u00a321.7 million) of the 2020 UK infrastructure private placement facility. Both of these amounts are included within current borrowings in the table above. On 22 February 2024, the Group signed a new secured committed term loan facility with \ufb01ve banks for \u00a3208.5 million (sterling equivalent). This comprised of three euro denominated tranches totalling \u20ac135.0 million due to mature in 2027 and a further two tranches of \u20ac50.0 million and \u00a350.0 million due to mature in 2029. The three tranches totalling \u20ac135.0 million due to mature in 2027 contain options to extend for up to a further two years, subject to lender approval. The term loan facility includes an option to establish an incremental facility for up to \u00a350.0 million under the same terms and conditions as the other tranches of the Term Loan. Interest on the term loans is set at a margin over EURIBOR or SONIA. On 27 February 2024, the Group established an additional \u00a350.0 million facility under this option with a tenor maturity date in 2027 with options to extend for a further two years, subject to lender approval, and with interest set at a margin over SONIA. The Group expects to draw the term loan facilities within three months from the signing date. 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 North American subsidiaries. The weighted average interest rate payable, at the reporting date, on the Group\u2019s borrowings was 4.79% (2022: 4.14%). Reconciliation of borrowings The table below shows the movement in borrowings during the current and prior year:
Year ended 31 December 2023
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \u00a3m
Borrowings at 1 January
1,449.8
(8.9)
1,440.9
Cash movements:
Repayment of uncommitted short-term loan facility
(43.4)
\u2013
(43.4)
Extension of existing facilities
\u2013
(0.2)
(0.2)
Drawdown of margin facility loan
140.0
\u2013
140.0
Repayment of CAD term facility
(60.1)
\u2013
(6 0 .1)
Repayment of margin facility loan
(20.0)
\u2013
(20.0)
Borrowings acquired in business combinations (note 5.1)
1.8
\u2013
1.8
Repayment of borrowings acquired in business combinations
(1.8)
\u2013
(1.8)
Non-cash movements:
Amortisation of deferred \ufb01nance costs (note 2.5)
\u2013
4.3
4.3
Amortisation of USD loan note premium
(0.4)
\u2013
(0.4)
Extension of existing facilities
\u2013
(0.4)
(0.4)
Effect of changes in foreign exchange rates
(35.4)
\u2013
(35.4)
Borrowings at 31 December
1,430.5
(5.2)
1,425.3
Year ended 31 December 2022
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \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)
Drawdown of facilities
188.5
\u2013
188.5
Repayment of facilities
(145.0)
\u2013
(145.0)
Non-cash movements:
Indexation of index-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
As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the sterling value of the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2022: losses) on borrowings disclosed in the above tables have been offset by \u00a329.5 million of foreign exchange losses (2022: \u00a362.0 million of gains) 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. Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated Adjusted EBITDA and the consolidated net leverage ratio. The consolidated net leverage ratio broadly equates to a Net debt to Adjusted EBITDA calculation (see note 2.7), and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. 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 for the foreseeable future, including the \ufb01ve-year viability period. See the Viability statement on page 92 for further details on the scenarios considered. (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. Letters of credit and surety bonds As at 31 December 2023, the Group had issued letters of credit totalling \u00a3180.3 million (2022: \u00a385.9 million) of which \u00a314.5 million (2022: \u00a354.5 million) were utilised to cover commodity trading collateral requirements and \u00a3120.0 million (2022: \u00a3nil) were utilised to cover the Margin Facility described above. As at 31 December 2023, the Group had surety bonds with a number of insurers totalling \u00a3119.0 million (2022: \u00a3202.0 million) of which \u00a370.0 million (2022: \u00a3165.0 million) were utilised to cover commodity trading collateral requirements. 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 187. 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
2023 2022
\u00a3m \u00a3m
Pro\ufb01t for the year
560.9
82.5
Adjustments for:
Interest payable and similar charges
115.2
83.1
Interest receivable
(13.1)
(4.3)
Tax charge/(credit)
235.5
(4.4)
Research and development tax credits
(2.0)
(5.5)
Share of losses/(pro\ufb01ts) from associates
1.6
(0.5)
Depreciation of property, plant and equipment
168.7
187.7
Amortisation of intangible assets
29.4
31.4
Depreciation of right-of-use assets
26.9
20.3
Impairment of non-current assets
70.8
41.5
Losses on disposal of \ufb01xed assets
2.6
5.5
Other losses
18.2
0.3
Certain remeasurements of derivative contracts
(222.0)
288.7
Non-cash charge for share-based payments
13.9
9.6
Effect of changes in foreign exchange rates
6.2
(2.2)
Operating cash \ufb02ows before movement in working capital
1,012.8
733.7
Changes in working capital:
Decrease/(increase) in inventories
20.6
(133.4)
Decrease/(increase) in receivables
71.4
(379.0)
(Decrease)/increase in payables
(30.8)
431.8
Net movement in collateral
155.4
(406.8)
Decrease in provisions
(4.4)
(29.1)
(Increase)/decrease in renewable certi\ufb01cate assets
(104.4)
113.7
Total cash released from/(absorbed by) working capital
107.8
(402.8)
Net movement in de\ufb01ned bene\ufb01t pension obligations
(9.6)
(10.6)
Cash generated from operations
1,111.0
320.3
(1) (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. At 31 December 2023, the Group had accelerated \u00a3nil of cash flows through the use of rebasing (2022: \u00a343.1 million). The Group has generated cash from operations of \u00a31,111.0 million during the year (2022: \u00a3320.3 million). This resulted from a cash inflow from operating activities before working capital of \u00a31,012.8 million (2022: \u00a3733.7 million) and a net working capital cash inflow of \u00a3107.8 million (2022: cash outflow of \u00a3402.8 million). This was offset by a \u00a39.6 million (2022: \u00a310.6 million) cash outflow in respect of pension obligations. The most signi\ufb01cant factors making up these cash movements are explained in further detail below. The \u00a3222.0 million outflow due to the adjustment for certain remeasurements of derivative contracts in the current year (2022: \u00a3288.7 million inflow) mainly relates to a net cash outflow due to realised losses on maturing trades. The adjustment for realised losses was in part offset by unrealised losses recognised within the Consolidated income statement.
Prices in power and commodity markets have reduced in 2023 compared to 2022, but remain elevated compared to historical norms.
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 mark-to-market positions reduce,
or contracts are settled, and the collateral is returned.
The Group actively manages its liquidity requirements. This includes managing collateral associated with the hedging of power
and other commodities, as well as other contractual arrangements. Under certain arrangements the Group is able to use non-cash
collateral, such as letters of credit and surety bonds, that may otherwise have required cash collateral.
The Group has had a net cash inflow of \u00a3155.4 million from collateral during the year, as trades have matured and mark-to-market
positions have reduced (2022: \u00a3406.8 million outflow). As at 31 December 2023, the Group held \u00a320.3 million in cash collateral
receipts (2022: \u00a3nil) recognised in payables, and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments recognised
in receivables. The Group had also utilised \u00a314.5 million (2022: \u00a354.5 million) of letters of credit and \u00a370.0 million (2022: \u00a3165.0 million)
of surety bonds to cover commodity trading collateral requirements. Letters of credit and surety bonds utilised at the reporting date
have reduced the requirement for cash collateral payments, which has increased the amount by which receivables have decreased.
The Group has a strong focus on cash flow discipline and managing liquidity. The Group enhances its working capital position by
managing payables, receivables, inventories and renewable 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 included within the further detail
explained below.
The table below sets out the key arrangements utilised by the Group to manage elements of its working capital:
As at As at
31 December 31 December In\ufb02ow/
2023 2022 (out\ufb02ow)
\u00a3m \u00a3m \u00a3m
Receivables monetisation
400.0
400.0
\u2013
ROC monetisation sales
298.4
331.2
(32.8)
Supply chain \ufb01nance
(48.6)
(53.9)
(5.3)
Deferred letters of credit
(224.7)
(181.2)
43.5
Credit cards
(0.4)
(33.3)
(32.9)
None of the balances in the table above are included within the Group\u2019s de\ufb01nition of Net debt or borrowings (see note 2.7 for further
details on Net debt and note 4.2 for further details on borrowings). The receivables monetisation facility is non-recourse in nature and
therefore there is no future liability associated with these amounts. Through standard ROC sales and ROC purchase arrangements the
Group is able to manage the working capital cycle of inflows and outflows of these assets. The supply chain \ufb01nance, deferred letters
of credit and credit card facilities are linked directly to speci\ufb01c payables that provide a short extension of payment terms of less than
12 months. The impact of these facilities on the cash flows of the Group is explained further below.
The overall cash inflow of \u00a371.4 million (2022: outflow of \u00a3379.0 million) due to lower receivables in the current year, is primarily a
result of a reduction in energy prices compared to the prior year.
The Customers business has access to a receivables monetisation facility which enables it to accelerate cash flows associated with
amounts receivable from energy supply customers on a non-recourse basis. The Group re\ufb01nanced this facility during the prior year, to
increase the size of the facility to \u00a3400.0 million from \u00a3200.0 million for the period to March 2025, and then reducing to \u00a3300.0 million
until the facility matures in January 2027. Utilisation of the facility was \u00a3400.0 million at 31 December 2023 (2022: \u00a3400.0 million).
As the facility was fully utilised at 31 December 2023 and 31 December 2022 there has been no cash flow impact in the period
(2022: \u00a3200.0 million cash inflow, as the facility was increased in size from \u00a3200.0 million to \u00a3400.0 million).
Payables have largely remained consistent year on year, with a cash outflow of \u00a330.8 million (2022: \u00a3431.8 million inflow). Certain
of 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 normal payment terms. At 31 December 2023, the Group had trade payables of \u00a348.6 million (2022: \u00a353.9 million) related
to this 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 other payment facilities which enable it to leverage scale and ef\ufb01ciencies in transaction processing,
whilst providing a working capital bene\ufb01t due to a short extension of payment terms of less than 12 months. The amount outstanding
under these facilities at 31 December 2023 was \u00a3225.1 million (2022: \u00a3214.5 million), of which \u00a3224.7 million (2022: \u00a3181.2 million)
related to deferred letters of credit and \u00a30.4 million (2022: \u00a333.3 million) related to credit cards. Of the total deferred letters of credit,
\u00a3155.1 million (2022: \u00a3133.8 million) were utilised for capital expenditure and \u00a369.6 million (2022: \u00a347.4 million) were utilised for trade
payables. Utilisation of these payment facilities impacted the purchases of property, plant and equipment line in the Consolidated cash
flow statement and the movement in payables line above.
The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales,
as described in note 3.3. The \u00a3104.4 million cash outflow (2022: \u00a3113.7 million inflow) is predominantly due to an increase in the value
of renewable certi\ufb01cates generated and still held by the Group compared to the prior year, and a reduced level of ROC monetisation
sales. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however,
through standard ROC sales and ROC purchase arrangements the Group is able to manage the working capital cycle of inflows and
outflows of these assets. At 31 December 2023 the Group had cash inflows of \u00a3298.4 million from using these standard renewable
certi\ufb01cate sales (2022: \u00a3331.2 million).
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:
Hedging
Borrowings Lease liabilities instruments Total
\u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2023
1,440.9
153.1
(2.2)
1,591.8
Cash \ufb02ows from \ufb01nancing activities
14.5
(25.8)
\u2013
(11.3)
Effect of changes in foreign exchange rates
(35.5)
(6.6)
29.8
(12.3)
Other movements
5.3
15.1
\u2013
20.4
Other movements from operating activities
\u2013
\u2013
4.9
4.9
At 31 December 2023
1,425.2
135.8
32.5
1,593.5
Hedging
Borrowings Lease liabilities instruments Total
\u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
1,361.0
125.9
62.5
1,549.4
Cash \ufb02ows from \ufb01nancing activities
2.1
(18.0)
\u2013
(15.9)
Effect of changes in foreign exchange rates
71.3
11.5
(56.2)
26.6
Other movements
6.5
33.7
\u2013
40.2
Other movements from operating activities
\u2013
\u2013
(8.5)
(8.5)
At 31 December 2022
1,440.9
153.1
(2.2)
1,591.8
Other movements principally relate to the amortisation of deferred \ufb01nance costs, debt acquired through the acquisition of BMM, discounting of lease liabilities and lease additions in the year. Hedging instruments includes cross-currency interest rate swaps that are hedging both principal and interest payments on borrowings. Interest payments are classi\ufb01ed as operating cash flows in the Consolidated cash flow statement, as such movements relating to interest payments are recognised within the Other movements from operating activities line above. 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
2023 2022
\u00a3m \u00a3m
Issued and fully paid:
424,923,406 ordinary shares of 11
16
\u204429 pence each (2022: 414,872,491)
49.1
47.9
The movement in allotted and fully paid share capital of the Company during the year was as follows:
Year ended 31 December
2023 2022
(number) (number)
At 1 January
414,872,491
413,068,027
Issued under employee share schemes
10,050,915
1,804,464
At 31 December
424,923,406
414,872,491
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 buyback programme On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme was concluded on 15 September 2023. The shares purchased by the Group have not been cancelled and so continue to be included in the issued shares in the above table. See note 2.11 for further details on the share buyback programme. Share premium The share premium account reflects amounts received in respect of issued share capital that exceeds the nominal value of the shares issued, net of incremental transaction costs and tax, that are directly attributable to the issue of new shares. Movements in the share premium reserve during the year reflect amounts received above the nominal value on the issue of shares under employee share schemes.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
433.3
432.2
Issue of share capital
7.9
1.1
At 31 December
441.2
433.3
Other reserves
Capital
redemption Translation Merger Treasury shares Total other
reserve reserve reserve reserve reserves
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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 1 January 2023
1.5
85.8
710.8
(50.4)
747.7
Exchange differences on translation of foreign operations
\u2013
(10.3)
\u2013
\u2013
(10.3)
Repurchase of own shares (see note 2.11)
\u2013
\u2013
\u2013
(149.2)
(149.2)
At 31 December 2023
1.5
75.5
710.8
(199.6)
588.2
The capital redemption and treasury shares reserves arose when the Group completed previous share buyback programmes. A further share buyback at a net cost of \u00a3149.2 million has taken place during the year (see note 2.11). The 40.3 million (2022: 13.8 million) shares held in the treasury shares reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\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. Hedge reserve and Cost of hedging reserve Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \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 2023, the Group has two (2022: two) subsidiary undertakings with NCIs. These subsidiaries were acquired during 2021 through the acquisition of Pinnacle. During the prior year, the Group purchased the remaining 10% of the 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\u2019 own \ufb01nancial statements prepared in accordance with IFRS, modi\ufb01ed for Group level fair value adjustments at acquisition. All amounts are presented before intercompany eliminations.
As at 31 December 2023
As at 31 December 2022
Non-controlling Non-controlling Non-controlling Non-controlling
Principal place interest interests interest interests
of business % \u00a3m % \u00a3m
Alabama Pellets LLC
North America
0%
0%
Lavington Pellet Limited Partnership
North America
25%
6.5
25%
7.7
Smithers Pellet Limited Partnership
North America
30%
5.5
30%
5.7
Total
12.0
13.4
No dividends were paid to NCIs in the current or prior reporting period. Summarised statement of total comprehensive income
Year ended 31 December 2023
Year ended 31 December 2022
Loss for the Total
Loss
Total
year comprehensive
for the year
comprehensive
attributable loss
attributable
loss
to the Total
attributable
to the
attributable
non- comprehensive
to the
non- Total to the
Loss controlling loss
non-controlling
Loss
controlling comprehensive non-controlling
Revenue for the year interests for the year
interests
Revenue
for the year
interests loss interests
\u00a3m \u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
39.5
(9.5)
(1.0)
(9.5)
(1.0)
Lavington Pellet
Limited Partnership
31.6
(1.7)
(0.4)
(2.5)
(0.5)
36.5
(1.7)
(0.7)
(1.7)
(0.7)
Smithers Pellet Limited
Partnership
14.5
(2.8)
(0.9)
(3.3)
(1.2)
13.0
(3.0)
(0.9)
(3.0)
(0.9)
Total
4 6 .1
(4.5)
(1.3)
(5.8)
(1.7)
89.0
(14.2)
(2.6)
(14.2)
(2.6)
(1) (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. Summarised balance sheet
As at 31 December 2023
As at 31 December 2022
Non-current Current Current Non-current Non-current Current Current Non-current
assets assets liabilities liabilities Net assets assets assets liabilities liabilities Net assets
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
Lavington Pellet
Limited Partnership
24.9
4.5
(2.0)
(1.4)
26.0
27.7
6.8
(3.1)
(0.6)
30.8
Smithers Pellet Limited
Partnership
15.8
3.1
(1.5)
\u2013
17.4
17.3
1.8
(1.1)
\u2013
18.0
Total
40.7
7.6
(3.5)
(1.4)
43.4
45.0
8.6
(4.2)
(0.6)
48.8
(1) (1) The remaining NCI of Alabama Pellets LLC was acquired by the Group on 30 September 2022, accordingly no balance sheet values have been presented in the above table as at 31 December 2022 or 31 December 2023. Summarised cash flow
Year ended 31 December 2023
Year ended 31 December 2022
Net cash Net cash Net cash
Net cash in\ufb02ow/ Net cash (out\ufb02ow)/in\ufb02ow in\ufb02ow/(out\ufb02ow) Net cash (out\ufb02ow)/in\ufb02ow
(out\ufb02ow) from out\ufb02ow from from from out\ufb02ow from from
operating investing \ufb01nancing Net cash operating investing \ufb01nancing Net cash
activities activities activities out\ufb02ow activities activities activities in\ufb02ow/(out\ufb02ow)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
Lavington Pellet
Limited Partnership
2.2
(1.3)
(2.3)
(1.4)
3.5
(0.7)
(2.2)
0.6
Smithers Pellet Limited
Partnership
(2.2)
(0.7)
2.7
(0.2)
(1.9)
(0.2)
1.8
(0.3)
Total
\u2013
(2.0)
0.4
(1.6)
1.6
(0.9)
(0.4)
0.3
(1) (1) The remaining NCI of Alabama Pellets LLC was acquired by the Group on 30 September 2022, accordingly no cash flow values have been presented in the above table as at 31 December 2022 or 31 December 2023. Transactions with NCI At the beginning of the prior year, the NCI in Alabama Pellets LLC (APLLC) was 10%. On 30 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 during 2022:
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 prior 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-633": { "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 deposit available
cash in low-risk bank accounts or short-term deposit accounts.
As at 31 December
2023 2022
\u00a3m \u00a3m
Cash at bank
77.5
102.1
Short-term deposits
130.9
19.5
Money market funds
171.1
116.4
Total cash and cash equivalents
379.5
238.0
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-725": { "value": "4.2 Borrowings Accounting policy The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration received. 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 may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\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 or losses or interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings amounts disclosed in the tables below exclude any impact of hedging instruments. Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt instrument are signi\ufb01cantly modi\ufb01ed, the existing liability is derecognised and a new liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modi\ufb01cation and post- modi\ufb01cation is recognised in the Consolidated income statement. The Group\u2019s net borrowings at each reporting date were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Non-current secured borrowings at amortised cost:
2.625% loan notes \u20ac250m
215.7
219.8
6.625% loan notes $500m
391.5
412.8
UK infrastructure private placement facilities (2019)
251.4
372.5
UK infrastructure private placement facilities (2020)
184.7
207.9
CAD term facility
117. 8
183.6
Current secured borrowings at amortised cost:
UK infrastructure private placement facilities (2019)
122.5
\u2013
UK infrastructure private placement facilities (2020)
21.7
\u2013
Current unsecured borrowings at amortised cost:
Uncommitted short-term loan facility \u20ac50m
\u2013
44.3
Margin facility
120.0
\u2013
Total borrowings
1,425.3
1,440.9
Current
264.2
44.3
Non-current
1,161.1
1,396.6
(1) (2) (3) (4) (5) (3) (4) (6) (7) (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 6.1%. (3) These comprise committed facilities totalling \u00a3375.0 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%. (4) These comprise committed facilities totalling \u00a398.0 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 2.6%. (5) This facility matures in 2026 and has a customary margin rate over the Canadian Dollar Offered Rate (CDOR). The Group has used a foreign currency forward contract to hedge the 2026 principal repayment on the loan at a \ufb01xed amount in sterling. The average \ufb01xed interest rate on this facility is 7.1%. (6) This is an uncommitted short-term facility with a maturity term of one month. The average \ufb01xed interest rate for this facility while it was drawn during 2022 was 2.4%. (7) This is a short-term margin facility with a current repayment date of July 2024. The interest rate on the current outstanding amount of \u00a3120.0 million is \ufb01xed to maturity at 7.1% . In the prior year, the Group secured a new \u00a3200.0 million committed liquidity facility with banks within its lending group. This facility provided an additional source of liquidity to the Group\u2019s existing undrawn RCFs. The Group did not draw on this facility in 2023 and it matured on 31 December 2023. The Group also has a \u20ac50.0 million uncommitted facility to support optimisation of generation and associated cash collateral postings. This facility was undrawn as at 31 December 2023 (2022: fully drawn). In September 2023, the Group secured a new uncommitted \u00a3200.0 million short-term facility with the main purpose of supporting cash collateral margin requirements of the Group\u2019s exchange-based commodity trading. It is expected that utilisation of this facility will change based on cash collateral margin requirements. As at 31 December 2023, \u00a3120.0 million is outstanding under the facility with a maturity date in July 2024. In November 2023, the Group agreed with lenders of the CAD term facility to exercise the extension option within the facility to extend the \ufb01nal maturity date from January 2024 to January 2026. As part of this extension, the Group chose to repay C$100.0 million (\u00a36 0 .1 million) of the outstanding loan, reducing the outstanding principal value to C$200.0 million (\u00a3118.5 million) as at 31 December 2023. The CAD term facility had floating interest rates linked to the Canadian dollar offered rate (CDOR). As part of the extension, the Group agreed with lenders to transition the floating rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. The Group has a committed \u00a3300.0 million RCF and C$10.0 million RCF. No cash was drawn on either facility as at 31 December 2023 or 31 December 2022. The Group has never drawn cash on the \u00a3300.0 million RCF since its inception in 2020. In January 2024, the Group agreed with lenders of the \u00a3300.0 million RCF to exercise the extension option within the facility to extend the \ufb01nal maturity date from January 2025 to January 2026. Subsequent to the reporting date, in January 2024, the C$10.0 million RCF has matured. See note 2.7 for further details on the Group\u2019s cash and committed facilities. Subsequent to the reporting date and prior to the signing date of the Consolidated \ufb01nancial statements, \u00a3122.5 million of the 2019 UK infrastructure private placement facility has been repaid, as well as \u20ac25.0 million (\u00a321.7 million) of the 2020 UK infrastructure private placement facility. Both of these amounts are included within current borrowings in the table above. On 22 February 2024, the Group signed a new secured committed term loan facility with \ufb01ve banks for \u00a3208.5 million (sterling equivalent). This comprised of three euro denominated tranches totalling \u20ac135.0 million due to mature in 2027 and a further two tranches of \u20ac50.0 million and \u00a350.0 million due to mature in 2029. The three tranches totalling \u20ac135.0 million due to mature in 2027 contain options to extend for up to a further two years, subject to lender approval. The term loan facility includes an option to establish an incremental facility for up to \u00a350.0 million under the same terms and conditions as the other tranches of the Term Loan. Interest on the term loans is set at a margin over EURIBOR or SONIA. On 27 February 2024, the Group established an additional \u00a350.0 million facility under this option with a tenor maturity date in 2027 with options to extend for a further two years, subject to lender approval, and with interest set at a margin over SONIA. The Group expects to draw the term loan facilities within three months from the signing date. 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 North American subsidiaries. The weighted average interest rate payable, at the reporting date, on the Group\u2019s borrowings was 4.79% (2022: 4.14%). Reconciliation of borrowings The table below shows the movement in borrowings during the current and prior year:
Year ended 31 December 2023
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \u00a3m
Borrowings at 1 January
1,449.8
(8.9)
1,440.9
Cash movements:
Repayment of uncommitted short-term loan facility
(43.4)
\u2013
(43.4)
Extension of existing facilities
\u2013
(0.2)
(0.2)
Drawdown of margin facility loan
140.0
\u2013
140.0
Repayment of CAD term facility
(60.1)
\u2013
(6 0 .1)
Repayment of margin facility loan
(20.0)
\u2013
(20.0)
Borrowings acquired in business combinations (note 5.1)
1.8
\u2013
1.8
Repayment of borrowings acquired in business combinations
(1.8)
\u2013
(1.8)
Non-cash movements:
Amortisation of deferred \ufb01nance costs (note 2.5)
\u2013
4.3
4.3
Amortisation of USD loan note premium
(0.4)
\u2013
(0.4)
Extension of existing facilities
\u2013
(0.4)
(0.4)
Effect of changes in foreign exchange rates
(35.4)
\u2013
(35.4)
Borrowings at 31 December
1,430.5
(5.2)
1,425.3
Year ended 31 December 2022
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \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)
Drawdown of facilities
188.5
\u2013
188.5
Repayment of facilities
(145.0)
\u2013
(145.0)
Non-cash movements:
Indexation of index-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
As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the sterling value of the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2022: losses) on borrowings disclosed in the above tables have been offset by \u00a329.5 million of foreign exchange losses (2022: \u00a362.0 million of gains) 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. Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated Adjusted EBITDA and the consolidated net leverage ratio. The consolidated net leverage ratio broadly equates to a Net debt to Adjusted EBITDA calculation (see note 2.7), and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. 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 for the foreseeable future, including the \ufb01ve-year viability period. See the Viability statement on page 92 for further details on the scenarios considered. (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. Letters of credit and surety bonds As at 31 December 2023, the Group had issued letters of credit totalling \u00a3180.3 million (2022: \u00a385.9 million) of which \u00a314.5 million (2022: \u00a354.5 million) were utilised to cover commodity trading collateral requirements and \u00a3120.0 million (2022: \u00a3nil) were utilised to cover the Margin Facility described above. As at 31 December 2023, the Group had surety bonds with a number of insurers totalling \u00a3119.0 million (2022: \u00a3202.0 million) of which \u00a370.0 million (2022: \u00a3165.0 million) were utilised to cover commodity trading collateral requirements. Changes in the fair value of plan assets are as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Fair value of plan assets at 1 January
219.6
369.8
Interest on plan assets
10 .1
6.7
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Employer contributions
8.9
17.7
Bene\ufb01ts paid
(11.3)
(26.6)
Fair value of plan assets at 31 December
220.3
219.6
The fair values of the major categories of plan assets were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Gilts
110.3
117. 2
Equities
24.1
6.5
Fixed interest bonds
5.0
4.8
Property
15.1
28.6
Investment funds
4.5
4.3
Cash and other assets
61.3
58.2
Fair value of total plan assets
220.3
219.6
(1) (2) (3) (1) As at 31 December 2023, the Scheme\u2019s target long-term asset strategy was: (34%) in multi-asset funds (with the key underlying asset strategies being equities, listed real assets and credit), direct lending (12%), hedge funds (3%), long-lease property (7%) and liability driven investing/cash (44%). There is a plan to transition the current asset holding to the long-term strategy by April 2024, noting that the precise allocations between the different asset classes may be adjusted as market conditions change. As 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 was (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 \u00a325.8 million (2022: \u00a329.9 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. 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 signi\ufb01cant 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 lease liabilities, 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
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
Section 7: Risk management (1)
Carrying amount
Fair value
Financial Financial
Restated Fair value- Mandatorily assets at liabilities at
At 31 December 2022 hedging at F V T PL- amortised amortised
\u00a3m instruments
others
FVOCI
 cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
322.8
84.0
\u2013
\u2013
\u2013
406.8
\u2013
406.8
\u2013
406.8
Foreign currency
exchange contracts
166.5
130.6
\u2013
\u2013
\u2013
297.1
\u2013
2 97.1
\u2013
2 97.1
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
Trade and other receivables
\u2013
\u2013
98.4
\u2013
\u2013
98.4
\u2013
98.4
\u2013
98.4
Cash and cash equivalents
\u2013
116.4
\u2013
\u2013
\u2013
116.4
\u2013
116.4
\u2013
116.4
Financial assets not measured at fair value
Trade and other
receivables
\u2013
\u2013
\u2013
973.5
\u2013
973.5
Cash and cash
equivalents
\u2013
\u2013
\u2013
121.6
\u2013
121.6
Financial liabilities measured at fair value
Commodity contracts
(577.2)
(296.5)
\u2013
\u2013
\u2013
(873.7)
\u2013
(873.7)
\u2013
(873.7)
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)
\u2013
(307.3)
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)
(2) (2) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. (2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no impact on the total trade and other receivables and cash and cash equivalents amounts presented. 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 commodity which may or may not be settled through physical delivery of the commodity, as well as weather-related contracts. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, swaps, 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 the UK Retail Price Index (RPI) or the UK Consumer Price Index (CPI). Fair value measurement \u2022 Commodity contracts \u2013 the fair value of open commodity contracts that do not qualify for the own-use exemption, or are otherwise within the scope of IFRS 9, is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 the fair value of 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. 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. The assessment of fair value is derived in part by reference to a market price or rate for the instrument in question. The Group bases its assessment of market prices or rates upon forward curves that are largely derived from readily obtainable prices or rates published 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 nature of the derivative \ufb01nancial instruments the Group holds, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but 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 for each derivative contract. 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), or where different forward curves are available. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. However, given the maturity pro\ufb01le of the Group\u2019s contracts, liquid forward market price curves are usually available for the duration of the contracts. The fair value of derivatives is not, however, considered a key source of estimation uncertainty as reasonably possible changes in assumptions are not expected to result in a materially different value within the next \ufb01nancial year. Also, whilst there is a signi\ufb01cant risk that the carrying amount of derivative assets and liabilities will change materially within the next \ufb01nancial year, as a result of movements in market prices or rates, the Group is not expecting to change its methodology or input sources in the next \ufb01nancial year. Any such changes are not as a result of assumptions or other sources of estimation uncertainty as at 31 December 2023 and therefore do not meet the de\ufb01nition of a key source of estimation uncertainty as de\ufb01ned by IAS 1. 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 USD loan notes, the EUR loan notes, and the 2020 UK infrastructure private placement facilities (see note 4.2) 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, foreign currency exchange contracts, interest rate swaps, cross-currency contracts and inflation swaps are largely determined by comparison between observable, liquid, forward market prices or rates, and the trade price or rate; therefore, these contracts are categorised as Level 2. Credit risk is not a signi\ufb01cant input to the fair value calculations. 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. No external specialists have been utilised for the valuation of the current or prior year derivative \ufb01nancial instruments. 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 contingent consideration receivable by the Group relates to the sale of the CCGT generation portfolio in 2021. The gross nominal value of \u00a329.0 million 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 of the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used .
Signi\ufb01cant unobservable inputs and range Relationship between signi\ufb01cant unobservable input
Valuation approach of inputs (probability weighted) and fair value measurement
Contingent The fair value of the contingent Forecasted future Capacity Market The fair value measurement would
consideration consideration is determined using a clearing prices: increase/(decrease) with:
discounted cash \ufb02ow model. The \u00a32.47/kW \u2013 \u00a377.20/kW
\u2022
higher/(lower) forecasted Capacity
valuation approach is based on a (\u00a342.66/kW) Market clearing prices causing a
calculation of the probability of the higher/(lower) probability of the
option to develop the Damhead (2022: \u00a37.00/kW \u2013 \u00a364.64/kW) option over the Damhead Creek 2
Creek 2 land being exercised. (2022: (\u00a335.91/kW)) land being exercised.
This probability is calculated using a Estimated bid price at which
\u2022
lower/(higher) estimated bid price
range of forecasts for future Damhead Creek 2 is to be entered required for the Damhead Creek 2
Capacity Market auctions and the into the Capacity Market auction: development to proceed causing a
assumption that the option to higher/(lower) probability of the
develop the land would be exercised \u00a367.5 0/kW option over the Damhead Creek 2
if the Capacity Market price were to (2022: \u00a340.00/kW) land being exercised.
clear above a certain level, providing
suf\ufb01cient certainty on the
economics of the development.
During the year, inputs to the fair value calculation have been updated to reflect increases in both forecasted future Capacity Market clearing prices and the estimated bid price at which Damhead Creek 2 is expected to be entered into the Capacity Market auction. Due to increased expectations relating to the cost to develop the project, the estimated bid price has increased from \u00a340.00/kW to \u00a367.50/kW. This, alongside the impact of updating the calculation with recent forecasts of future Capacity Market clearing prices, has resulted in an \u00a318.2 million decrease to the fair value of the contingent consideration. As the change in fair value reflects the reversal of a previous credit recorded within exceptional items, and the current year decrease in fair value is above the Group\u2019s threshold to be considered exceptional, the \u00a318.2 million has been excluded from Adjusted results and presented as an exceptional item included within other gains or losses in the Consolidated income statement (see note 2.7). A reconciliation of the contingent consideration is detailed below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Balance at 1 January
27.4
27.7
Net change in fair value (unrealised)
(18.2)
(0.3)
Balance at 31 December
9.2
27.4
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 Increase
\u00a3m \u00a3m
As at 31 December 2023
Forecasted future Capacity Market clearing prices (10%)
(9.2)
7.0
Estimated bid price (10%)
7. 0
(4 .1)
Impact on pro\ufb01t before tax
Decrease Increase
\u00a3m \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)
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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s energy supply contracts, are excluded from fair value mark-to-market accounting. 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 (see 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 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. 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. Derivative balances are classi\ufb01ed in the Consolidated balance sheet as current or non-current based on the \ufb01nal maturity date of the contracts. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
Restated
2023 2022
\u00a3m \u00a3m
Non-current derivative \ufb01nancial instrument assets
293.6
361.0
Current derivative \ufb01nancial instrument assets
368.4
396.9
Total derivative \ufb01nancial instrument assets
662.0
757.9
Non-current derivative \ufb01nancial instrument liabilities
(306.6)
(674.7)
Current derivative \ufb01nancial instrument liabilities
(231.6)
(590.0)
Total derivative \ufb01nancial instrument liabilities
(538.2)
(1,264.7)
Total net derivative \ufb01nancial instruments
123.8
(506.8)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at fair value through pro\ufb01t or loss (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/(losses) recognised
2023 2022
\u00a3m \u00a3m
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
revenue
70.7
(441.4)
(Losses)/gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
cost of sales
(127.0)
32.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges
(0.3)
(0.4)
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
foreign exchange (losses)/gains
4.9
(3.8)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting
(51.7)
(413.0)
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 and the impact of discounting. 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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting, or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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 94). The Financial Risk Management Committee identi\ufb01es, evaluates and manages \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, 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 as at 31 December. The analysis assumes all other variables were held constant. Financial and commodity markets saw signi\ufb01cant volatility and high prices in 2022. During 2023 the high prices seen in the prior year have generally reversed, but in the most part prices are still above historical averages. See the Principal risks and uncertainties section on page 94 for further details on UK energy market conditions. As a result of these fluctuating market conditions, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, have seen large reversals of the amounts recognised in the prior year. Sensitivities for a 10% change in prices have been included in the current and prior year. The impact of smaller and larger price changes can be 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 other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Power
\u2013
\u2013
34.9
(34.9)
Carbon
2.8
(2.8)
(0.2)
0.2
Gas
11.1
(11.1)
\u2013
\u2013
Oil
(7.9)
7.9
\u2013
\u2013
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. 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. 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, after taking account of the volume held back for operational risk management purposes. 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 commodity contracts to be economic hedges. If either the contracts cannot be readily net settled or if the Group is able to demonstrate these contracts were entered into and continue to be held for the purpose of receipt or delivery of the non-\ufb01nancial item in accordance with the Group\u2019s expected purchase, sale or usage requirements and the own-use exemption applies, then these contracts are not within the scope of IFRS 9. For other contracts that are within the scope of IFRS 9 the Group applies hedge accounting were possible. If the contracts are within the scope of IFRS 9 and hedge accounting is not applied 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows.
31 December 2023
Change in fair Balance in the
value of hedging hedge reserve for
instrument Balance in the hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
5,580,931
129.4
413.3
402.3
(58.8)
257.4
\u2013
Purchase of carbon
emissions allowances
62,000
37.4
1.4
0.4
\u2013
0.3
(0.7)
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item
the reporting recognised in Line item transferred to due to the \ufb02ows in the income
period used Hedging gains the income in the income the cost or hedged being no longer statement/
for measuring recognised in statement statement carrying value of item affecting expected to balance sheet
ineffectiveness OCI in the period in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013gains/(losses) \u2013 gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Commodity contracts
Sale of power
(413.3)
413.3
\u2013
Revenue
\u2013
183.4
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
(1.4)
1.4
\u2013
sales
\u2013
1.6
\u2013
sales
31 December 2022 Restated
Change in fair Balance in
value of hedging the hedge reserve
instrument Balance in the for hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013 gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
2,135,90
9
218.0
(534.4)
322.8
(576.2)
(19 0.1)
\u2013
Purchase of carbon
emissions allowances
148,000
77.5
(4.2)
\u2013
(1.0)
(0.8)
(1.9)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the fair values of assets and liabilities recognised in the Consolidated balance sheet, but not the overall net asset position. See the offsetting section on page 178 for further details on this restatement. 31 December 2022 Change in fair Amount value of hedged Hedge Amount reclassi\ufb01ed due item during ineffectiveness Amount reclassi\ufb01ed to the hedged Line item in the reporting recognised in Line item in the transferred to due to the future cash \ufb02ows the income period used Hedging losses the income income the cost or hedged being no longer statement/ for measuring recognised in OCI statement statement carrying value item affecting expected to balance sheet ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses reclassi\ufb01cation/ \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m transfer Commodity contracts Sale of power 534.4 (534.4) \u2013 Revenue \u2013 459.8 \u2013 Revenue Purchase of carbon Cost of Cost of emissions allowances 4.2 (4.2) \u2013 sales \u2013 0.1 \u2013 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), euros (EUR) or Canadian dollars (CAD), and the foreign currency debt is also denominated in USD, EUR and CAD (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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at 31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their related hedges. 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. 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. 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, EUR and CAD (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward contracts, to manage exchange risk on foreign currency debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022 Change in fair Amount value of hedged Hedge Amount Amount reclassi\ufb01ed due item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income period used recognised in the income income carrying value hedged being no longer statement/ for measuring OCI statement statement of a non- item affecting expected to balance sheet ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/ \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign Cost of currency \u2013 USD (187. 2) 187. 2 \u2013 sales (34.2) \u2013 \u2013 Inventories Purchases in foreign Cost of currency \u2013 EUR (17.9) 17.9 \u2013 sales 5.9 \u2013 \u2013 Inventories Purchases in foreign Cost of currency \u2013 CAD (0.4) 0.4 \u2013 sales 9.2 \u2013 \u2013 Inventories Foreign currency denominated debt Interest Interest payable payable and and Interest and principal similar similar repayments \u2013 USD (47.5) 47.5 \u2013 charges \u2013 (9.2) \u2013 charges Foreign Foreign exchange exchange (losses)/ (losses)/ \u2013 gains \u2013 (44.7) \u2013 gains Interest Interest payable payable and and Interest and principal similar similar repayments \u2013 EUR 3.1 ( 3.1) \u2013 charges \u2013 2.6 \u2013 charges Foreign Foreign exchange exchange (losses)/ (losses)/ \u2013 gains \u2013 (17.3) \u2013 gains 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 revolving credit facility (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 2019 UK infrastructure private placement facility. For the 2020 UK infrastructure private placement facility, the Group has \ufb01xed the interest rate payable on the \u00a398 million GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated \u20ac95 million tranche of the 2020 UK infrastructure private placement facility, through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in note 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 2023, 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. In January 2024, the Group entered into a floating-to-\ufb01xed cross-currency swap to \ufb01x the sterling value of interest payments on the CAD denominated term loan. 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. Certain Group borrowings are at \ufb01xed rates, including the USD and EUR bonds, and are therefore not exposed to interest rate risk. 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 benchmark reform The only interest rate benchmark to which the Group is still exposed to, that is subject to interest rate benchmark reform, is the Canadian Dollar Offered Rate (CDOR). The Group has a C$200 million term loan facility that is linked to a floating-rate CDOR benchmark. During the year the Group has extended the facility to a maturity date of January 2026. As part of the extension, the Group agreed with lenders to transition the floating-rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. \u2018Phase 2\u2019 of the amendments requires that, for \ufb01nancial instruments measured using amortised cost measurement (that is, \ufb01nancial instruments classi\ufb01ed as amortised cost and debt \ufb01nancial assets classi\ufb01ed as FVOCI), changes to the basis for determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate. No immediate gain or loss is recognised. The expedient is only applicable to changes that are required by interest rate benchmark reform, which is the case if, and only if, the change is necessary as a direct consequence of interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis (that is, the basis immediately preceding the change). The following table contains details of all of the \ufb01nancial instruments that the Group holds at 31 December 2023 which reference CDOR and have not yet transitioned to the CORRA interest rate benchmark:
Hedge
Pre-transition Nominal value accounting
Non-derivative \ufb01nancial instrument benchmark rate
C$
Maturity date
applied
Transition progress
New benchmark rate
Agreed transition to CORRA from
the start of the \ufb01rst interest period
CAD term facility
CDOR
200.0
2026
Unhedged
post 31 December 2023
CORRA
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 what the impact on the current years pro\ufb01t after tax and other components of equity would have been for a reasonably possible increase or decrease in interest rates. For interest rate derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Variable rate debt \u2013 unhedged
(1.2)
1.2
\u2013
\u2013
Variable rate debt \u2013 hedged
(4.2)
4.2
\u2013
\u2013
Interest rate swaps
4.2
(4.2)
8.1
(8.1)
Net impact
(1.2)
1.2
8.1
(8.1)
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)
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 \ufb02oating-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 \ufb02oating-to-\ufb01xed interest rate swaps as hedging instruments under cash \ufb02ow 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 valuations. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a \ufb02oor of 0% for the benchmark interest rate. The Group also has CAD denominated debt that has a variable rate based on CDOR. At 31 December 2023, no swaps were in place to hedge the interest risk on the CAD denominated debt. Therefore, in relation to this debt a change in interest rate would have 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 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 \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 2023
Change in fair Balance in the hedge
value of hedging reserve for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional for measuring recognised in recognised in hedges net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure \u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
559.8
1.06%
(33.0)
22.7
\u2013
18.9
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item in the
the reporting Hedging losses recognised in transferred to due to the \ufb02ows being income
period used recognised in the income Line item in the the cost or hedged no longer statement/
for measuring OCI statement income statement carrying value of item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest
payable payable
Variable rate GBP and similar and similar
debt
33.0
(33.0)
\u2013
charges
\u2013
16.0
\u2013
 charges
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging Balance in the for hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
\u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
558.8
1.06%
39.9
37.5
\u2013
31.7
\u2013
Exposure
31 December 2022
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged Line item
item during Hedging ineffectiveness transferred to reclassi\ufb01ed future cash in the
the reporting gains recognised in the cost or due to the \ufb02ows income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest payable
Variable rate payable and and similar
GBP debt
(39.9)
39.9
\u2013
similar charges
\u2013
(3.1)
\u2013
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 or decrease in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
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 business 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. Such facilities are not included within the Group\u2019s de\ufb01nition of Net debt, as outlined in note 2.7. The following tables set out details of the expected maturity pro\ufb01le of the undiscounted, contractual payments 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 2023
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Term loans, gross value
153.9
154.9
271.6
278.8
87.0
946.2
Loan notes, gross value
\u2013
31.7
635.3
\u2013
\u2013
6 67.0
Borrowings, contractual maturity
153.9
186.6
906.9
278.8
87.0
1,613.2
Trade and other payables
763.8
150.7
3.2
1.5
\u2013
919.2
Lease liabilities
8.6
24.8
28.6
52.6
57. 0
171.6
926.3
362.1
938.7
332.9
144.0
2,704.0
Trade and other payables of \u00a3919.2 million (2022: \u00a31,065.9 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to deliver ROCs and employee bene\ufb01t related accruals.
As at 31 December 2022
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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
1,002.1
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
1,067.0
216.9
2,869.0
The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.79% (2022: 4.14%). The following tables set out details of the expected maturity pro\ufb01le of contractual payments of derivative \ufb01nancial liabilities. 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 based on the trade value rather than the mark-to-market value, the gross cash flows have been presented. Certain commodity contracts are expected to be gross settled through delivery or receipt of the commodity and a subsequent cash settlement of the trade value. Vanilla foreign currency exchange contracts are expected to be gross settled through delivery of one currency and receipt of another. 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 2023
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
795.3
79.3
1.6
876.2
Foreign currency exchange contracts
952.4
497.1
39 4.1
1,843.6
Cross-currency contracts
763.7
2.5
31.2
797.4
In\ufb02ation contracts
81.6
85.2
107. 5
274.3
2,593.0
66 4 .1
534.4
3,791.5
As at 31 December 2022
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
1,328.8
173.8
4.6
1,507.2
Foreign currency exchange contracts
921.4
45.4
47. 8
1,014.6
Cross-currency contracts
776.3
2.5
3.8
782.6
In\ufb02ation contracts
67.3
83.1
203.8
354.2
3,093.8
304.8
260.0
3,658.6
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. The maximum exposure to credit risk at the reporting date is the carrying value of each class of \ufb01nancial assets disclosed in note 7.1. Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a359.4 million (2022: \u00a360.9 million) and expected credit losses on accrued income of \u00a39.4 million (2022: \u00a37.6 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, payment terms, 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. 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 smaller 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 industry 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. The Group had cash and cash equivalents of \u00a3379.5 million at 31 December 2023 (2022: \u00a3238.0 million). Cash and cash equivalents are subject to the impairment requirements of IFRS 9. The identi\ufb01ed impairment loss, based on the 12-month expected credit loss basis, was immaterial. Cash and cash equivalents are held with banks with external credit ratings between AAA and A. 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. Credit risk is a factor in the determination of fair value. The carrying amount of these \ufb01nancial assets, disclosed in note 7.1, represents the Group\u2019s maximum credit risk exposure. Some derivative contracts are fully cash collateralised, thereby minimising credit risk. At 31 December 2023 the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) covering certain derivative assets and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments covering certain derivative liabilities. The credit rating of counterparties to which the \u00a398.9 million of cash collateral had been posted was A\u2013. 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 wide 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 92 for details of scenario analysis performed on covenant restrictions within the Group\u2019s \ufb01nancing facilities.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
1,425.3
1,440.9
Cash and cash equivalents (note 4.1)
(379.5)
(238.0)
Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries
0.3
0.7
Impact of hedging instruments
37. 8
2.4
Net debt (note 2.7)
1,083.9
1,206.0
Total shareholders\u2019 equity attributable to owners of the parent company, excluding hedge and cost of
hedging reserves
1,744.9
1,422.7
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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated in the hedge reserve is transferred and included within the initial cost of the asset. 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
Foreign
Commodity currency Interest In\ufb02ation
price risk exchange risk rate risk rate risk Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
(138.2)
(39.3)
4.2
(4.1)
(17 7.4)
(Losses)/gains 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 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 (losses)/gains
\u2013
(62.0)
\u2013
\u2013
(62.0)
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
39.5
39.5
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(19.1)
\u2013
\u2013
(19.1)
Related deferred tax, net (note 2.6)
24.1
(39.2)
(9.3)
23.6
(0.8)
At 1 January 2023
(192.8)
83.7
31.7
(74.6)
(152.0)
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instrument recognised in OCI
414.7
(115.0)
(33.0)
(0.2)
266.5
Reclassi\ufb01ed from equity as the hedged item has affected
pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in cost of sales
1.6
\u2013
\u2013
\u2013
1.6
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in revenue
183.4
\u2013
\u2013
16.6
200.0
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in interest payable and similar charges
\u2013
(0.3)
16.0
\u2013
15.7
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in foreign exchange (losses)/gains
\u2013
29.5
\u2013
\u2013
29.5
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
9.3
9.3
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(43.4)
\u2013
\u2013
(43.4)
Related deferred tax, net (note 2.6)
(149.9)
32.3
4.2
(6.4)
(119.8)
At 31 December 2023
257.0
(13.2)
18.9
(55.3)
207.4
The expected release pro\ufb01le from equity of post-tax hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity risk
199.4
56.0
1.6
257.0
Foreign currency exchange risk
(4.9)
(6 .1)
(2.2)
(13.2)
Interest rate risk
11.5
6.3
1.1
18.9
In\ufb02ation risk
(19.4)
(15.2)
(20.7)
(55.3)
186.6
41.0
(20.2)
207.4
At 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \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)
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 hedging the purchase of inventory denominated in foreign currencies 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 transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
Cost of hedging
2023 2022
\u00a3m \u00a3m
At 1 January
40.1
78.5
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instruments recognised in the Consolidated statement of
comprehensive income
7.5
(19.0)
Transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
(36.0)
(28.8)
Related deferred tax, net (note 2.6)
7.1
9.4
At 31 December
18.7
4 0.1
The expected release pro\ufb01le from equity of post-tax cost of hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
16.6
4.3
(2.2)
18.7
As at 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
21.7
13.0
5.4
4 0.1
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 or receivable. The table below shows the impact of \ufb01nancial assets and liabilities that are offset in the Consolidated balance sheet, and it also shows the impact if the carrying amounts that are subject to these master netting agreements were also to be offset in certain circumstances, such as a bankruptcy:
As at 31 December 2023
Net amounts of
Gross amounts \ufb01nancial Related
of \ufb01nancial instruments \ufb01nancial Related cash
Gross amounts instruments offset presented instruments collateral assets/
of \ufb01nancial in the balance in the that are (liabilities) that are
instruments sheet balance sheet not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
888.5
(226.5)
662.0
(220.9)
(20.3)
420.8
Trade and other receivables and
contract assets
1,088.5
(111.6)
976.9
(4.9)
(95.9)
8 76 .1
Financial liabilities
Derivative \ufb01nancial instruments
(764.7)
226.5
(538.2)
215.3
95.9
(2 27.1)
Trade and other payables and contract
liabilities
(1,651.2)
111.6
(1,539.6)
10.5
20.3
(1,508.8)
As at 31 December 2022
Net amounts
of \ufb01nancial
Gross amounts instruments Related
of \ufb01nancial presented \ufb01nancial Related cash
Gross amounts instruments in the instruments collateral assets/
of \ufb01nancial offset in the balance sheet that are (liabilities) that are
instruments balance sheet Restated not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
1,218.0
(4 6 0.1)
757.9
(608.6)
\u2013
149.3
Trade and other receivables and
contract assets
1,398.8
(171.8)
1, 227.0
(31.8)
(230.6)
964.6
Financial liabilities
Derivative \ufb01nancial instruments
(1,724.8)
4 60.1
(1,264.7)
619.6
230.6
(414.4)
Trade and other payables and
contract liabilities
(1,699.7)
171.8
(1,527.9)
20.7
\u2013
(1,507.2)
The amounts at 31 December 2022 have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The above collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-681": { "value": "4.2 Borrowings Accounting policy The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration received. 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 may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\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 or losses or interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings amounts disclosed in the tables below exclude any impact of hedging instruments. Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt instrument are signi\ufb01cantly modi\ufb01ed, the existing liability is derecognised and a new liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modi\ufb01cation and post- modi\ufb01cation is recognised in the Consolidated income statement. The Group\u2019s net borrowings at each reporting date were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Non-current secured borrowings at amortised cost:
2.625% loan notes \u20ac250m
215.7
219.8
6.625% loan notes $500m
391.5
412.8
UK infrastructure private placement facilities (2019)
251.4
372.5
UK infrastructure private placement facilities (2020)
184.7
207.9
CAD term facility
117. 8
183.6
Current secured borrowings at amortised cost:
UK infrastructure private placement facilities (2019)
122.5
\u2013
UK infrastructure private placement facilities (2020)
21.7
\u2013
Current unsecured borrowings at amortised cost:
Uncommitted short-term loan facility \u20ac50m
\u2013
44.3
Margin facility
120.0
\u2013
Total borrowings
1,425.3
1,440.9
Current
264.2
44.3
Non-current
1,161.1
1,396.6
(1) (2) (3) (4) (5) (3) (4) (6) (7) (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 6.1%. (3) These comprise committed facilities totalling \u00a3375.0 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%. (4) These comprise committed facilities totalling \u00a398.0 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 2.6%. (5) This facility matures in 2026 and has a customary margin rate over the Canadian Dollar Offered Rate (CDOR). The Group has used a foreign currency forward contract to hedge the 2026 principal repayment on the loan at a \ufb01xed amount in sterling. The average \ufb01xed interest rate on this facility is 7.1%. (6) This is an uncommitted short-term facility with a maturity term of one month. The average \ufb01xed interest rate for this facility while it was drawn during 2022 was 2.4%. (7) This is a short-term margin facility with a current repayment date of July 2024. The interest rate on the current outstanding amount of \u00a3120.0 million is \ufb01xed to maturity at 7.1% . In the prior year, the Group secured a new \u00a3200.0 million committed liquidity facility with banks within its lending group. This facility provided an additional source of liquidity to the Group\u2019s existing undrawn RCFs. The Group did not draw on this facility in 2023 and it matured on 31 December 2023. The Group also has a \u20ac50.0 million uncommitted facility to support optimisation of generation and associated cash collateral postings. This facility was undrawn as at 31 December 2023 (2022: fully drawn). In September 2023, the Group secured a new uncommitted \u00a3200.0 million short-term facility with the main purpose of supporting cash collateral margin requirements of the Group\u2019s exchange-based commodity trading. It is expected that utilisation of this facility will change based on cash collateral margin requirements. As at 31 December 2023, \u00a3120.0 million is outstanding under the facility with a maturity date in July 2024. In November 2023, the Group agreed with lenders of the CAD term facility to exercise the extension option within the facility to extend the \ufb01nal maturity date from January 2024 to January 2026. As part of this extension, the Group chose to repay C$100.0 million (\u00a36 0 .1 million) of the outstanding loan, reducing the outstanding principal value to C$200.0 million (\u00a3118.5 million) as at 31 December 2023. The CAD term facility had floating interest rates linked to the Canadian dollar offered rate (CDOR). As part of the extension, the Group agreed with lenders to transition the floating rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. The Group has a committed \u00a3300.0 million RCF and C$10.0 million RCF. No cash was drawn on either facility as at 31 December 2023 or 31 December 2022. The Group has never drawn cash on the \u00a3300.0 million RCF since its inception in 2020. In January 2024, the Group agreed with lenders of the \u00a3300.0 million RCF to exercise the extension option within the facility to extend the \ufb01nal maturity date from January 2025 to January 2026. Subsequent to the reporting date, in January 2024, the C$10.0 million RCF has matured. See note 2.7 for further details on the Group\u2019s cash and committed facilities. Subsequent to the reporting date and prior to the signing date of the Consolidated \ufb01nancial statements, \u00a3122.5 million of the 2019 UK infrastructure private placement facility has been repaid, as well as \u20ac25.0 million (\u00a321.7 million) of the 2020 UK infrastructure private placement facility. Both of these amounts are included within current borrowings in the table above. On 22 February 2024, the Group signed a new secured committed term loan facility with \ufb01ve banks for \u00a3208.5 million (sterling equivalent). This comprised of three euro denominated tranches totalling \u20ac135.0 million due to mature in 2027 and a further two tranches of \u20ac50.0 million and \u00a350.0 million due to mature in 2029. The three tranches totalling \u20ac135.0 million due to mature in 2027 contain options to extend for up to a further two years, subject to lender approval. The term loan facility includes an option to establish an incremental facility for up to \u00a350.0 million under the same terms and conditions as the other tranches of the Term Loan. Interest on the term loans is set at a margin over EURIBOR or SONIA. On 27 February 2024, the Group established an additional \u00a350.0 million facility under this option with a tenor maturity date in 2027 with options to extend for a further two years, subject to lender approval, and with interest set at a margin over SONIA. The Group expects to draw the term loan facilities within three months from the signing date. 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 North American subsidiaries. The weighted average interest rate payable, at the reporting date, on the Group\u2019s borrowings was 4.79% (2022: 4.14%). Reconciliation of borrowings The table below shows the movement in borrowings during the current and prior year:
Year ended 31 December 2023
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \u00a3m
Borrowings at 1 January
1,449.8
(8.9)
1,440.9
Cash movements:
Repayment of uncommitted short-term loan facility
(43.4)
\u2013
(43.4)
Extension of existing facilities
\u2013
(0.2)
(0.2)
Drawdown of margin facility loan
140.0
\u2013
140.0
Repayment of CAD term facility
(60.1)
\u2013
(6 0 .1)
Repayment of margin facility loan
(20.0)
\u2013
(20.0)
Borrowings acquired in business combinations (note 5.1)
1.8
\u2013
1.8
Repayment of borrowings acquired in business combinations
(1.8)
\u2013
(1.8)
Non-cash movements:
Amortisation of deferred \ufb01nance costs (note 2.5)
\u2013
4.3
4.3
Amortisation of USD loan note premium
(0.4)
\u2013
(0.4)
Extension of existing facilities
\u2013
(0.4)
(0.4)
Effect of changes in foreign exchange rates
(35.4)
\u2013
(35.4)
Borrowings at 31 December
1,430.5
(5.2)
1,425.3
Year ended 31 December 2022
Borrowings before deferred Deferred Net
\ufb01nance costs \ufb01nance costs borrowings
\u00a3m \u00a3m \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)
Drawdown of facilities
188.5
\u2013
188.5
Repayment of facilities
(145.0)
\u2013
(145.0)
Non-cash movements:
Indexation of index-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
As disclosed above, the Group has a number of cross-currency interest rate swaps that \ufb01x the sterling value of the principal repayment of certain foreign currency denominated borrowings. Accordingly, the foreign exchange gains (2022: losses) on borrowings disclosed in the above tables have been offset by \u00a329.5 million of foreign exchange losses (2022: \u00a362.0 million of gains) 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. Compliance with loan covenants The Group has customary \ufb01nancial covenants, principally in relation to consolidated Adjusted EBITDA and the consolidated net leverage ratio. The consolidated net leverage ratio broadly equates to a Net debt to Adjusted EBITDA calculation (see note 2.7), and is calculated in line with the Group\u2019s \ufb01nancial covenant requirements in the loan facility agreements (1) . The Group also has conditions placed on its dividend payments as a result of the \ufb01nancing facilities. 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 for the foreseeable future, including the \ufb01ve-year viability period. See the Viability statement on page 92 for further details on the scenarios considered. (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.
Letters of credit and surety bonds
As at 31 December 2023, the Group had issued letters of credit totalling \u00a3180.3 million (2022: \u00a385.9 million) of which \u00a314.5 million
(2022: \u00a354.5 million) were utilised to cover commodity trading collateral requirements and \u00a3120.0 million (2022: \u00a3nil) were utilised
to cover the Margin Facility described above. As at 31 December 2023, the Group had surety bonds with a number of insurers totalling
\u00a3119.0 million (2022: \u00a3202.0 million) of which \u00a370.0 million (2022: \u00a3165.0 million) were utilised to cover commodity trading collateral
requirements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-756": { "value": "Accounting policy The Group measures all debt instruments initially at fair value, which equates to the principal value of the consideration 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 may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\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 or losses or interest payable and similar charges, to match the exposure they are hedging, where effective. The borrowings amounts disclosed in the tables below exclude any impact of hedging instruments. Debt instruments are derecognised when the contractual obligations are discharged, cancelled or expired. If the terms of a debt instrument are signi\ufb01cantly modi\ufb01ed, the existing liability is derecognised and a new liability based on the modi\ufb01ed terms is recognised at fair value. The difference between the carrying value of the debt instrument based on the terms pre-modi\ufb01cation and post- modi\ufb01cation is recognised in the Consolidated income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-741": { "value": "Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. Loan commitment fees may be payable to the lender to entitle the Group to draw down at any time over a \ufb01xed period. Where there is a \ufb01xed repayment date, regardless of when the loan is drawn down, the commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Where the loan has the same \ufb01xed term, regardless of when the loan is drawn down, if drawdown is probable, then the commitment fees are deferred until drawn down and are recognised over the life of the instrument as part of the effective interest rate. If drawdown is not probable, then loan commitment fees are recognised on a systematic basis over the period the Group is able to draw down. Fees that are paid for the availability of a facility where the amount and timing of drawdown can vary at the Group\u2019s discretion, such as a revolving credit facility (RCF), are recognised on a systematic basis over the life of the facility. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-634": { "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 187. 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
2023 2022
\u00a3m \u00a3m
Pro\ufb01t for the year
560.9
82.5
Adjustments for:
Interest payable and similar charges
115.2
83.1
Interest receivable
(13.1)
(4.3)
Tax charge/(credit)
235.5
(4.4)
Research and development tax credits
(2.0)
(5.5)
Share of losses/(pro\ufb01ts) from associates
1.6
(0.5)
Depreciation of property, plant and equipment
168.7
187.7
Amortisation of intangible assets
29.4
31.4
Depreciation of right-of-use assets
26.9
20.3
Impairment of non-current assets
70.8
41.5
Losses on disposal of \ufb01xed assets
2.6
5.5
Other losses
18.2
0.3
Certain remeasurements of derivative contracts
(222.0)
288.7
Non-cash charge for share-based payments
13.9
9.6
Effect of changes in foreign exchange rates
6.2
(2.2)
Operating cash \ufb02ows before movement in working capital
1,012.8
733.7
Changes in working capital:
Decrease/(increase) in inventories
20.6
(133.4)
Decrease/(increase) in receivables
71.4
(379.0)
(Decrease)/increase in payables
(30.8)
431.8
Net movement in collateral
155.4
(406.8)
Decrease in provisions
(4.4)
(29.1)
(Increase)/decrease in renewable certi\ufb01cate assets
(104.4)
113.7
Total cash released from/(absorbed by) working capital
107.8
(402.8)
Net movement in de\ufb01ned bene\ufb01t pension obligations
(9.6)
(10.6)
Cash generated from operations
1,111.0
320.3
(1)
(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. At 31 December 2023, the Group had accelerated \u00a3nil of cash flows through the use of rebasing (2022: \u00a343.1 million).
The Group has generated cash from operations of \u00a31,111.0 million during the year (2022: \u00a3320.3 million). This resulted from a cash
inflow from operating activities before working capital of \u00a31,012.8 million (2022: \u00a3733.7 million) and a net working capital cash inflow
of \u00a3107.8 million (2022: cash outflow of \u00a3402.8 million). This was offset by a \u00a39.6 million (2022: \u00a310.6 million) cash outflow in respect
of pension obligations. The most signi\ufb01cant factors making up these cash movements are explained in further detail below.
The \u00a3222.0 million outflow due to the adjustment for certain remeasurements of derivative contracts in the current year
(2022: \u00a3288.7 million inflow) mainly relates to a net cash outflow due to realised losses on maturing trades. The adjustment
for realised losses was in part offset by unrealised losses recognised within the Consolidated income statement.
Prices in power and commodity markets have reduced in 2023 compared to 2022, but remain elevated compared to historical norms. 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 mark-to-market positions reduce, or contracts are settled, and the collateral is returned. The Group actively manages its liquidity requirements. This includes managing collateral associated with the hedging of power and other commodities, as well as other contractual arrangements. Under certain arrangements the Group is able to use non-cash collateral, such as letters of credit and surety bonds, that may otherwise have required cash collateral. The Group has had a net cash inflow of \u00a3155.4 million from collateral during the year, as trades have matured and mark-to-market positions have reduced (2022: \u00a3406.8 million outflow). As at 31 December 2023, the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) recognised in payables, and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments recognised in receivables. The Group had also utilised \u00a314.5 million (2022: \u00a354.5 million) of letters of credit and \u00a370.0 million (2022: \u00a3165.0 million) of surety bonds to cover commodity trading collateral requirements. Letters of credit and surety bonds utilised at the reporting date have reduced the requirement for cash collateral payments, which has increased the amount by which receivables have decreased. The Group has a strong focus on cash flow discipline and managing liquidity. The Group enhances its working capital position by managing payables, receivables, inventories and renewable 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 included within the further detail explained below. The table below sets out the key arrangements utilised by the Group to manage elements of its working capital:
As at As at
31 December 31 December In\ufb02ow/
2023 2022 (out\ufb02ow)
\u00a3m \u00a3m \u00a3m
Receivables monetisation
400.0
400.0
\u2013
ROC monetisation sales
298.4
331.2
(32.8)
Supply chain \ufb01nance
(48.6)
(53.9)
(5.3)
Deferred letters of credit
(224.7)
(181.2)
43.5
Credit cards
(0.4)
(33.3)
(32.9)
None of the balances in the table above are included within the Group\u2019s de\ufb01nition of Net debt or borrowings (see note 2.7 for further details on Net debt and note 4.2 for further details on borrowings). The receivables monetisation facility is non-recourse in nature and therefore there is no future liability associated with these amounts. Through standard ROC sales and ROC purchase arrangements the Group is able to manage the working capital cycle of inflows and outflows of these assets. The supply chain \ufb01nance, deferred letters of credit and credit card facilities are linked directly to speci\ufb01c payables that provide a short extension of payment terms of less than 12 months. The impact of these facilities on the cash flows of the Group is explained further below. The overall cash inflow of \u00a371.4 million (2022: outflow of \u00a3379.0 million) due to lower receivables in the current year, is primarily a result of a reduction in energy prices compared to the prior year. The Customers business has access to a receivables monetisation facility which enables it to accelerate cash flows associated with amounts receivable from energy supply customers on a non-recourse basis. The Group re\ufb01nanced this facility during the prior year, to increase the size of the facility to \u00a3400.0 million from \u00a3200.0 million for the period to March 2025, and then reducing to \u00a3300.0 million until the facility matures in January 2027. Utilisation of the facility was \u00a3400.0 million at 31 December 2023 (2022: \u00a3400.0 million). As the facility was fully utilised at 31 December 2023 and 31 December 2022 there has been no cash flow impact in the period (2022: \u00a3200.0 million cash inflow, as the facility was increased in size from \u00a3200.0 million to \u00a3400.0 million). Payables have largely remained consistent year on year, with a cash outflow of \u00a330.8 million (2022: \u00a3431.8 million inflow). Certain of 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 normal payment terms. At 31 December 2023, the Group had trade payables of \u00a348.6 million (2022: \u00a353.9 million) related to this 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 other payment facilities which enable it to leverage scale and ef\ufb01ciencies in transaction processing, whilst providing a working capital bene\ufb01t due to a short extension of payment terms of less than 12 months. The amount outstanding under these facilities at 31 December 2023 was \u00a3225.1 million (2022: \u00a3214.5 million), of which \u00a3224.7 million (2022: \u00a3181.2 million) related to deferred letters of credit and \u00a30.4 million (2022: \u00a333.3 million) related to credit cards. Of the total deferred letters of credit, \u00a3155.1 million (2022: \u00a3133.8 million) were utilised for capital expenditure and \u00a369.6 million (2022: \u00a347.4 million) were utilised for trade payables. Utilisation of these payment facilities impacted the purchases of property, plant and equipment line in the Consolidated cash flow statement and the movement in payables line above. The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales, as described in note 3.3. The \u00a3104.4 million cash outflow (2022: \u00a3113.7 million inflow) is predominantly due to an increase in the value of renewable certi\ufb01cates generated and still held by the Group compared to the prior year, and a reduced level of ROC monetisation sales. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however, through standard ROC sales and ROC purchase arrangements the Group is able to manage the working capital cycle of inflows and outflows of these assets. At 31 December 2023 the Group had cash inflows of \u00a3298.4 million from using these standard renewable certi\ufb01cate sales (2022: \u00a3331.2 million).
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:
Hedging
Borrowings Lease liabilities instruments Total
\u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2023
1,440.9
153.1
(2.2)
1,591.8
Cash \ufb02ows from \ufb01nancing activities
14.5
(25.8)
\u2013
(11.3)
Effect of changes in foreign exchange rates
(35.5)
(6.6)
29.8
(12.3)
Other movements
5.3
15.1
\u2013
20.4
Other movements from operating activities
\u2013
\u2013
4.9
4.9
At 31 December 2023
1,425.2
135.8
32.5
1,593.5
Hedging
Borrowings Lease liabilities instruments Total
\u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
1,361.0
125.9
62.5
1,549.4
Cash \ufb02ows from \ufb01nancing activities
2.1
(18.0)
\u2013
(15.9)
Effect of changes in foreign exchange rates
71.3
11.5
(56.2)
26.6
Other movements
6.5
33.7
\u2013
40.2
Other movements from operating activities
\u2013
\u2013
(8.5)
(8.5)
At 31 December 2022
1,440.9
153.1
(2.2)
1,591.8
Other movements principally relate to the amortisation of deferred \ufb01nance costs, debt acquired through the acquisition of BMM,
discounting of lease liabilities and lease additions in the year.
Hedging instruments includes cross-currency interest rate swaps that are hedging both principal and interest payments on
borrowings. Interest payments are classi\ufb01ed as operating cash flows in the Consolidated cash flow statement, as such movements
relating to interest payments are recognised within the Other movements from operating activities line above.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-742": { "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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-682": { "value": "The Group has generated cash from operations of \u00a31,111.0 million during the year (2022: \u00a3320.3 million). This resulted from a cash inflow from operating activities before working capital of \u00a31,012.8 million (2022: \u00a3733.7 million) and a net working capital cash inflow of \u00a3107.8 million (2022: cash outflow of \u00a3402.8 million). This was offset by a \u00a39.6 million (2022: \u00a310.6 million) cash outflow in respect of pension obligations. The most signi\ufb01cant factors making up these cash movements are explained in further detail below. The \u00a3222.0 million outflow due to the adjustment for certain remeasurements of derivative contracts in the current year (2022: \u00a3288.7 million inflow) mainly relates to a net cash outflow due to realised losses on maturing trades. The adjustment for realised losses was in part offset by unrealised losses recognised within the Consolidated income statement. Prices in power and commodity markets have reduced in 2023 compared to 2022, but remain elevated compared to historical norms. 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 mark-to-market positions reduce, or contracts are settled, and the collateral is returned. The Group actively manages its liquidity requirements. This includes managing collateral associated with the hedging of power and other commodities, as well as other contractual arrangements. Under certain arrangements the Group is able to use non-cash collateral, such as letters of credit and surety bonds, that may otherwise have required cash collateral. The Group has had a net cash inflow of \u00a3155.4 million from collateral during the year, as trades have matured and mark-to-market positions have reduced (2022: \u00a3406.8 million outflow). As at 31 December 2023, the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) recognised in payables, and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments recognised in receivables. The Group had also utilised \u00a314.5 million (2022: \u00a354.5 million) of letters of credit and \u00a370.0 million (2022: \u00a3165.0 million) of surety bonds to cover commodity trading collateral requirements. Letters of credit and surety bonds utilised at the reporting date have reduced the requirement for cash collateral payments, which has increased the amount by which receivables have decreased. The Group has a strong focus on cash flow discipline and managing liquidity. The Group enhances its working capital position by managing payables, receivables, inventories and renewable 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 included within the further detail explained below. The table below sets out the key arrangements utilised by the Group to manage elements of its working capital:
As at As at
31 December 31 December In\ufb02ow/
2023 2022 (out\ufb02ow)
\u00a3m \u00a3m \u00a3m
Receivables monetisation
400.0
400.0
\u2013
ROC monetisation sales
298.4
331.2
(32.8)
Supply chain \ufb01nance
(48.6)
(53.9)
(5.3)
Deferred letters of credit
(224.7)
(181.2)
43.5
Credit cards
(0.4)
(33.3)
(32.9)
None of the balances in the table above are included within the Group\u2019s de\ufb01nition of Net debt or borrowings (see note 2.7 for further details on Net debt and note 4.2 for further details on borrowings). The receivables monetisation facility is non-recourse in nature and therefore there is no future liability associated with these amounts. Through standard ROC sales and ROC purchase arrangements the Group is able to manage the working capital cycle of inflows and outflows of these assets. The supply chain \ufb01nance, deferred letters of credit and credit card facilities are linked directly to speci\ufb01c payables that provide a short extension of payment terms of less than 12 months. The impact of these facilities on the cash flows of the Group is explained further below. The overall cash inflow of \u00a371.4 million (2022: outflow of \u00a3379.0 million) due to lower receivables in the current year, is primarily a result of a reduction in energy prices compared to the prior year. The Customers business has access to a receivables monetisation facility which enables it to accelerate cash flows associated with amounts receivable from energy supply customers on a non-recourse basis. The Group re\ufb01nanced this facility during the prior year, to increase the size of the facility to \u00a3400.0 million from \u00a3200.0 million for the period to March 2025, and then reducing to \u00a3300.0 million until the facility matures in January 2027. Utilisation of the facility was \u00a3400.0 million at 31 December 2023 (2022: \u00a3400.0 million). As the facility was fully utilised at 31 December 2023 and 31 December 2022 there has been no cash flow impact in the period (2022: \u00a3200.0 million cash inflow, as the facility was increased in size from \u00a3200.0 million to \u00a3400.0 million). Payables have largely remained consistent year on year, with a cash outflow of \u00a330.8 million (2022: \u00a3431.8 million inflow). Certain of 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 normal payment terms. At 31 December 2023, the Group had trade payables of \u00a348.6 million (2022: \u00a353.9 million) related to this 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 other payment facilities which enable it to leverage scale and ef\ufb01ciencies in transaction processing, whilst providing a working capital bene\ufb01t due to a short extension of payment terms of less than 12 months. The amount outstanding under these facilities at 31 December 2023 was \u00a3225.1 million (2022: \u00a3214.5 million), of which \u00a3224.7 million (2022: \u00a3181.2 million) related to deferred letters of credit and \u00a30.4 million (2022: \u00a333.3 million) related to credit cards. Of the total deferred letters of credit, \u00a3155.1 million (2022: \u00a3133.8 million) were utilised for capital expenditure and \u00a369.6 million (2022: \u00a347.4 million) were utilised for trade payables. Utilisation of these payment facilities impacted the purchases of property, plant and equipment line in the Consolidated cash flow statement and the movement in payables line above. The movement in renewable certi\ufb01cate assets during the year includes a combination of generation, utilisation, purchases and sales, as described in note 3.3. The \u00a3104.4 million cash outflow (2022: \u00a3113.7 million inflow) is predominantly due to an increase in the value of renewable certi\ufb01cates generated and still held by the Group compared to the prior year, and a reduced level of ROC monetisation sales. Cash from renewable certi\ufb01cates, and in particular ROCs, is typically realised several months after they are earned; however, through standard ROC sales and ROC purchase arrangements the Group is able to manage the working capital cycle of inflows and outflows of these assets. At 31 December 2023 the Group had cash inflows of \u00a3298.4 million from using these standard renewable certi\ufb01cate sales (2022: \u00a3331.2 million). 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 business 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. Such facilities are not included within the Group\u2019s de\ufb01nition of Net debt, as outlined in note 2.7. 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. ", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-683": { "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
2023 2022
\u00a3m \u00a3m
Issued and fully paid:
424,923,406 ordinary shares of 11
16
\u204429 pence each (2022: 414,872,491)
49.1
47.9
The movement in allotted and fully paid share capital of the Company during the year was as follows:
Year ended 31 December
2023 2022
(number) (number)
At 1 January
414,872,491
413,068,027
Issued under employee share schemes
10,050,915
1,804,464
At 31 December
424,923,406
414,872,491
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 buyback programme On 26 April 2023, the Group announced the commencement of a \u00a3150 million share buyback programme. The buyback programme was concluded on 15 September 2023. The shares purchased by the Group have not been cancelled and so continue to be included in the issued shares in the above table. See note 2.11 for further details on the share buyback programme. Share premium The share premium account reflects amounts received in respect of issued share capital that exceeds the nominal value of the shares issued, net of incremental transaction costs and tax, that are directly attributable to the issue of new shares. Movements in the share premium reserve during the year reflect amounts received above the nominal value on the issue of shares under employee share schemes.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
433.3
432.2
Issue of share capital
7.9
1.1
At 31 December
441.2
433.3
Other reserves
Capital
redemption Translation Merger Treasury shares Total other
reserve reserve reserve reserve reserves
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
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 1 January 2023
1.5
85.8
710.8
(50.4)
747.7
Exchange differences on translation of foreign operations
\u2013
(10.3)
\u2013
\u2013
(10.3)
Repurchase of own shares (see note 2.11)
\u2013
\u2013
\u2013
(149.2)
(149.2)
At 31 December 2023
1.5
75.5
710.8
(199.6)
588.2
The capital redemption and treasury shares reserves arose when the Group completed previous share buyback programmes. A further share buyback at a net cost of \u00a3149.2 million has taken place during the year (see note 2.11). The 40.3 million (2022: 13.8 million) shares held in the treasury shares reserve have no voting rights attached to them. Exchange differences relating to the translation of the net assets of the Group\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. Hedge reserve and Cost of hedging reserve Movements in the hedge reserve and the cost of hedging reserve, which reflect the change in fair value of derivative \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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-743": { "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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-663": { "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 during the year reflect amounts received above the nominal value on the issue of shares under employee share schemes.
Year ended 31 December
2023 2022
\u00a3m \u00a3m
At 1 January
433.3
432.2
Issue of share capital
7.9
1.1
At 31 December
441.2
433.3
", "dimensions": { "concept": "draxgroupplc:DisclosureOfSharePremium", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-635": { "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 2023, the Group has two (2022: two) subsidiary undertakings with NCIs. These subsidiaries were acquired during
2021 through the acquisition of Pinnacle. During the prior year, the Group purchased the remaining 10% of the 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\u2019 own \ufb01nancial statements prepared in accordance with IFRS, modi\ufb01ed for Group level fair value adjustments
at acquisition. All amounts are presented before intercompany eliminations.
As at 31 December 2023
As at 31 December 2022
Non-controlling Non-controlling Non-controlling Non-controlling
Principal place interest interests interest interests
of business % \u00a3m % \u00a3m
Alabama Pellets LLC
North America
0%
0%
Lavington Pellet Limited Partnership
North America
25%
6.5
25%
7.7
Smithers Pellet Limited Partnership
North America
30%
5.5
30%
5.7
Total
12.0
13.4
No dividends were paid to NCIs in the current or prior reporting period.
Summarised statement of total comprehensive income
Year ended 31 December 2023
Year ended 31 December 2022
Loss for the Total
Loss
Total
year comprehensive
for the year
comprehensive
attributable loss
attributable
loss
to the Total
attributable
to the
attributable
non- comprehensive
to the
non- Total to the
Loss controlling loss
non-controlling
Loss
controlling comprehensive non-controlling
Revenue for the year interests for the year
interests
Revenue
for the year
interests loss interests
\u00a3m \u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
39.5
(9.5)
(1.0)
(9.5)
(1.0)
Lavington Pellet
Limited Partnership
31.6
(1.7)
(0.4)
(2.5)
(0.5)
36.5
(1.7)
(0.7)
(1.7)
(0.7)
Smithers Pellet Limited
Partnership
14.5
(2.8)
(0.9)
(3.3)
(1.2)
13.0
(3.0)
(0.9)
(3.0)
(0.9)
Total
4 6 .1
(4.5)
(1.3)
(5.8)
(1.7)
89.0
(14.2)
(2.6)
(14.2)
(2.6)
(1)
(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.
Summarised balance sheet
As at 31 December 2023
As at 31 December 2022
Non-current Current Current Non-current Non-current Current Current Non-current
assets assets liabilities liabilities Net assets assets assets liabilities liabilities Net assets
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
Lavington Pellet
Limited Partnership
24.9
4.5
(2.0)
(1.4)
26.0
27.7
6.8
(3.1)
(0.6)
30.8
Smithers Pellet Limited
Partnership
15.8
3.1
(1.5)
\u2013
17.4
17.3
1.8
(1.1)
\u2013
18.0
Total
40.7
7.6
(3.5)
(1.4)
43.4
45.0
8.6
(4.2)
(0.6)
48.8
(1)
(1) The remaining NCI of Alabama Pellets LLC was acquired by the Group on 30 September 2022, accordingly no balance sheet values have been presented in the above
table as at 31 December 2022 or 31 December 2023.
Summarised cash flow
Year ended 31 December 2023
Year ended 31 December 2022
Net cash Net cash Net cash
Net cash in\ufb02ow/ Net cash (out\ufb02ow)/in\ufb02ow in\ufb02ow/(out\ufb02ow) Net cash (out\ufb02ow)/in\ufb02ow
(out\ufb02ow) from out\ufb02ow from from from out\ufb02ow from from
operating investing \ufb01nancing Net cash operating investing \ufb01nancing Net cash
activities activities activities out\ufb02ow activities activities activities in\ufb02ow/(out\ufb02ow)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
Lavington Pellet
Limited Partnership
2.2
(1.3)
(2.3)
(1.4)
3.5
(0.7)
(2.2)
0.6
Smithers Pellet Limited
Partnership
(2.2)
(0.7)
2.7
(0.2)
(1.9)
(0.2)
1.8
(0.3)
Total
\u2013
(2.0)
0.4
(1.6)
1.6
(0.9)
(0.4)
0.3
(1)
(1) The remaining NCI of Alabama Pellets LLC was acquired by the Group on 30 September 2022, accordingly no cash flow values have been presented in the above table as
at 31 December 2022 or 31 December 2023.
Transactions with NCI
At the beginning of the prior year, the NCI in Alabama Pellets LLC (APLLC) was 10%. On 30 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 during 2022:
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 prior 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-723": { "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 2023, the Group has two (2022: two) subsidiary undertakings with NCIs. These subsidiaries were acquired during 2021 through the acquisition of Pinnacle. During the prior year, the Group purchased the remaining 10% of the 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\u2019 own \ufb01nancial statements prepared in accordance with IFRS, modi\ufb01ed for Group level fair value adjustments at acquisition. All amounts are presented before intercompany eliminations.
As at 31 December 2023
As at 31 December 2022
Non-controlling Non-controlling Non-controlling Non-controlling
Principal place interest interests interest interests
of business % \u00a3m % \u00a3m
Alabama Pellets LLC
North America
0%
0%
Lavington Pellet Limited Partnership
North America
25%
6.5
25%
7.7
Smithers Pellet Limited Partnership
North America
30%
5.5
30%
5.7
Total
12.0
13.4
No dividends were paid to NCIs in the current or prior reporting period. Summarised statement of total comprehensive income
Year ended 31 December 2023
Year ended 31 December 2022
Loss for the Total
Loss
Total
year comprehensive
for the year
comprehensive
attributable loss
attributable
loss
to the Total
attributable
to the
attributable
non- comprehensive
to the
non- Total to the
Loss controlling loss
non-controlling
Loss
controlling comprehensive non-controlling
Revenue for the year interests for the year
interests
Revenue
for the year
interests loss interests
\u00a3m \u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
39.5
(9.5)
(1.0)
(9.5)
(1.0)
Lavington Pellet
Limited Partnership
31.6
(1.7)
(0.4)
(2.5)
(0.5)
36.5
(1.7)
(0.7)
(1.7)
(0.7)
Smithers Pellet Limited
Partnership
14.5
(2.8)
(0.9)
(3.3)
(1.2)
13.0
(3.0)
(0.9)
(3.0)
(0.9)
Total
4 6 .1
(4.5)
(1.3)
(5.8)
(1.7)
89.0
(14.2)
(2.6)
(14.2)
(2.6)
(1) (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. Summarised balance sheet
As at 31 December 2023
As at 31 December 2022
Non-current Current Current Non-current Non-current Current Current Non-current
assets assets liabilities liabilities Net assets assets assets liabilities liabilities Net assets
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
Lavington Pellet
Limited Partnership
24.9
4.5
(2.0)
(1.4)
26.0
27.7
6.8
(3.1)
(0.6)
30.8
Smithers Pellet Limited
Partnership
15.8
3.1
(1.5)
\u2013
17.4
17.3
1.8
(1.1)
\u2013
18.0
Total
40.7
7.6
(3.5)
(1.4)
43.4
45.0
8.6
(4.2)
(0.6)
48.8
(1) (1) The remaining NCI of Alabama Pellets LLC was acquired by the Group on 30 September 2022, accordingly no balance sheet values have been presented in the above table as at 31 December 2022 or 31 December 2023. Summarised cash flow
Year ended 31 December 2023
Year ended 31 December 2022
Net cash Net cash Net cash
Net cash in\ufb02ow/ Net cash (out\ufb02ow)/in\ufb02ow in\ufb02ow/(out\ufb02ow) Net cash (out\ufb02ow)/in\ufb02ow
(out\ufb02ow) from out\ufb02ow from from from out\ufb02ow from from
operating investing \ufb01nancing Net cash operating investing \ufb01nancing Net cash
activities activities activities out\ufb02ow activities activities activities in\ufb02ow/(out\ufb02ow)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Alabama Pellets LLC
Lavington Pellet
Limited Partnership
2.2
(1.3)
(2.3)
(1.4)
3.5
(0.7)
(2.2)
0.6
Smithers Pellet Limited
Partnership
(2.2)
(0.7)
2.7
(0.2)
(1.9)
(0.2)
1.8
(0.3)
Total
\u2013
(2.0)
0.4
(1.6)
1.6
(0.9)
(0.4)
0.3
(1) (1) The remaining NCI of Alabama Pellets LLC was acquired by the Group on 30 September 2022, accordingly no cash flow values have been presented in the above table as at 31 December 2022 or 31 December 2023. Transactions with NCI At the beginning of the prior year, the NCI in Alabama Pellets LLC (APLLC) was 10%. On 30 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 during 2022:
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 prior year in the Group\u2019s NCIs is given in the Consolidated statement of changes in equity.
5.1 Business combinations
Accounting policy
Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business
combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains
control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related
costs are recognised as an expense in the Consolidated income statement in the period that they are incurred.
Goodwill is measured as the excess of the:
\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.
Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment
post-acquisition are treated as post-acquisition remuneration.
Acquisition of BMM
On 31 August 2023, Drax Energy Solutions Limited, a wholly owned subsidiary of the Group, acquired 100% of the issued share capital
of BMM Energy Solutions Limited (BMM). BMM specialises in the installation and maintenance of electric vehicle charge points and
has been the Group\u2019s primary installation partner since 2018. The acquisition strengthens the Group\u2019s end-to-end electric vehicle
charging proposition to UK businesses.
Total consideration payable was \u00a39.0 million. Following the acquisition the Group repaid borrowings acquired of \u00a31.8 million. There was
no contingent or deferred consideration.
The Group has a one year measurement period, from the acquisition date, to \ufb01nalise the acquisition accounting. Provisional fair values
of the identi\ufb01able assets acquired and liabilities assumed as at 31 August 2023 were as follows:
As at 31 August
2023
\u00a3m
Property, plant and equipment
0.1
Intangible assets
5.0
Right-of-use assets
0.1
Inventories
0.3
Trade and other receivables
1.3
Trade and other payables
(0.6)
Lease liabilities
(0.1)
Deferred tax liabilities
(1.3)
Borrowings
(1.8)
Identi\ufb01able net assets acquired
3.0
Add: Goodwill
6.0
Net assets acquired
9.0
The Group recognised an identi\ufb01able intangible asset on the acquisition date for customer relationships of \u00a35.0 million (see note 5.2
for further details). Goodwill of \u00a36.0 million arose on this transaction. The goodwill relates to future uncontracted revenues expected
to be realised and has been allocated to the Drax Energy Solutions CGU.
No contingent liabilities or indemni\ufb01cation assets have been recognised.
The Group acquired receivables with a fair value of \u00a31.3 million. These receivables had a gross contracted value of \u00a31.7 million.
A provision of \u00a30.4 million was recognised in relation to expected credit losses.
The Group acquired inventories with a gross value of \u00a30.4 million. A provision of \u00a30.1 million was recognised in relation to these
inventories.
As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements .
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 C$11.5 million (\u00a3 7.6 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
\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)
Identi\ufb01able net 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. 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), that the Group has signi\ufb01cant influence over. 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 2023
Balances as at 31 December 2023
(1)
Management
Drax fee income Purchases Payable Receivable
Ownership \u00a3m \u00a3m \u00a3m \u00a3m
Houston Pellet Limited Partnership
HPLP
30%
0 .1
14.6
1.1
1.2
Transactions in the period to 31 December 2022
Balances as at 31 December 2022
Management
Drax fee income Purchases Payable Receivable
Ownership \u00a3m \u00a3m \u00a3m \u00a3m
Houston Pellet Limited Partnership
HPLP
30%
0.1
18.2
1.7
0.4
(1) (1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-744": { "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 2023, the Group has two (2022: two) subsidiary undertakings with NCIs. These subsidiaries were acquired during 2021 through the acquisition of Pinnacle. During the prior year, the Group purchased the remaining 10% of the 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-604": { "value": "This section provides information on the assets and liabilities in the Consolidated balance sheet that are not covered in other sections, including goodwill, other intangible assets and provisions. 5.1 Business combinations Accounting policy Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related costs are recognised as an expense in the Consolidated income statement in the period that they are incurred. Goodwill is measured as the excess of the: \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. Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment post-acquisition are treated as post-acquisition remuneration. Acquisition of BMM On 31 August 2023, Drax Energy Solutions Limited, a wholly owned subsidiary of the Group, acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM). BMM specialises in the installation and maintenance of electric vehicle charge points and has been the Group\u2019s primary installation partner since 2018. The acquisition strengthens the Group\u2019s end-to-end electric vehicle charging proposition to UK businesses. Total consideration payable was \u00a39.0 million. Following the acquisition the Group repaid borrowings acquired of \u00a31.8 million. There was no contingent or deferred consideration. The Group has a one year measurement period, from the acquisition date, to \ufb01nalise the acquisition accounting. Provisional fair values of the identi\ufb01able assets acquired and liabilities assumed as at 31 August 2023 were as follows:
As at 31 August
2023
\u00a3m
Property, plant and equipment
0.1
Intangible assets
5.0
Right-of-use assets
0.1
Inventories
0.3
Trade and other receivables
1.3
Trade and other payables
(0.6)
Lease liabilities
(0.1)
Deferred tax liabilities
(1.3)
Borrowings
(1.8)
Identi\ufb01able net assets acquired
3.0
Add: Goodwill
6.0
Net assets acquired
9.0
The Group recognised an identi\ufb01able intangible asset on the acquisition date for customer relationships of \u00a35.0 million (see note 5.2 for further details). Goodwill of \u00a36.0 million arose on this transaction. The goodwill relates to future uncontracted revenues expected to be realised and has been allocated to the Drax Energy Solutions CGU. No contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value of \u00a31.3 million. These receivables had a gross contracted value of \u00a31.7 million. A provision of \u00a30.4 million was recognised in relation to expected credit losses. The Group acquired inventories with a gross value of \u00a30.4 million. A provision of \u00a30.1 million was recognised in relation to these inventories. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements . Section 5: Other assets and liabilities
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 C$11.5 million (\u00a3 7.6 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
\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)
Identi\ufb01able net 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
Intangible assets are not physical in nature but are identi\ufb01able from other assets. Goodwill arises on the acquisition of a business when
the consideration paid exceeds the fair value of the net assets acquired. Intangible assets other than goodwill can be acquired in
business combinations, acquired separately or internally generated.
Accounting policy
Goodwill is measured as the excess of the:
\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.
Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the
functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at
the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement
of comprehensive income.
Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the
acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated
to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed
annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost.
Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are
measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of
preparing the asset for use in the manner intended by management.
The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is
to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However,
if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost.
Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year
end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological
changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the
UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024
to reflect the estimated period over which the value will be recognised.
Average UEL
remaining
Method of amortisation (years)
At 31 December 2023
Customer-related assets:
Pinnacle
Straight line
7
Opus Energy
Reducing balance
1
BMM
Straight line
9
Other
Straight line
10
Brand
Straight line
1
Computer software and licences
Straight line
5
Other intangibles
Straight line
4
Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to
the Pellet Operations CGU, the Opus Energy CGU, and the Drax Energy Solutions CGU following the acquisition of BMM. The brand
is attributable to the Opus Energy CGU. Details of the impairment assessments relating to these CGUs are included in note 2.4.
Computer
Customer-related software and Development Other
assets Brand licences assets intangibles Goodwill Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost and carrying amount:
At 1 January 2022
255.5
11.3
147.2
1.7
0.3
416.3
832.3
Additions at cost \u2013 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 from/(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 1 January 2023
257.6
11.3
129.5
\u2013
0.3
424.2
822.9
Additions at cost \u2013 internally generated
\u2013
\u2013
7.7
\u2013
\u2013
\u2013
7.7
Additions at cost \u2013 acquired separately
\u2013
\u2013
2.2
\u2013
\u2013
\u2013
2.2
Acquired in business combinations
5.0
\u2013
\u2013
\u2013
\u2013
6.0
11.0
Impairment
\u2013
\u2013
\u2013
\u2013
\u2013
(14.5)
(14.5)
Transfers from property, plant
and equipment
\u2013
\u2013
0.6
\u2013
\u2013
\u2013
0.6
Effect of changes in foreign
exchange rates
(1.5)
\u2013
(0.2)
\u2013
\u2013
1.0
(0.7)
At 31 December 2023
261.1
11.3
139.8
\u2013
0.3
416.7
829.2
Accumulated amortisation:
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 1 January 2023
170.6
6.8
79.0
\u2013
\u2013
\u2013
256.4
Charge for the year
17. 2
1.1
11.0
\u2013
0.1
\u2013
29.4
Impairment
31.5
3.0
11.1
\u2013
\u2013
\u2013
45.6
Effect of changes in foreign
exchange rates
(0.3)
\u2013
(0.1)
\u2013
\u2013
\u2013
(0.4)
At 31 December 2023
219.0
10.9
101.0
\u2013
0.1
\u2013
331.0
Net book value:
At 31 December 2022
87.0
4.5
50.5
\u2013
0.3
424.2
566.5
At 31 December 2023
42.1
0.4
38.8
\u2013
0.2
416.7
498.2
The Group has incurred research and development expenditure of \u00a322.8 million (2022: \u00a312.5 million), which is included within operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets re\ufb02ects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017, the acquisition of Pinnacle in April 2021, the Paci\ufb01c BioEnergy sales contracts purchased by Pellet Operations in December 2021, and the customer asset acquired on acquisition of BMM in August 2023. The Opus Energy asset had an acquisition date fair value of \u00a3211.0 million re\ufb02ecting the estimated value of the future cash \ufb02ows 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 \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.7%. The asset had 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 was being amortised on a reducing balance basis to re\ufb02ect the diminishing rate of contract renewals over time. During the current year the Opus Energy CGU has been tested for impairment and an impairment charge of \u00a331.5 million was allocated to the Opus Energy customer-related asset as part of this (see note 2.4 for further details on this impairment assessment). At 31 December 2023, the Opus Energy customer-related asset had a carrying value of \u00a33.8 million (2022: \u00a347.8 million) and a remaining UEL of approximately one year (2022: \ufb01ve years). The UEL has been reduced due to increased customer churn rates, in part due to the announced exit and offboarding of gas customers in February 2023. The Pinnacle asset provided the Group with access to customer bases with contracted cash \ufb02ows. The asset had an acquisition date fair value of C$62.1 million (\u00a335.9 million) which was estimated based upon a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash \ufb02ows attributable to the customer-related 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 \ufb02ows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The cash \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.0%. The asset had an estimated UEL from acquisition of 10 years, supported by the distribution of value, with around 90% of the value to be derived from the contracts provided in this period. The Pinnacle customer-related asset is being amortised on a straight-line basis to re\ufb02ect the even spread of contract maturities over the UEL. At 31 December 2023, the Pinnacle asset had a carrying value of \u00a326.8 million (2022: \u00a331.5 million) and a remaining UEL of approximately seven years (2022: eight years). On acquisition of BMM in August 2023 a customer-related asset with a fair value of \u00a35.0 million was recognised re\ufb02ecting the estimated future cash \ufb02ows from existing customer relationships that were not yet contracted. The fair value was estimated based upon a multi-period excess earnings method. At 31 December 2023, the BMM asset had a carrying value of \u00a34.8 million and a remaining UEL of nine years. The other customer-related assets relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. At 31 December 2023 this asset had a carrying value of \u00a36.7 million (2022: \u00a37.7 million) and a remaining UEL of 10 years (2022: 11 years). Opus Energy brand The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017 and valued at \u00a311.3 million using a relief-from-royalty method. During the current year the Opus CGU has been tested for impairment and an impairment charge of \u00a33.0 million was allocated to the Opus Energy brand as part of this (see note 2.4 for further details on this impairment assessment). The carrying value of the Opus Energy brand at 31 December 2023 was \u00a30.4 million (2022: \u00a34.5 million) and had a remaining UEL of one year (2022: four years). The UEL of the brand asset was accelerated during the year in line with the Opus Energy customer-related asset. 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 UELs ranging from 2\u201310 years. From 1 January 2022, following an agenda decision from the International Financial Reporting Interpretations Committee (IFRIC), the Group applied a new accounting policy for Software as a Service (SaaS) costs. 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 were impaired during 2022, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost in the Consolidated income statement (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in operating and administrative expenses in the Consolidated income statement . As at 31 December 2023, computer software assets under the course of construction amounted to \u00a319.7 million (2022: \u00a318.3 million). During the prior year the Group recognised a \u00a319.2 million impairment relating to a new billing system in the Customers business where the Group had stopped development as it no longer expected future economic bene\ufb01ts to be recovered as an ongoing intangible asset. The impairment charge was recognised against cost in the table above, and recorded as an exceptional cost in the Consolidated income statement. A legal claim in respect of this project was settled with the supplier during the current year. This has resulted in a credit to the Consolidated income statement amounting to \u00a313.7 million. This has also been recognised as an exceptional item in the Consolidated income statement (see note 2.7). 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:
Drax Energy Pellet
Solutions Opus Energy Lanark Galloway Cruachan Production Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill
At 1 January 2023
10.7
159.2
11.3
4 0 .1
26.9
176.0
424.2
Acquisitions
6.0
\u2013
\u2013
\u2013
\u2013
\u2013
6.0
Reallocations
144.7
(144.7)
\u2013
\u2013
\u2013
\u2013
\u2013
Impairment
\u2013
(14.5)
\u2013
\u2013
\u2013
\u2013
(14.5)
Effect of changes in foreign
exchange rates
\u2013
\u2013
\u2013
\u2013
\u2013
1.0
1.0
At 31 December 2023
161.4
\u2013
11.3
4 0.1
26.9
17 7.0
416.7
Following a reorganisation of the Customers business, which included the transfer of certain activities from the Opus Energy CGU to the Drax Energy Solutions CGU, goodwill of \u00a3144.7 million has been reallocated between the two CGUs on a relative fair value approach. Of the \u00a3159.2 million of goodwill allocated to the Opus Energy CGU in the prior year, \u00a3144.7 million has been allocated to the Drax Energy Solutions CGU. The remaining \u00a314.5 million was subsequently impaired as a result of the impairment assessment described 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 and Pellet Production assets at the end of their 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 UELs of the Group\u2019s generation assets and pellet plants, 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, with the capitalisation shown in the movement in reinstatement asset line in note 3.1 and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges in the Consolidated income statement. 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. Other provisions include a provision in respect of dilapidation costs for leased of\ufb01ces and rail cars.
Decommissioning Restructuring Other
provision provision provisions Total
\u00a3m \u00a3m \u00a3m \u00a3m
Carrying amount:
At 1 January 2023
44.0
12.7
1.9
58.6
Additional provision charged to PPE (note 3.1)
22.7
\u2013
\u2013
22.7
Transfer between provision categories
1.2
\u2013
(1.2)
\u2013
Charged/(credited) to pro\ufb01t or loss:
Additional provision recognised
\u2013
\u2013
0.3
0.3
Utilised
(1.4)
(2.8)
\u2013
(4.2)
Released
\u2013
\u2013
(0.5)
(0.5)
Unwinding of discount
1.9
\u2013
\u2013
1.9
At 31 December 2023
68.4
9.9
0.5
78.8
Current
5.1
1.3
0.2
6.6
Non-current
63.3
8.6
0.3
72.2
Decommissioning provisions are made in respect of Drax Power Station (\u00a364.5 million) and certain pellet plants (\u00a33.9 million).
The decommissioning provision in respect of Drax Power Station is based on the assumption that the initial decommissioning work,
relating to coal operations, will be completed between 2024 and 2026, with the remainder beginning at the end of station life, which
is currently estimated to be 2039. The decommissioning provision relating to certain pellet plants is based on the assumption that the
decommissioning and reinstatement will take place at the end of the expected UEL of each site, which are estimated to be between
2027 and 2040. The provisions have been estimated using existing technology at current prices based upon specialist, third-party
advice, updated on a triennial basis as a minimum, but more regularly when deemed appropriate due to changes that might
signi\ufb01cantly impact the estimated cost, such as changes in prices, or changes in expected decommissioning plans. The most recent
update for the Drax Power Station and pellet plant provisions took place in December 2023.
The cost of the Drax Power Station decommissioning is estimated, based on the midpoint of the range calculated by the third-party
experts, to be \u00a393.6 million at current prices. An inflation curve was then applied to estimate the separate elements of the
decommissioning cost at the dates that they are expected to occur. These values were then discounted to calculate the present value
of the provision to be recognised.
The discount rates used are nominal risk-free rates that reflect the duration of the liabilities. These discount rates are 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 average discount rates used for the Group\u2019s decommissioning provisions range from
3.02%\u20135.03% (2022: 4.05%).
The additional provision recognised in the year is predominantly due to the change in the assumptions around the timing and method
of the decommissioning at Drax Power Station. It was previously assumed the decommissioning would all take place at the end of the
station life in 2039. Due to the UK BECCS development project, certain parts of the site will be required to be decommissioned before
the end of station life, which has resulted in an increase in the provision due to the higher estimated costs of decommissioning work
taking place around a live power station. The timing of these costs being earlier has also resulted in an increase to the provision once
the changes in assumptions around inflation and discounting are factored in.
The Drax Power Station 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 estimated cost of decommissioning Drax Power Station based on specialist, third-party advice using existing technology at
current prices had a range of \u00a365.5 million to \u00a3121.6 million. Applying inflation and discounting assumptions consistent with those
applied to the provision recognised would result in an estimated provision range of \u00a345.3 million to \u00a38 4.1 million. An increase of
100 basis points in the inflation and discount rates used would result in a \u00a39.6 million (2022: \u00a39.5 million) increase and a \u00a37.9 million
(2022: \u00a37.0 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 extrapolated from these amounts.
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. The costs being estimated are also several years in the future. All of these factors
increase the estimation uncertainty of the decommissioning provision. The impact of climate change, both physical and transitional,
extending over the medium term, was also considered by the third party when determining the provision. The Group has concluded
that climate change is unlikely to have a signi\ufb01cant impact on the future decommissioning costs, however this risk will continue to
be reassessed and the impact of any changes will be reflected in the valuation.
The restructuring provision includes 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 following cessation of operating. At the request of the UK Government, the Group 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 network from October 2022 until
the end of March 2023, which delayed the formal closure of the coal units and resulted in the utilisation of certain amounts of the
restructuring provision also being delayed. This has not materially impacted the expected costs. The formal closure of the coal units
commenced at the end of the winter contingency service in March 2023.
The amount of the restructuring provision utilised in the year predominantly relates to engineering and redundancy costs. Of the
\u00a39.9 million remaining at 31 December 2023, \u00a38.9 million relates to engineering works, of which \u00a30.7 million is expected to be utilised
in 2024 with the remaining amounts expected to be utilised in the period from 2025 to 2027. A further \u00a30.6 million relates to
redundancy costs, which are expected to be utilised in 2024, and the remaining \u00a30.4 million relates to other costs, which are expected
to be utilised in the period from 2025 to 2027.
", "dimensions": { "concept": "draxgroupplc:DisclosureOfOtherAssetsAndLiabilities", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-664": { "value": "5.1 Business combinations Accounting policy Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related costs are recognised as an expense in the Consolidated income statement in the period that they are incurred. Goodwill is measured as the excess of the: \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. Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment post-acquisition are treated as post-acquisition remuneration. Acquisition of BMM On 31 August 2023, Drax Energy Solutions Limited, a wholly owned subsidiary of the Group, acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM). BMM specialises in the installation and maintenance of electric vehicle charge points and has been the Group\u2019s primary installation partner since 2018. The acquisition strengthens the Group\u2019s end-to-end electric vehicle charging proposition to UK businesses. Total consideration payable was \u00a39.0 million. Following the acquisition the Group repaid borrowings acquired of \u00a31.8 million. There was no contingent or deferred consideration. The Group has a one year measurement period, from the acquisition date, to \ufb01nalise the acquisition accounting. Provisional fair values of the identi\ufb01able assets acquired and liabilities assumed as at 31 August 2023 were as follows:
As at 31 August
2023
\u00a3m
Property, plant and equipment
0.1
Intangible assets
5.0
Right-of-use assets
0.1
Inventories
0.3
Trade and other receivables
1.3
Trade and other payables
(0.6)
Lease liabilities
(0.1)
Deferred tax liabilities
(1.3)
Borrowings
(1.8)
Identi\ufb01able net assets acquired
3.0
Add: Goodwill
6.0
Net assets acquired
9.0
The Group recognised an identi\ufb01able intangible asset on the acquisition date for customer relationships of \u00a35.0 million (see note 5.2 for further details). Goodwill of \u00a36.0 million arose on this transaction. The goodwill relates to future uncontracted revenues expected to be realised and has been allocated to the Drax Energy Solutions CGU. No contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value of \u00a31.3 million. These receivables had a gross contracted value of \u00a31.7 million. A provision of \u00a30.4 million was recognised in relation to expected credit losses. The Group acquired inventories with a gross value of \u00a30.4 million. A provision of \u00a30.1 million was recognised in relation to these inventories. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements . 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 C$11.5 million (\u00a3 7.6 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
\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)
Identi\ufb01able net 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-726": { "value": "Accounting policy Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related costs are recognised as an expense in the Consolidated income statement in the period that they are incurred. Goodwill is measured as the excess of the: \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. Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment post-acquisition are treated as post-acquisition remuneration. Accounting policy 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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-745": { "value": "Accounting policy Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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\ufb01ts or losses of the acquired businesses are recognised in the Consolidated income statement. Acquisition-related costs are recognised as an expense in the Consolidated income statement in the period that they are incurred. Goodwill is measured as the excess of the: \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. Bonuses paid to employees of the acquired entity that are dependent upon the employee remaining in continuous employment post-acquisition are treated as post-acquisition remuneration. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-757": { "value": "Business combinations are transactions or other events in which the Group obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. Acquisitions of businesses are recognised at the point the Group obtains control of the 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. Accounting policy The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is accelerated at the point of cancellation. If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance with IFRS 2. 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 signi\ufb01cant to the fair value measurement of the relevant asset or liability. Fair value measurement \u2022 Commodity contracts \u2013 the fair value of open commodity contracts that do not qualify for the own-use exemption, or are otherwise within the scope of IFRS 9, is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 the fair value of 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. 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-684": { "value": "Acquisition of BMM On 31 August 2023, Drax Energy Solutions Limited, a wholly owned subsidiary of the Group, acquired 100% of the issued share capital of BMM Energy Solutions Limited (BMM). BMM specialises in the installation and maintenance of electric vehicle charge points and has been the Group\u2019s primary installation partner since 2018. The acquisition strengthens the Group\u2019s end-to-end electric vehicle charging proposition to UK businesses. Total consideration payable was \u00a39.0 million. Following the acquisition the Group repaid borrowings acquired of \u00a31.8 million. There was no contingent or deferred consideration. The Group has a one year measurement period, from the acquisition date, to \ufb01nalise the acquisition accounting. Provisional fair values of the identi\ufb01able assets acquired and liabilities assumed as at 31 August 2023 were as follows:
As at 31 August
2023
\u00a3m
Property, plant and equipment
0.1
Intangible assets
5.0
Right-of-use assets
0.1
Inventories
0.3
Trade and other receivables
1.3
Trade and other payables
(0.6)
Lease liabilities
(0.1)
Deferred tax liabilities
(1.3)
Borrowings
(1.8)
Identi\ufb01able net assets acquired
3.0
Add: Goodwill
6.0
Net assets acquired
9.0
The Group recognised an identi\ufb01able intangible asset on the acquisition date for customer relationships of \u00a35.0 million (see note 5.2 for further details). Goodwill of \u00a36.0 million arose on this transaction. The goodwill relates to future uncontracted revenues expected to be realised and has been allocated to the Drax Energy Solutions CGU. No contingent liabilities or indemni\ufb01cation assets have been recognised. The Group acquired receivables with a fair value of \u00a31.3 million. These receivables had a gross contracted value of \u00a31.7 million. A provision of \u00a30.4 million was recognised in relation to expected credit losses. The Group acquired inventories with a gross value of \u00a30.4 million. A provision of \u00a30.1 million was recognised in relation to these inventories. As the transaction is immaterial in its entirety, the full IFRS 3 disclosures are not presented in these Consolidated \ufb01nancial statements 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 C$11.5 million (\u00a3 7.6 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
\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)
Identi\ufb01able net 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
2023 2022
\u00a3m \u00a3m
Fair value of plan assets at 1 January
219.6
369.8
Interest on plan assets
10 .1
6.7
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Employer contributions
8.9
17.7
Bene\ufb01ts paid
(11.3)
(26.6)
Fair value of plan assets at 31 December
220.3
219.6
The fair values of the major categories of plan assets were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Gilts
110.3
117. 2
Equities
24.1
6.5
Fixed interest bonds
5.0
4.8
Property
15.1
28.6
Investment funds
4.5
4.3
Cash and other assets
61.3
58.2
Fair value of total plan assets
220.3
219.6
(1) (2) (3) (1) As at 31 December 2023, the Scheme\u2019s target long-term asset strategy was: (34%) in multi-asset funds (with the key underlying asset strategies being equities, listed real assets and credit), direct lending (12%), hedge funds (3%), long-lease property (7%) and liability driven investing/cash (44%). There is a plan to transition the current asset holding to the long-term strategy by April 2024, noting that the precise allocations between the different asset classes may be adjusted as market conditions change. As 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 was (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 \u00a325.8 million (2022: \u00a329.9 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. 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 signi\ufb01cant 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 lease liabilities, 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
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
(1)
Carrying amount
Fair value
Financial Financial
Restated Fair value- Mandatorily assets at liabilities at
At 31 December 2022 hedging at F V T PL- amortised amortised
\u00a3m instruments
others
FVOCI
 cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
322.8
84.0
\u2013
\u2013
\u2013
406.8
\u2013
406.8
\u2013
406.8
Foreign currency
exchange contracts
166.5
130.6
\u2013
\u2013
\u2013
297.1
\u2013
2 97.1
\u2013
2 97.1
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
Trade and other receivables
\u2013
\u2013
98.4
\u2013
\u2013
98.4
\u2013
98.4
\u2013
98.4
Cash and cash equivalents
\u2013
116.4
\u2013
\u2013
\u2013
116.4
\u2013
116.4
\u2013
116.4
Financial assets not measured at fair value
Trade and other
receivables
\u2013
\u2013
\u2013
973.5
\u2013
973.5
Cash and cash
equivalents
\u2013
\u2013
\u2013
121.6
\u2013
121.6
Financial liabilities measured at fair value
Commodity contracts
(577.2)
(296.5)
\u2013
\u2013
\u2013
(873.7)
\u2013
(873.7)
\u2013
(873.7)
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)
\u2013
(307.3)
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)
(2) (2) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. (2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no impact on the total trade and other receivables and cash and cash equivalents amounts presented. 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 commodity which may or may not be settled through physical delivery of the commodity, as well as weather-related contracts. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, swaps, 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 the UK Retail Price Index (RPI) or the UK Consumer Price Index (CPI). Fair value measurement \u2022 Commodity contracts \u2013 the fair value of open commodity contracts that do not qualify for the own-use exemption, or are otherwise within the scope of IFRS 9, is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 the fair value of 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. 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. The assessment of fair value is derived in part by reference to a market price or rate for the instrument in question. The Group bases its assessment of market prices or rates upon forward curves that are largely derived from readily obtainable prices or rates published 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 nature of the derivative \ufb01nancial instruments the Group holds, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but 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 for each derivative contract. 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), or where different forward curves are available. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. However, given the maturity pro\ufb01le of the Group\u2019s contracts, liquid forward market price curves are usually available for the duration of the contracts. The fair value of derivatives is not, however, considered a key source of estimation uncertainty as reasonably possible changes in assumptions are not expected to result in a materially different value within the next \ufb01nancial year. Also, whilst there is a signi\ufb01cant risk that the carrying amount of derivative assets and liabilities will change materially within the next \ufb01nancial year, as a result of movements in market prices or rates, the Group is not expecting to change its methodology or input sources in the next \ufb01nancial year. Any such changes are not as a result of assumptions or other sources of estimation uncertainty as at 31 December 2023 and therefore do not meet the de\ufb01nition of a key source of estimation uncertainty as de\ufb01ned by IAS 1. 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 USD loan notes, the EUR loan notes, and the 2020 UK infrastructure private placement facilities (see note 4.2) 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, foreign currency exchange contracts, interest rate swaps, cross-currency contracts and inflation swaps are largely determined by comparison between observable, liquid, forward market prices or rates, and the trade price or rate; therefore, these contracts are categorised as Level 2. Credit risk is not a signi\ufb01cant input to the fair value calculations. 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. No external specialists have been utilised for the valuation of the current or prior year derivative \ufb01nancial instruments. 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 contingent consideration receivable by the Group relates to the sale of the CCGT generation portfolio in 2021. The gross nominal value of \u00a329.0 million 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 of the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used .
Signi\ufb01cant unobservable inputs and range Relationship between signi\ufb01cant unobservable input
Valuation approach of inputs (probability weighted) and fair value measurement
Contingent The fair value of the contingent Forecasted future Capacity Market The fair value measurement would
consideration consideration is determined using a clearing prices: increase/(decrease) with:
discounted cash \ufb02ow model. The \u00a32.47/kW \u2013 \u00a377.20/kW
\u2022
higher/(lower) forecasted Capacity
valuation approach is based on a (\u00a342.66/kW) Market clearing prices causing a
calculation of the probability of the higher/(lower) probability of the
option to develop the Damhead (2022: \u00a37.00/kW \u2013 \u00a364.64/kW) option over the Damhead Creek 2
Creek 2 land being exercised. (2022: (\u00a335.91/kW)) land being exercised.
This probability is calculated using a Estimated bid price at which
\u2022
lower/(higher) estimated bid price
range of forecasts for future Damhead Creek 2 is to be entered required for the Damhead Creek 2
Capacity Market auctions and the into the Capacity Market auction: development to proceed causing a
assumption that the option to higher/(lower) probability of the
develop the land would be exercised \u00a367.5 0/kW option over the Damhead Creek 2
if the Capacity Market price were to (2022: \u00a340.00/kW) land being exercised.
clear above a certain level, providing
suf\ufb01cient certainty on the
economics of the development.
During the year, inputs to the fair value calculation have been updated to reflect increases in both forecasted future Capacity Market clearing prices and the estimated bid price at which Damhead Creek 2 is expected to be entered into the Capacity Market auction. Due to increased expectations relating to the cost to develop the project, the estimated bid price has increased from \u00a340.00/kW to \u00a367.50/kW. This, alongside the impact of updating the calculation with recent forecasts of future Capacity Market clearing prices, has resulted in an \u00a318.2 million decrease to the fair value of the contingent consideration. As the change in fair value reflects the reversal of a previous credit recorded within exceptional items, and the current year decrease in fair value is above the Group\u2019s threshold to be considered exceptional, the \u00a318.2 million has been excluded from Adjusted results and presented as an exceptional item included within other gains or losses in the Consolidated income statement (see note 2.7). A reconciliation of the contingent consideration is detailed below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Balance at 1 January
27.4
27.7
Net change in fair value (unrealised)
(18.2)
(0.3)
Balance at 31 December
9.2
27.4
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 Increase
\u00a3m \u00a3m
As at 31 December 2023
Forecasted future Capacity Market clearing prices (10%)
(9.2)
7.0
Estimated bid price (10%)
7. 0
(4 .1)
Impact on pro\ufb01t before tax
Decrease Increase
\u00a3m \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)
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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s energy supply contracts, are excluded from fair value mark-to-market accounting. 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 (see 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 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. 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.
Derivative balances are classi\ufb01ed in the Consolidated balance sheet as current or non-current based on the \ufb01nal maturity date of the
contracts. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
Restated
2023 2022
\u00a3m \u00a3m
Non-current derivative \ufb01nancial instrument assets
293.6
361.0
Current derivative \ufb01nancial instrument assets
368.4
396.9
Total derivative \ufb01nancial instrument assets
662.0
757.9
Non-current derivative \ufb01nancial instrument liabilities
(306.6)
(674.7)
Current derivative \ufb01nancial instrument liabilities
(231.6)
(590.0)
Total derivative \ufb01nancial instrument liabilities
(538.2)
(1,264.7)
Total net derivative \ufb01nancial instruments
123.8
(506.8)
(1)
(1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted
the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain
unchanged. See the offsetting section on page 178 for further details on this restatement.
The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at fair value through
pro\ufb01t or loss (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/(losses) recognised
2023 2022
\u00a3m \u00a3m
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
revenue
70.7
(441.4)
(Losses)/gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
cost of sales
(127.0)
32.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges
(0.3)
(0.4)
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
foreign exchange (losses)/gains
4.9
(3.8)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting
(51.7)
(413.0)
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 and the impact of discounting.
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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are
recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting,
or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-694": { "value": "5.2 Goodwill and intangible assets Intangible assets are not physical in nature but are identi\ufb01able from other assets. Goodwill arises on the acquisition of a business when the consideration paid exceeds the fair value of the net assets acquired. Intangible assets other than goodwill can be acquired in business combinations, acquired separately or internally generated. Accounting policy Goodwill is measured as the excess of the: \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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised.
Average UEL
remaining
Method of amortisation (years)
At 31 December 2023
Customer-related assets:
Pinnacle
Straight line
7
Opus Energy
Reducing balance
1
BMM
Straight line
9
Other
Straight line
10
Brand
Straight line
1
Computer software and licences
Straight line
5
Other intangibles
Straight line
4
Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-related assets are attributable to the Pellet Operations CGU, the Opus Energy CGU, and the Drax Energy Solutions CGU following the acquisition of BMM. The brand is attributable to the Opus Energy CGU. Details of the impairment assessments relating to these CGUs are included in note 2.4.
Computer
Customer-related software and Development Other
assets Brand licences assets intangibles Goodwill Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost and carrying amount:
At 1 January 2022
255.5
11.3
147.2
1.7
0.3
416.3
832.3
Additions at cost \u2013 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 from/(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 1 January 2023
257.6
11.3
129.5
\u2013
0.3
424.2
822.9
Additions at cost \u2013 internally generated
\u2013
\u2013
7.7
\u2013
\u2013
\u2013
7.7
Additions at cost \u2013 acquired separately
\u2013
\u2013
2.2
\u2013
\u2013
\u2013
2.2
Acquired in business combinations
5.0
\u2013
\u2013
\u2013
\u2013
6.0
11.0
Impairment
\u2013
\u2013
\u2013
\u2013
\u2013
(14.5)
(14.5)
Transfers from property, plant
and equipment
\u2013
\u2013
0.6
\u2013
\u2013
\u2013
0.6
Effect of changes in foreign
exchange rates
(1.5)
\u2013
(0.2)
\u2013
\u2013
1.0
(0.7)
At 31 December 2023
261.1
11.3
139.8
\u2013
0.3
416.7
829.2
Accumulated amortisation:
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 1 January 2023
170.6
6.8
79.0
\u2013
\u2013
\u2013
256.4
Charge for the year
17. 2
1.1
11.0
\u2013
0.1
\u2013
29.4
Impairment
31.5
3.0
11.1
\u2013
\u2013
\u2013
45.6
Effect of changes in foreign
exchange rates
(0.3)
\u2013
(0.1)
\u2013
\u2013
\u2013
(0.4)
At 31 December 2023
219.0
10.9
101.0
\u2013
0.1
\u2013
331.0
Net book value:
At 31 December 2022
87.0
4.5
50.5
\u2013
0.3
424.2
566.5
At 31 December 2023
42.1
0.4
38.8
\u2013
0.2
416.7
498.2
The Group has incurred research and development expenditure of \u00a322.8 million (2022: \u00a312.5 million), which is included within operating and administrative expenses in the Consolidated income statement. Customer-related assets Customer-related assets re\ufb02ects the value of customer contracts acquired on the acquisition of Opus Energy in February 2017, the acquisition of Pinnacle in April 2021, the Paci\ufb01c BioEnergy sales contracts purchased by Pellet Operations in December 2021, and the customer asset acquired on acquisition of BMM in August 2023. The Opus Energy asset had an acquisition date fair value of \u00a3211.0 million re\ufb02ecting the estimated value of the future cash \ufb02ows 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 \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.7%. The asset had 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 was being amortised on a reducing balance basis to re\ufb02ect the diminishing rate of contract renewals over time. During the current year the Opus Energy CGU has been tested for impairment and an impairment charge of \u00a331.5 million was allocated to the Opus Energy customer-related asset as part of this (see note 2.4 for further details on this impairment assessment). At 31 December 2023, the Opus Energy customer-related asset had a carrying value of \u00a33.8 million (2022: \u00a347.8 million) and a remaining UEL of approximately one year (2022: \ufb01ve years). The UEL has been reduced due to increased customer churn rates, in part due to the announced exit and offboarding of gas customers in February 2023. The Pinnacle asset provided the Group with access to customer bases with contracted cash \ufb02ows. The asset had an acquisition date fair value of C$62.1 million (\u00a335.9 million) which was estimated based upon a multi-period excess earnings method. This was based on the present value of the incremental after-tax cash \ufb02ows attributable to the customer-related 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 \ufb02ows. The valuation estimates an appropriate margin to apply to the contracts. No customer retentions were assumed as part of the valuation. The cash \ufb02ows were discounted using an asset speci\ufb01c discount rate of 10.0%. The asset had an estimated UEL from acquisition of 10 years, supported by the distribution of value, with around 90% of the value to be derived from the contracts provided in this period. The Pinnacle customer-related asset is being amortised on a straight-line basis to re\ufb02ect the even spread of contract maturities over the UEL. At 31 December 2023, the Pinnacle asset had a carrying value of \u00a326.8 million (2022: \u00a331.5 million) and a remaining UEL of approximately seven years (2022: eight years). On acquisition of BMM in August 2023 a customer-related asset with a fair value of \u00a35.0 million was recognised re\ufb02ecting the estimated future cash \ufb02ows from existing customer relationships that were not yet contracted. The fair value was estimated based upon a multi-period excess earnings method. At 31 December 2023, the BMM asset had a carrying value of \u00a34.8 million and a remaining UEL of nine years. The other customer-related assets relate to pellet sales contracts acquired from Paci\ufb01c BioEnergy on 31 December 2021. At 31 December 2023 this asset had a carrying value of \u00a36.7 million (2022: \u00a37.7 million) and a remaining UEL of 10 years (2022: 11 years). Opus Energy brand The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017 and valued at \u00a311.3 million using a relief-from-royalty method. During the current year the Opus CGU has been tested for impairment and an impairment charge of \u00a33.0 million was allocated to the Opus Energy brand as part of this (see note 2.4 for further details on this impairment assessment). The carrying value of the Opus Energy brand at 31 December 2023 was \u00a30.4 million (2022: \u00a34.5 million) and had a remaining UEL of one year (2022: four years). The UEL of the brand asset was accelerated during the year in line with the Opus Energy customer-related asset. 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 UELs ranging from 2\u201310 years. From 1 January 2022, following an agenda decision from the International Financial Reporting Interpretations Committee (IFRIC), the Group applied a new accounting policy for Software as a Service (SaaS) costs. 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 were impaired during 2022, with the charge being recognised against accumulated amortisation in the table above, and recorded as an exceptional cost in the Consolidated income statement (see note 2.7). SaaS costs incurred from 1 January 2022 have been recognised in operating and administrative expenses in the Consolidated income statement . As at 31 December 2023, computer software assets under the course of construction amounted to \u00a319.7 million (2022: \u00a318.3 million). During the prior year the Group recognised a \u00a319.2 million impairment relating to a new billing system in the Customers business where the Group had stopped development as it no longer expected future economic bene\ufb01ts to be recovered as an ongoing intangible asset. The impairment charge was recognised against cost in the table above, and recorded as an exceptional cost in the Consolidated income statement. A legal claim in respect of this project was settled with the supplier during the current year. This has resulted in a credit to the Consolidated income statement amounting to \u00a313.7 million. This has also been recognised as an exceptional item in the Consolidated income statement (see note 2.7). 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:
Drax Energy Pellet
Solutions Opus Energy Lanark Galloway Cruachan Production Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Goodwill
At 1 January 2023
10.7
159.2
11.3
4 0 .1
26.9
176.0
424.2
Acquisitions
6.0
\u2013
\u2013
\u2013
\u2013
\u2013
6.0
Reallocations
144.7
(144.7)
\u2013
\u2013
\u2013
\u2013
\u2013
Impairment
\u2013
(14.5)
\u2013
\u2013
\u2013
\u2013
(14.5)
Effect of changes in foreign
exchange rates
\u2013
\u2013
\u2013
\u2013
\u2013
1.0
1.0
At 31 December 2023
161.4
\u2013
11.3
4 0.1
26.9
17 7.0
416.7
Following a reorganisation of the Customers business, which included the transfer of certain activities from the Opus Energy CGU to the Drax Energy Solutions CGU, goodwill of \u00a3144.7 million has been reallocated between the two CGUs on a relative fair value approach. Of the \u00a3159.2 million of goodwill allocated to the Opus Energy CGU in the prior year, \u00a3144.7 million has been allocated to the Drax Energy Solutions CGU. The remaining \u00a314.5 million was subsequently impaired as a result of the impairment assessment described in note 2.4.", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-763": { "value": "Accounting policy 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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-746": { "value": "Accounting policy 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. Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and therefore denominated in the functional currency of the operation to which it is allocated. Goodwill denominated in a foreign currency is subsequently translated at the rate prevailing at each reporting date. Exchange differences arising on retranslation are recognised in the Consolidated statement of comprehensive income. Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected to bene\ufb01t from the synergies of the acquisition. If one or more CGU, or group of CGUs, to which goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the restructure. Goodwill is considered to have an inde\ufb01nite useful life, is not amortised, and is assessed annually for impairment (see note 2.4). Any impairment charge is recognised against the carrying value of goodwill in cost. Intangible assets acquired in business combinations are measured at fair value on the acquisition date. Other intangible assets are measured initially at cost. Cost comprises the purchase price (net of any discount or rebate) and any directly attributable costs of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-727": { "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 of preparing the asset for use in the manner intended by management. The carrying amounts of intangible assets are assessed for indicators of impairment at each reporting date. The Group\u2019s policy is to recognise an impairment charge through accumulated amortisation if the asset will continue to be used by the Group. However, if the asset is still under construction, as no amortisation has yet been charged, the impairment charge is recognised in cost. Intangible assets are amortised over their anticipated useful economic lives (UELs), which are reviewed at least at each \ufb01nancial year end. When reviewing UELs the assessment takes into account regulatory changes, climate change and commercial and technological changes. Any changes to estimated UELs are applied prospectively. During the current year this review has resulted in a change to the UELs of the Opus Energy customer-related asset and brand asset. These intangible assets are now being amortised to December 2024 to reflect the estimated period over which the value will be recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-711": { "value": "The Group has incurred research and development expenditure of \u00a322.8 million (2022: \u00a312.5 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-720": { "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 and Pellet Production assets at the end of their 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 UELs of the Group\u2019s generation assets and pellet plants, 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, with the capitalisation shown in the movement in reinstatement asset line in note 3.1 and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges in the Consolidated income statement. 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. Other provisions include a provision in respect of dilapidation costs for leased of\ufb01ces and rail cars.
Decommissioning Restructuring Other
provision provision provisions Total
\u00a3m \u00a3m \u00a3m \u00a3m
Carrying amount:
At 1 January 2023
44.0
12.7
1.9
58.6
Additional provision charged to PPE (note 3.1)
22.7
\u2013
\u2013
22.7
Transfer between provision categories
1.2
\u2013
(1.2)
\u2013
Charged/(credited) to pro\ufb01t or loss:
Additional provision recognised
\u2013
\u2013
0.3
0.3
Utilised
(1.4)
(2.8)
\u2013
(4.2)
Released
\u2013
\u2013
(0.5)
(0.5)
Unwinding of discount
1.9
\u2013
\u2013
1.9
At 31 December 2023
68.4
9.9
0.5
78.8
Current
5.1
1.3
0.2
6.6
Non-current
63.3
8.6
0.3
72.2
Decommissioning provisions are made in respect of Drax Power Station (\u00a364.5 million) and certain pellet plants (\u00a33.9 million). The decommissioning provision in respect of Drax Power Station is based on the assumption that the initial decommissioning work, relating to coal operations, will be completed between 2024 and 2026, with the remainder beginning at the end of station life, which is currently estimated to be 2039. The decommissioning provision relating to certain pellet plants is based on the assumption that the decommissioning and reinstatement will take place at the end of the expected UEL of each site, which are estimated to be between 2027 and 2040. The provisions have been estimated using existing technology at current prices based upon specialist, third-party advice, updated on a triennial basis as a minimum, but more regularly when deemed appropriate due to changes that might signi\ufb01cantly impact the estimated cost, such as changes in prices, or changes in expected decommissioning plans. The most recent update for the Drax Power Station and pellet plant provisions took place in December 2023. The cost of the Drax Power Station decommissioning is estimated, based on the midpoint of the range calculated by the third-party experts, to be \u00a393.6 million at current prices. An inflation curve was then applied to estimate the separate elements of the decommissioning cost at the dates that they are expected to occur. These values were then discounted to calculate the present value of the provision to be recognised. The discount rates used are nominal risk-free rates that reflect the duration of the liabilities. These discount rates are 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 average discount rates used for the Group\u2019s decommissioning provisions range from 3.02%\u20135.03% (2022: 4.05%). The additional provision recognised in the year is predominantly due to the change in the assumptions around the timing and method of the decommissioning at Drax Power Station. It was previously assumed the decommissioning would all take place at the end of the station life in 2039. Due to the UK BECCS development project, certain parts of the site will be required to be decommissioned before the end of station life, which has resulted in an increase in the provision due to the higher estimated costs of decommissioning work taking place around a live power station. The timing of these costs being earlier has also resulted in an increase to the provision once the changes in assumptions around inflation and discounting are factored in. The Drax Power Station 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 estimated cost of decommissioning Drax Power Station based on specialist, third-party advice using existing technology at current prices had a range of \u00a365.5 million to \u00a3121.6 million. Applying inflation and discounting assumptions consistent with those applied to the provision recognised would result in an estimated provision range of \u00a345.3 million to \u00a38 4.1 million. An increase of 100 basis points in the inflation and discount rates used would result in a \u00a39.6 million (2022: \u00a39.5 million) increase and a \u00a37.9 million (2022: \u00a37.0 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 extrapolated from these amounts. 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. The costs being estimated are also several years in the future. All of these factors increase the estimation uncertainty of the decommissioning provision. The impact of climate change, both physical and transitional, extending over the medium term, was also considered by the third party when determining the provision. The Group has concluded that climate change is unlikely to have a signi\ufb01cant impact on the future decommissioning costs, however this risk will continue to be reassessed and the impact of any changes will be reflected in the valuation. The restructuring provision includes 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 following cessation of operating. At the request of the UK Government, the Group 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 network from October 2022 until the end of March 2023, which delayed the formal closure of the coal units and resulted in the utilisation of certain amounts of the restructuring provision also being delayed. This has not materially impacted the expected costs. The formal closure of the coal units commenced at the end of the winter contingency service in March 2023. The amount of the restructuring provision utilised in the year predominantly relates to engineering and redundancy costs. Of the \u00a39.9 million remaining at 31 December 2023, \u00a38.9 million relates to engineering works, of which \u00a30.7 million is expected to be utilised in 2024 with the remaining amounts expected to be utilised in the period from 2025 to 2027. A further \u00a30.6 million relates to redundancy costs, which are expected to be utilised in 2024, and the remaining \u00a30.4 million relates to other costs, which are expected to be utilised in the period from 2025 to 2027. 7.6 Contingencies Contingent assets are potential future in\ufb02ows 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 out\ufb02ows 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. Contingent liabilities Ofgem investigation On 31 May 2023, Ofgem announced the opening of an investigation into Drax Power Limited\u2019s annual biomass pro\ufb01ling reporting under the Renewables Obligation scheme. Ofgem\u2019s announcement stated that the opening of an investigation does not imply any \ufb01nding of non-compliance. Ofgem separately con\ufb01rmed that they have not established any non-compliance that would affect the issuance of ROCs to Drax Power Limited, and therefore the associated \ufb01nancial bene\ufb01t. Like all energy generators, the Company receives regular requests from Ofgem. We continue to cooperate fully throughout the investigation and have con\ufb01dence in our compliance with the Renewables Obligation scheme criteria. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the stage of the process and the uncertainty in future outcome. Ofgem NIS declaration As noted in the Audit Committee report on page 132, Drax Power Station is required to maintain a de\ufb01ned level of both physical and cyber resilience, as outlined within the Network and Information Systems Regulations (NIS Regulations). The Group submitted a report to Ofgem in January 2024 con\ufb01rming that Drax Power Station had not fully achieved the level required by the deadline of 31 December 2023, but had a plan to address this during 2024. Ofgem will consider this matter in due course and decide 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. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-758": { "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 UELs of the Group\u2019s generation assets and pellet plants, 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, with the capitalisation shown in the movement in reinstatement asset line in note 3.1 and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges in the Consolidated income statement. 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDecommissioningRestorationAndRehabilitationProvisionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-747": { "value": "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 UELs of the Group\u2019s generation assets and pellet plants, 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, with the capitalisation shown in the movement in reinstatement asset line in note 3.1 and is depreciated over the UELs of the related assets. The unwinding of the discount is included in interest payable and similar charges in the Consolidated income statement. 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. Other provisions include a provision in respect of dilapidation costs for leased of\ufb01ces and rail cars. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-764": { "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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-605": { "value": "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 monthly number of employees in Operations (staff based at Pellet 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 144. Staff costs (including Executive directors)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Wages and salaries
240.4
201.8
Social security costs
22.3
21.6
De\ufb01ned bene\ufb01t pension service cost (note 6.3)
2.3
4.7
De\ufb01ned contribution pension cost (note 6.3)
21.4
16.7
Share-based payments (note 6.2)
13.8
9.6
Termination bene\ufb01ts
1.5
1.4
Total staff costs
301.7
255.8
Staff costs capitalised
(7.7)
(6.9)
Staff costs included in operating and administrative expenses (note 2.3)
294.0
248.9
Average monthly number of people employed (including Executive directors)
Year ended 31 December
2023 2022
(number) (number)
Operations (Pellet Production)
781
696
Operations (Generation)
675
685
Customers
892
866
Central corporate and commercial functions
1,072
880
Total average monthly number of people employed
3,420
3,127
6.2 Share-based payments The Group operates \ufb01ve 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, One Drax Awards which are recognition and retention awards granted to certain employees below senior management, the Employee Stock Purchase Plan (ESPP) for all qualifying US and Canada-based employees, and the Save As You Earn (SAYE) scheme for all UK qualifying employees. 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 description of each scheme and the number of options outstanding at the reporting date. Accounting policy The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is accelerated at the point of cancellation. If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance with IFRS 2. Section 6: People costs
Costs recognised in the Consolidated income statement in relation to share-based payments during the year were as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
LTIP (granted from 2020)
8.7
5.6
PSP (granted from 2017 to 2019)
\u2013
0.5
DSP (granted from 2017)
0.5
0.4
One Drax Awards
1.4
1.0
ESPP
0.1
\u2013
SAYE
3.1
2.1
Total share-based payment expense included within staff costs (note 6.1)
13.8
9.6
Movements in the number of share options outstanding at the reporting date for each scheme is shown below.
The following schemes are bonus award schemes and therefore have no exercise price.
LTIP PSP DSP One Drax Awards
(number) (number) (number) (number)
At 1 January 2022
4,570,228
716,422
567,426
216,066
Granted
1,399,952
\u2013
71,399
143,439
Forfeited
(238,121)
(46,716)
(5,598)
(11,235)
Exercised
\u2013
(622,989)
(265,482)
(211,265)
Expired
(32,688)
(46,717)
\u2013
(258)
At 1 January 2023
5,699,371
\u2013
367,745
136,747
Granted
2,282,798
\u2013
101,657
262,526
Forfeited
(123,776)
\u2013
\u2013
(2,738)
Exercised
(2,750,860)
\u2013
(208,627)
(140,669)
Expired
(14,370)
\u2013
\u2013
\u2013
At 31 December 2023
5,
0
93,163
\u2013
260,775
255,866
The following schemes are share purchase schemes and therefore weighted average exercise prices are presented.
ESPP
SAYE
Three-year Five-year
weighted weighted
Weighted average average average
exercise price ESPP exercise price SAYE three-year exercise price SAYE \ufb01ve-year
(pence) (number) (pence) (number) (pence) (number)
At 1 January 2022
\u2013
\u2013
149
8,376,823
140
2,539,710
Granted
\u2013
\u2013
563
700,799
563
107,122
Forfeited
\u2013
\u2013
176
(222,311)
154
(80,928)
Exercised
\u2013
\u2013
206
(545,220)
188
(72,097)
Expired
\u2013
\u2013
304
(146,423)
254
(28,945)
At 1 January 2023
\u2013
\u2013
178
8 ,163,6 6 8
155
2,464,862
Granted
469
64,497
498
1
,9
9 6 ,117
498
19
7,
82 5
Forfeited
\u2013
\u2013
327
(46,063)
432
(8,228)
Exercised
\u2013
\u2013
127
(6,831,232)
219
(15,727)
Expired
\u2013
\u2013
509
(395,588)
496
(52,923)
At 31 December 2023
469
64,497
470
2,886,902
173
2,585,809
Key information about each active scheme for options granted and exercised in the current and prior year is presented below.
Year ended 31 December 2023
Scheme
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE \ufb01ve-year
Weighted average share price of options
exercised during the year at the date
of exercise (pence)
621
621
621
\u2013
554
604
Number of options exercisable at reporting
date
119,102
13,351
\u2013
\u2013
25,207
712
Range of exercise price of options Between Between
outstanding at reporting date (pence)
469
127 and 563 127 and 563
Weighted average remaining
contractual life (months)
17
14
3
2
22
20
Year ended 31 December 2022
Scheme
LTIP
PSP
DSP
One Drax Awards
SAYE three-year
SAYE \ufb01ve-year
Weighted average share price of options
exercised during the year at the date
of exercise (pence)
\u2013
711
729
729
729
722
Number of options exercisable at reporting
date
\u2013
\u2013
17,058
\u2013
605
\u2013
Range of exercise price of options Between Between
outstanding at reporting date (pence)
127
and 563
127 and 563
Weighted average remaining
contractual life (months)
13
\u2013
11
3
8
30
The fair value of share options is calculated using a Monte-Carlo simulation if the scheme vests subject to market conditions, or
the Black-Scholes model otherwise. The Monte-Carlo simulation takes into account the estimated probability of different levels
of vesting for share options with market based conditions and produces a probability-based fair value calculation.
The key inputs to both the Monte-Carlo and Black-Scholes valuation models are the share price at the date of grant, exercise price
where applicable, dividend yield on the underlying share, time to expiry of the option, expected volatility and risk-free interest rate.
Expected volatility is determined by calculating the historical volatility of the Group\u2019s share price. The expected life used in the
valuations is based on the length of the vesting period, adjusted, based on management\u2019s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations. The risk-free interest rate is determined using the rate for the
equivalent length zero-coupon UK Government bond for each scheme.
Information about the valuation models used for options granted during the current and prior year, and relevant inputs to those models
is set out in the tables below.
Year ended 31 December 2023
Scheme
LTIP
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE \ufb01ve-year
31 March 5 September 31 March 31 March 1 September 12 April 12 April
Grant date 2023 2023 2023 2023 2023 2023 2023
Monte- Monte- Black- Black- Black- Black- Black-
Valuation model used Carlo Carlo Scholes Scholes Scholes Scholes Scholes
Share price at grant date (pence)
608
545
608
608
547
641
641
Exercise price (pence)
\u2013
\u2013
\u2013
\u2013
469
498
498
Dividend yield
2.50%
2.50%
\u2013
3.94%
3.57%
4.10%
4.54%
Vesting period of options granted
3 years
3 years
3 years
1 year
6 months
3 years
5 years
Expected volatility
39.92%
39.92%
36.35%
37.25%
26.95%
36.35%
38.95%
Annual risk-free interest rate
3.56%
3.56%
4.94%
5.17%
4.97%
4.94%
4.62%
Weighted average fair value of options
granted at measurement date (pence)
481
481
608
585
110
205
220
Fair value of all options granted (\u00a3m)
9.4
1.5
0.6
1.5
0 .1
4.1
0.4
Year ended 31 December 2022
Scheme
LTIP
DSP
One Drax Awards
SAYE three-year
SAYE \ufb01ve-year
18 March 18 March 18 March 12 April 12 April
Grant date 2022 2022 2022 2022 2022
Valuation model used
Monte-
Black- Black- Black- Black-
Carlo Scholes Scholes Scholes Scholes
Share price at grant date (pence)
726
726
726
783
783
Exercise price (pence)
\u2013
\u2013
\u2013
563
563
Dividend yield
4.24%
\u2013
\u2013
2.85%
3.15%
Vesting period of options granted
3 years
3 years
1 year
3 years
5 years
Expected volatility
40.19%
4 0.19%
4 0.19%
40.98%
38.29%
Annual risk-free interest rate
1.20%
1.20%
1.20%
2.46%
2.38%
Weighted average fair value of options granted
at measurement date (pence)
697
726
726
293
291
Fair value of all options granted (\u00a3m)
9.8
0.5
1.0
2.1
0.3
LTIP The LTIP was introduced in 2020 for Executive directors and senior employees. This replaced the PSP scheme (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 50% of the shares 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 the remaining 50% of shares is conditional upon performance of cumulative Adjusted EPS (de\ufb01ned to be derived from Adjusted results) over three years. Additionally, each time a dividend is paid during the vesting period of the scheme, participants are entitled to receive further share options of equivalent value to the dividends, determined by the market value of shares on the ex-dividend date, which are formally granted on the vesting date for each scheme. The fair value of LTIP options is calculated with the support of external IFRS 2 specialists due to the TSR vesting condition being market based and therefore requiring a Monte-Carlo simulation. PSP The PSP was in place for Executive directors and senior employees from 2017 to 2019. 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 50% of shares was conditional upon whether the Group\u2019s TSR matched or outperformed an index (determined in accordance with the scheme rules) over three years and vesting of the remaining 50% of shares was conditional upon performance against the Group Scorecard (see page 151). The last of the outstanding PSP options expired during 2022. DSP The Group operates the DSP, under which Executive directors receive 40% of their annual bonus in share options. DSP awards are granted at nil cost and vest after three years subject to continued employment or \u201cgood leaver\u201d termination provisions. Each time a dividend is paid during the vesting period of the scheme, participants are entitled to receive further share options of equivalent value to the dividends, determined by the market value of shares on the ex-dividend date, which are formally granted on the vesting date for each scheme. As such, a dividend yield of 0% is input into the Black-Scholes calculation to reflect that the fair value of each share option is not reduced by dividends paid out over the vesting period. One Drax Awards One Drax Awards are granted 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 at the grant date. ESPP From September 2023, participation in the new ESPP scheme is offered to all US and Canada qualifying employees biannually. Under the ESPP, employees are granted the option to purchase shares at a 15% discount to the market price of Drax Group plc shares, based on the lower of the market price at the grant date and the market price at the vesting date. The options are exercisable at the end of six-month savings contracts, under which an employee selects a \ufb01xed percentage of their salary to be put towards the scheme. SAYE Participation in the SAYE scheme (Sharesave) is offered to all UK qualifying employees every April. Options are granted for employees to acquire shares at a discount of 20% to the market price of Drax Group plc shares, based on the average closing price for the \ufb01ve days immediately preceding 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 153 and 154 6.3 Retirement bene\ufb01t obligations The Group operates one de\ufb01ned bene\ufb01t and three de\ufb01ned contribution pension schemes. Up until 31 January 2023, the Group also operated an additional de\ufb01ned bene\ufb01t pension scheme, the Drax Power Group (DPG) section of the Electricity Supply Pension Scheme (ESPS). As at 1 February 2023, the Group replaced its three UK Group Personal Pension Plans with the My Drax Retirement Savings Section of the Aon MasterTrust.
Name of scheme
Type of bene\ufb01t
Status
Country
DPG section of ESPS (DPG ESPS)
De\ufb01ned bene\ufb01t \ufb01nal salary
Closed on 31 January 2023
UK
Closed to new members
Drax 2019
Scheme
De\ufb01ned bene\ufb01t \ufb01nal salary
on transfer in 2019
UK
Closed to new members on 31
Drax Group Personal Pension Plan
De\ufb01ned contribution
January 2023
UK
Drax Energy Solutions Personal Closed to new members on 31
Pension Plan
De\ufb01ned contribution
January 2023
UK
Opus Energy Group Personal Closed to new members on 31
Pension Plan
De\ufb01ned contribution
January 2023
UK
My Drax Retirement Savings Section
of the Aon MasterTrust 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
On 31 January 2023 the DPG ESPS\u2019s assets and liabilities were transferred to the Drax 2019 Scheme, and the DPG ESPS was wound up on 17 April 2023. The Drax 2019 Scheme continues 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. Trustee governance (de\ufb01ned bene\ufb01t pension schemes) The Drax 2019 Scheme is administered by a sole Trustee (PAN Trustees UK LLP), which was appointed on 30 November 2022 and is legally separate from the Group. The Trustee is required by law to act in the interest of all relevant bene\ufb01ciaries and is responsible for the investment policy for the assets and the day-to-day administration of the de\ufb01ned bene\ufb01t scheme. Prior to 30 November 2022, the Drax 2019 Scheme was administered by a board of Trustees composed of representatives of both the employer and employees. A separate board of Trustees also administered the DPG ESPS while it was active. 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 schemes 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 2023 have been prepared in accordance with specialist, third-party 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
2023 2022
\u00a3m \u00a3m
Total included in staff costs (note 6.1)
21.4
16.7
As at 31 December 2023, contributions of \u00a30.4 million (2022: \u00a31.5 million) due in respect of the current reporting period had not been paid over to the schemes. This has been recognised within Trade and other payables and contract liabilities within the Consolidated balance sheet. 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 The Group currently operates one de\ufb01ned bene\ufb01t scheme, following the closure of the DPG ESPS in January 2023. Previously, any pension surplus or obligation within each scheme was shown gross on the Consolidated balance sheet, as there was no legal right of offset between the two schemes. On 31 January 2023, all assets and liabilities of the DPG ESPS were transferred to the Drax 2019 Scheme and are no longer segregated from the existing assets and liabilities of the Drax 2019 Scheme for funding purposes. Therefore a combined net surplus will be presented going forward. The net pension surplus is as follows (shown separately for the two schemes at the prior reporting date):
As at 31 December
2023 2022
\u00a3m \u00a3m
DPG ESPS
\u2013
32.4
Drax 2019
Scheme
18.4
6.1
Total net surplus recognised in the Consolidated balance sheet
18.4
38.5
The Drax 2019 Scheme is referred to as \u201cthe Scheme\u201d below. The DPG ESPS and the Drax 2019 Scheme are collectively referred to as \u201cthe Schemes\u201d. At 31 December 2023, application of the accounting assumptions used in relation to the Scheme, which are described in further detail below, continued to result in a net position of surplus assets over liabilities. The 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 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. 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 continued to build up pension bene\ufb01ts. All members of the DPG ESPS transferred to the Scheme during 2023. The Scheme is a de\ufb01ned bene\ufb01t \ufb01nal salary plan, where employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on attainment of retirement age (or earlier withdrawal or death). Pensions are payable for life and updated in line with inflationary increases. 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 Trustee 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 Scheme 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 Scheme exposes the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be:
Investment risk
The Scheme\u2019s liabilities are calculated using a discount rate set with reference to corporate bond yields; if
assets underperform against this yield, this creates a de\ufb01cit. The Scheme holds a signi\ufb01cant proportion of
growth assets (diversi\ufb01ed growth funds, direct lending, credit, leveraged equities 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.
Discount rate risk
A decrease in corporate bond yields will increase the value placed upon the Scheme\u2019s liabilities, although
this will be partially offset by an increase in the value of the Scheme\u2019s bond holdings.
Longevity risk
The majority of the Scheme\u2019s 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 Scheme.
In\ufb02ation risk
The majority of the Scheme\u2019s obligations to pay bene\ufb01ts are linked to RPI 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 Scheme has a signi\ufb01cant holding in liability-driven investments to protect against in\ufb02ation risk.
Credit risk
Around 95% of the Scheme\u2019s overall funded liabilities are currently hedged against interest rates and in\ufb02ation
using liability-driven investments. The Scheme hedges interest rate risks on a statutory and long-term funding
basis (gilts driven) 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 Scheme\u2019s holding in
corporate bonds mitigates this risk to some extent.
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 Trustee ensures certain bene\ufb01ts are payable on death before retirement. A quali\ufb01ed third-party actuary, Aon, carried out the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2022. The valuation made allowance for the DPG ESPS assets and liabilities that were transferred into the Drax 2019 Scheme on 31 January 2023. The actuarial review at 31 December 2023 is based on the same membership and other data as this funding valuation. The Scheme\u2019s Board accepted the advice of the actuary and approved the use of these assumptions for the purpose of assessing the Scheme\u2019s costs. The result of the latest funding valuation has been adjusted to 31 December 2023, taking into account experience over the period since 31 March 2022, 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 across the current and prior year are set out below. Where absolute assumptions differed between the Schemes in the prior year, reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average is shown.
As at 31 December
2023 2022
% p.a. % p.a.
Discount rate
4.6
4.8
In\ufb02ation (RPI)
2.8
3.0
Rate of increase in pensions in payment and deferred pensions
2.7
2.8
Rate of increase in pensionable salaries
3.2
3.6
Whilst actual inflation has been high during 2023, long-term expectations as at 31 December 2023 are slightly lower than long-term expectations as at 31 December 2022. The de\ufb01ned bene\ufb01t obligation for the Scheme as at 31 December 2023 allows for expected bene\ufb01t increases that will be awarded in 2024, based on known 2023 indices. Mortality assumptions are based on recent actual mortality experience of the Scheme\u2019s members and allow for expected future changes in mortality rates. The assumptions are that a member aged 60 in 2023 will live, on average, for a further 25 years if they are male (2022: 26 years) and for a further 27 years if they are female (2022: 28 years). Life expectancy at age 60 for male and female non-pensioners currently aged 45 is assumed to be 26 and 28 years respectively (2022: 27 and 29 years respectively). The DPG ESPS liabilities were transferred into the Drax 2019 Scheme in 2023 and the weighted average duration of the Drax 2019 Scheme (including DPG ESPS) at 31 December 2023 based on the IAS 19 position was 16 years. The weighted average duration of the DPG ESPS and the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 18 years and 21 years respectively. The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (28%), former employees of the Group who are yet to retire (10%) and retired pensioners (62%). 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
2023 2022
\u00a3m \u00a3m
Fair value of plan assets
220.3
219.6
De\ufb01ned bene\ufb01t obligation
(201.9)
(181.1)
Net surplus recognised in the Consolidated balance sheet
18.4
38.5
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
2023 2022
\u00a3m \u00a3m
Included in staff costs (note 6.1):
Current service cost
2.3
4.7
Included in interest receivable (note 2.5):
Interest income on net de\ufb01ned bene\ufb01t surplus
(2.1)
(1.0)
Total amount recognised in the Consolidated income statement
0.2
3.7
Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
De\ufb01ned bene\ufb01t obligation at 1 January
181.1
320.9
Current service cost
2.3
4.7
Interest cost
8.0
5.7
Actuarial losses/(gains)
21.8
(123.6)
Bene\ufb01ts paid
(11.3)
(26.6)
De\ufb01ned bene\ufb01t obligation at 31 December
201.9
181.1
The actuarial losses of \u00a321.8 million (2022: gains of \u00a3123.6 million) reflect losses of \u00a30.3 million (2022: gains of \u00a3133.3 million) arising from changes in \ufb01nancial assumptions, losses of \u00a322.4 million (2022: \u00a39.9 million) arising from scheme experience and gains of \u00a30.9 million (2022: \u00a30.2 million) arising from changes in demographic assumptions. The losses due to changes in \ufb01nancial assumptions principally reflect the increase in the present value of the Scheme\u2019s liabilities arising as a result of the movement in discount rate assumption to 4.6% p.a. (2022: 4.8% p.a.) following a decrease in corporate bond yields. This was partly offset by a slight decrease in overall long-term inflationary assumptions, reflecting market pricing, and a decrease in the real salary assumption adopted relative to inflation. Changes in the fair value of plan assets are as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Fair value of plan assets at 1 January
219.6
369.8
Interest on plan assets
10 .1
6.7
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Employer contributions
8.9
17.7
Bene\ufb01ts paid
(11.3)
(26.6)
Fair value of plan assets at 31 December
220.3
219.6
Employer contributions included payments totalling \u00a34.3 million (2022: \u00a37.6 million) to reduce the actuarial de\ufb01cit related to the legacy DPG ESPS. There were contributions of \u00a30.2 million outstanding at the end of the year relating to the Drax 2019 Scheme (2022: \u00a33.2 million for both Schemes). The actual return on plan assets in the period was a gain of \u00a33.1 million (2022: loss of \u00a3141.3 million). Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a328.8 million (2022: \u00a324.4 million) were recognised in the Consolidated statement of comprehensive income. These are made up as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Actuarial (losses)/gains on de\ufb01ned bene\ufb01t obligation
(21.8)
123.6
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Total remeasurement losses recognised in other comprehensive income
(28.8)
(24.4)
The fair values of the major categories of plan assets were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Gilts
110.3
117. 2
Equities
24.1
6.5
Fixed interest bonds
5.0
4.8
Property
15.1
28.6
Investment funds
4.5
4.3
Cash and other assets
61.3
58.2
Fair value of total plan assets
220.3
219.6
(1) (2) (3) (1) As at 31 December 2023, the Scheme\u2019s target long-term asset strategy was: (34%) in multi-asset funds (with the key underlying asset strategies being equities, listed real assets and credit), direct lending (12%), hedge funds (3%), long-lease property (7%) and liability driven investing/cash (44%). There is a plan to transition the current asset holding to the long-term strategy by April 2024, noting that the precise allocations between the different asset classes may be adjusted as market conditions change. As 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 was (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 \u00a325.8 million (2022: \u00a329.9 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 Scheme\u2019s surplus. The following table provides an indication of the sensitivity of the net pension surplus at 31 December 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 obligations, this could result in a material change to the amount recognised.
Increase/(decrease) in net surplus
2023 2022
As at 31 December \u00a3m \u00a3m
Discount rate
\u2013 Increase
0.25%
7.9
8.0
\u2013 Decrease
0.25%
(8.2)
(8.5)
In\ufb02ation rate
\u2013 Increase
0.25%
(6.5)
(7.0)
\u2013 Decrease
0.25%
6.3
6.6
Life expectancy
\u2013 Increase
1 year
(7.2)
(6.2)
\u2013 Decrease
1 year
7.4
6.4
(1) (1) The sensitivity of the Scheme\u2019s 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, these risks are mitigated by the Scheme being around 95% hedged against movements in Government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Scheme is broadly only exposed to changes in credit spreads plus around 5% of changes in underlying gilt yields and, for inflation, the Scheme\u2019s exposure is around 5% 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 Trustee and the Group must agree the contributions required (if any) such that the Scheme is fully funded over time on the basis of suitably prudent assumptions. The Group expects to make total contributions of \u00a31.9 million to the Scheme during the 12 months ending 31 December 2024. The latest actuarial valuation of the Drax 2019 Scheme (which included the DPG ESPS) which was carried out as at 31 March 2022 resulted in a funding surplus of \u00a313.9 million and so no de\ufb01cit recovery plan was required. The Group agreed to make additional contributions to the Drax 2019 Scheme from February 2023 to June 2023 and an additional payment in 2026 to fully fund the Scheme on a low-risk basis, as agreed between the Group and Trustee at the time, through the provision of a surety bond. At this point, the Scheme is expected to be self-suf\ufb01cient, 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 Scheme provide the sponsors of the Scheme with an unconditional right to a refund of surplus assets assuming the gradual settlement of plan liabilities over time. Based on these rights, any net surplus in the Scheme is recognised in full in the Consolidated balance sheet. In June 2023, the UK High Court issued a ruling in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others relating to the validity of certain historical pension changes. This case may have implications for other de\ufb01ned bene\ufb01t schemes in the UK, although is subject to possible appeal in 2024. The Group are aware of this legal ruling and are monitoring developments. The Group will assess whether there is any potential impact related to the Drax 2019 Scheme once the case is concluded and as such no related quanti\ufb01cation has been determined. ", "dimensions": { "concept": "draxgroupplc:DisclosureOfPeopleCosts", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-721": { "value": "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 monthly number of employees in Operations (staff based at Pellet 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 144. Staff costs (including Executive directors)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Wages and salaries
240.4
201.8
Social security costs
22.3
21.6
De\ufb01ned bene\ufb01t pension service cost (note 6.3)
2.3
4.7
De\ufb01ned contribution pension cost (note 6.3)
21.4
16.7
Share-based payments (note 6.2)
13.8
9.6
Termination bene\ufb01ts
1.5
1.4
Total staff costs
301.7
255.8
Staff costs capitalised
(7.7)
(6.9)
Staff costs included in operating and administrative expenses (note 2.3)
294.0
248.9
Section 6: People costs 6.2 Share-based payments The Group operates \ufb01ve 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, One Drax Awards which are recognition and retention awards granted to certain employees below senior management, the Employee Stock Purchase Plan (ESPP) for all qualifying US and Canada-based employees, and the Save As You Earn (SAYE) scheme for all UK qualifying employees. 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 description of each scheme and the number of options outstanding at the reporting date. Accounting policy The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is accelerated at the point of cancellation. If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance with IFRS 2. Costs recognised in the Consolidated income statement in relation to share-based payments during the year were as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
LTIP (granted from 2020)
8.7
5.6
PSP (granted from 2017 to 2019)
\u2013
0.5
DSP (granted from 2017)
0.5
0.4
One Drax Awards
1.4
1.0
ESPP
0.1
\u2013
SAYE
3.1
2.1
Total share-based payment expense included within staff costs (note 6.1)
13.8
9.6
Movements in the number of share options outstanding at the reporting date for each scheme is shown below. The following schemes are bonus award schemes and therefore have no exercise price.
LTIP PSP DSP One Drax Awards
(number) (number) (number) (number)
At 1 January 2022
4,570,228
716,422
567,426
216,066
Granted
1,399,952
\u2013
71,399
143,439
Forfeited
(238,121)
(46,716)
(5,598)
(11,235)
Exercised
\u2013
(622,989)
(265,482)
(211,265)
Expired
(32,688)
(46,717)
\u2013
(258)
At 1 January 2023
5,699,371
\u2013
367,745
136,747
Granted
2,282,798
\u2013
101,657
262,526
Forfeited
(123,776)
\u2013
\u2013
(2,738)
Exercised
(2,750,860)
\u2013
(208,627)
(140,669)
Expired
(14,370)
\u2013
\u2013
\u2013
At 31 December 2023
5,
0
93,163
\u2013
260,775
255,866
The following schemes are share purchase schemes and therefore weighted average exercise prices are presented.
ESPP
SAYE
Three-year Five-year
weighted weighted
Weighted average average average
exercise price ESPP exercise price SAYE three-year exercise price SAYE \ufb01ve-year
(pence) (number) (pence) (number) (pence) (number)
At 1 January 2022
\u2013
\u2013
149
8,376,823
140
2,539,710
Granted
\u2013
\u2013
563
700,799
563
107,122
Forfeited
\u2013
\u2013
176
(222,311)
154
(80,928)
Exercised
\u2013
\u2013
206
(545,220)
188
(72,097)
Expired
\u2013
\u2013
304
(146,423)
254
(28,945)
At 1 January 2023
\u2013
\u2013
178
8 ,163,6 6 8
155
2,464,862
Granted
469
64,497
498
1
,9
9 6 ,117
498
19
7,
82 5
Forfeited
\u2013
\u2013
327
(46,063)
432
(8,228)
Exercised
\u2013
\u2013
127
(6,831,232)
219
(15,727)
Expired
\u2013
\u2013
509
(395,588)
496
(52,923)
At 31 December 2023
469
64,497
470
2,886,902
173
2,585,809
Key information about each active scheme for options granted and exercised in the current and prior year is presented below.
Year ended 31 December 2023
Scheme
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE \ufb01ve-year
Weighted average share price of options
exercised during the year at the date
of exercise (pence)
621
621
621
\u2013
554
604
Number of options exercisable at reporting
date
119,102
13,351
\u2013
\u2013
25,207
712
Range of exercise price of options Between Between
outstanding at reporting date (pence)
469
127 and 563 127 and 563
Weighted average remaining
contractual life (months)
17
14
3
2
22
20
Year ended 31 December 2022
Scheme
LTIP
PSP
DSP
One Drax Awards
SAYE three-year
SAYE \ufb01ve-year
Weighted average share price of options
exercised during the year at the date
of exercise (pence)
\u2013
711
729
729
729
722
Number of options exercisable at reporting
date
\u2013
\u2013
17,058
\u2013
605
\u2013
Range of exercise price of options Between Between
outstanding at reporting date (pence)
127
and 563
127 and 563
Weighted average remaining
contractual life (months)
13
\u2013
11
3
8
30
The fair value of share options is calculated using a Monte-Carlo simulation if the scheme vests subject to market conditions, or the Black-Scholes model otherwise. The Monte-Carlo simulation takes into account the estimated probability of different levels of vesting for share options with market based conditions and produces a probability-based fair value calculation. The key inputs to both the Monte-Carlo and Black-Scholes valuation models are the share price at the date of grant, exercise price where applicable, dividend yield on the underlying share, time to expiry of the option, expected volatility and risk-free interest rate. Expected volatility is determined by calculating the historical volatility of the Group\u2019s share price. The expected life used in the valuations is based on the length of the vesting period, adjusted, based on management\u2019s best estimate, for the effects of non- transferability, exercise restrictions and behavioural considerations. The risk-free interest rate is determined using the rate for the equivalent length zero-coupon UK Government bond for each scheme. Information about the valuation models used for options granted during the current and prior year, and relevant inputs to those models is set out in the tables below.
Year ended 31 December 2023
Scheme
LTIP
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE \ufb01ve-year
31 March 5 September 31 March 31 March 1 September 12 April 12 April
Grant date 2023 2023 2023 2023 2023 2023 2023
Monte- Monte- Black- Black- Black- Black- Black-
Valuation model used Carlo Carlo Scholes Scholes Scholes Scholes Scholes
Share price at grant date (pence)
608
545
608
608
547
641
641
Exercise price (pence)
\u2013
\u2013
\u2013
\u2013
469
498
498
Dividend yield
2.50%
2.50%
\u2013
3.94%
3.57%
4.10%
4.54%
Vesting period of options granted
3 years
3 years
3 years
1 year
6 months
3 years
5 years
Expected volatility
39.92%
39.92%
36.35%
37.25%
26.95%
36.35%
38.95%
Annual risk-free interest rate
3.56%
3.56%
4.94%
5.17%
4.97%
4.94%
4.62%
Weighted average fair value of options
granted at measurement date (pence)
481
481
608
585
110
205
220
Fair value of all options granted (\u00a3m)
9.4
1.5
0.6
1.5
0 .1
4.1
0.4
Year ended 31 December 2022
Scheme
LTIP
DSP
One Drax Awards
SAYE three-year
SAYE \ufb01ve-year
18 March 18 March 18 March 12 April 12 April
Grant date 2022 2022 2022 2022 2022
Valuation model used
Monte-
Black- Black- Black- Black-
Carlo Scholes Scholes Scholes Scholes
Share price at grant date (pence)
726
726
726
783
783
Exercise price (pence)
\u2013
\u2013
\u2013
563
563
Dividend yield
4.24%
\u2013
\u2013
2.85%
3.15%
Vesting period of options granted
3 years
3 years
1 year
3 years
5 years
Expected volatility
40.19%
4 0.19%
4 0.19%
40.98%
38.29%
Annual risk-free interest rate
1.20%
1.20%
1.20%
2.46%
2.38%
Weighted average fair value of options granted
at measurement date (pence)
697
726
726
293
291
Fair value of all options granted (\u00a3m)
9.8
0.5
1.0
2.1
0.3
LTIP
The LTIP was introduced in 2020 for Executive directors and senior employees. This replaced the PSP scheme (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 50% of the shares 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 the remaining 50% of shares is conditional upon performance of cumulative Adjusted EPS (de\ufb01ned to be derived from
Adjusted results) over three years. Additionally, each time a dividend is paid during the vesting period of the scheme, participants
are entitled to receive further share options of equivalent value to the dividends, determined by the market value of shares on the
ex-dividend date, which are formally granted on the vesting date for each scheme. The fair value of LTIP options is calculated
with the support of external IFRS 2 specialists due to the TSR vesting condition being market based and therefore requiring a
Monte-Carlo simulation.
PSP
The PSP was in place for Executive directors and senior employees from 2017 to 2019. 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 50% of
shares was conditional upon whether the Group\u2019s TSR matched or outperformed an index (determined in accordance with the scheme
rules) over three years and vesting of the remaining 50% of shares was conditional upon performance against the Group Scorecard
(see page 151). The last of the outstanding PSP options expired during 2022.
DSP
The Group operates the DSP, under which Executive directors receive 40% of their annual bonus in share options. DSP awards are
granted at nil cost and vest after three years subject to continued employment or \u201cgood leaver\u201d termination provisions. Each time a
dividend is paid during the vesting period of the scheme, participants are entitled to receive further share options of equivalent value
to the dividends, determined by the market value of shares on the ex-dividend date, which are formally granted on the vesting date
for each scheme. As such, a dividend yield of 0% is input into the Black-Scholes calculation to reflect that the fair value of each share
option is not reduced by dividends paid out over the vesting period.
One Drax Awards
One Drax Awards are granted 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 at the grant date.
ESPP
From September 2023, participation in the new ESPP scheme is offered to all US and Canada qualifying employees biannually. Under
the ESPP, employees are granted the option to purchase shares at a 15% discount to the market price of Drax Group plc shares, based
on the lower of the market price at the grant date and the market price at the vesting date. The options are exercisable at the end
of six-month savings contracts, under which an employee selects a \ufb01xed percentage of their salary to be put towards the scheme.
SAYE
Participation in the SAYE scheme (Sharesave) is offered to all UK qualifying employees every April. Options are granted for employees
to acquire shares at a discount of 20% to the market price of Drax Group plc shares, based on the average closing price for the \ufb01ve
days immediately preceding 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 153 and 154 .
6.3 Retirement bene\ufb01t obligations The Group operates one de\ufb01ned bene\ufb01t and three de\ufb01ned contribution pension schemes. Up until 31 January 2023, the Group also operated an additional de\ufb01ned bene\ufb01t pension scheme, the Drax Power Group (DPG) section of the Electricity Supply Pension Scheme (ESPS). As at 1 February 2023, the Group replaced its three UK Group Personal Pension Plans with the My Drax Retirement Savings Section of the Aon MasterTrust.
Name of scheme
Type of bene\ufb01t
Status
Country
DPG section of ESPS (DPG ESPS)
De\ufb01ned bene\ufb01t \ufb01nal salary
Closed on 31 January 2023
UK
Closed to new members
Drax 2019
Scheme
De\ufb01ned bene\ufb01t \ufb01nal salary
on transfer in 2019
UK
Closed to new members on 31
Drax Group Personal Pension Plan
De\ufb01ned contribution
January 2023
UK
Drax Energy Solutions Personal Closed to new members on 31
Pension Plan
De\ufb01ned contribution
January 2023
UK
Opus Energy Group Personal Closed to new members on 31
Pension Plan
De\ufb01ned contribution
January 2023
UK
My Drax Retirement Savings Section
of the Aon MasterTrust 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
On 31 January 2023 the DPG ESPS\u2019s assets and liabilities were transferred to the Drax 2019 Scheme, and the DPG ESPS was wound up on 17 April 2023. The Drax 2019 Scheme continues 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. Trustee governance (de\ufb01ned bene\ufb01t pension schemes) The Drax 2019 Scheme is administered by a sole Trustee (PAN Trustees UK LLP), which was appointed on 30 November 2022 and is legally separate from the Group. The Trustee is required by law to act in the interest of all relevant bene\ufb01ciaries and is responsible for the investment policy for the assets and the day-to-day administration of the de\ufb01ned bene\ufb01t scheme. Prior to 30 November 2022, the Drax 2019 Scheme was administered by a board of Trustees composed of representatives of both the employer and employees. A separate board of Trustees also administered the DPG ESPS while it was active. 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 schemes 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 2023 have been prepared in accordance with specialist, third-party 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
2023 2022
\u00a3m \u00a3m
Total included in staff costs (note 6.1)
21.4
16.7
As at 31 December 2023, contributions of \u00a30.4 million (2022: \u00a31.5 million) due in respect of the current reporting period had not been paid over to the schemes. This has been recognised within Trade and other payables and contract liabilities within the Consolidated balance sheet. 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 The Group currently operates one de\ufb01ned bene\ufb01t scheme, following the closure of the DPG ESPS in January 2023. Previously, any pension surplus or obligation within each scheme was shown gross on the Consolidated balance sheet, as there was no legal right of offset between the two schemes. On 31 January 2023, all assets and liabilities of the DPG ESPS were transferred to the Drax 2019 Scheme and are no longer segregated from the existing assets and liabilities of the Drax 2019 Scheme for funding purposes. Therefore a combined net surplus will be presented going forward. The net pension surplus is as follows (shown separately for the two schemes at the prior reporting date):
As at 31 December
2023 2022
\u00a3m \u00a3m
DPG ESPS
\u2013
32.4
Drax 2019
Scheme
18.4
6.1
Total net surplus recognised in the Consolidated balance sheet
18.4
38.5
The Drax 2019 Scheme is referred to as \u201cthe Scheme\u201d below. The DPG ESPS and the Drax 2019 Scheme are collectively referred to as \u201cthe Schemes\u201d. At 31 December 2023, application of the accounting assumptions used in relation to the Scheme, which are described in further detail below, continued to result in a net position of surplus assets over liabilities. The 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 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. 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 continued to build up pension bene\ufb01ts. All members of the DPG ESPS transferred to the Scheme during 2023. The Scheme is a de\ufb01ned bene\ufb01t \ufb01nal salary plan, where employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on attainment of retirement age (or earlier withdrawal or death). Pensions are payable for life and updated in line with inflationary increases. 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 Trustee 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 Scheme 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 Scheme exposes the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be:
Investment risk
The Scheme\u2019s liabilities are calculated using a discount rate set with reference to corporate bond yields; if
assets underperform against this yield, this creates a de\ufb01cit. The Scheme holds a signi\ufb01cant proportion of
growth assets (diversi\ufb01ed growth funds, direct lending, credit, leveraged equities 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.
Discount rate risk
A decrease in corporate bond yields will increase the value placed upon the Scheme\u2019s liabilities, although
this will be partially offset by an increase in the value of the Scheme\u2019s bond holdings.
Longevity risk
The majority of the Scheme\u2019s 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 Scheme.
In\ufb02ation risk
The majority of the Scheme\u2019s obligations to pay bene\ufb01ts are linked to RPI 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 Scheme has a signi\ufb01cant holding in liability-driven investments to protect against in\ufb02ation risk.
Credit risk
Around 95% of the Scheme\u2019s overall funded liabilities are currently hedged against interest rates and in\ufb02ation
using liability-driven investments. The Scheme hedges interest rate risks on a statutory and long-term funding
basis (gilts driven) 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 Scheme\u2019s holding in
corporate bonds mitigates this risk to some extent.
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 Trustee ensures certain bene\ufb01ts are payable on death before retirement. A quali\ufb01ed third-party actuary, Aon, carried out the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2022. The valuation made allowance for the DPG ESPS assets and liabilities that were transferred into the Drax 2019 Scheme on 31 January 2023. The actuarial review at 31 December 2023 is based on the same membership and other data as this funding valuation. The Scheme\u2019s Board accepted the advice of the actuary and approved the use of these assumptions for the purpose of assessing the Scheme\u2019s costs. The result of the latest funding valuation has been adjusted to 31 December 2023, taking into account experience over the period since 31 March 2022, 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 across the current and prior year are set out below. Where absolute assumptions differed between the Schemes in the prior year, reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average is shown.
As at 31 December
2023 2022
% p.a. % p.a.
Discount rate
4.6
4.8
In\ufb02ation (RPI)
2.8
3.0
Rate of increase in pensions in payment and deferred pensions
2.7
2.8
Rate of increase in pensionable salaries
3.2
3.6
Whilst actual inflation has been high during 2023, long-term expectations as at 31 December 2023 are slightly lower than long-term expectations as at 31 December 2022. The de\ufb01ned bene\ufb01t obligation for the Scheme as at 31 December 2023 allows for expected bene\ufb01t increases that will be awarded in 2024, based on known 2023 indices. Mortality assumptions are based on recent actual mortality experience of the Scheme\u2019s members and allow for expected future changes in mortality rates. The assumptions are that a member aged 60 in 2023 will live, on average, for a further 25 years if they are male (2022: 26 years) and for a further 27 years if they are female (2022: 28 years). Life expectancy at age 60 for male and female non-pensioners currently aged 45 is assumed to be 26 and 28 years respectively (2022: 27 and 29 years respectively). The DPG ESPS liabilities were transferred into the Drax 2019 Scheme in 2023 and the weighted average duration of the Drax 2019 Scheme (including DPG ESPS) at 31 December 2023 based on the IAS 19 position was 16 years. The weighted average duration of the DPG ESPS and the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 18 years and 21 years respectively. The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (28%), former employees of the Group who are yet to retire (10%) and retired pensioners (62%). 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
2023 2022
\u00a3m \u00a3m
Fair value of plan assets
220.3
219.6
De\ufb01ned bene\ufb01t obligation
(201.9)
(181.1)
Net surplus recognised in the Consolidated balance sheet
18.4
38.5
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
2023 2022
\u00a3m \u00a3m
Included in staff costs (note 6.1):
Current service cost
2.3
4.7
Included in interest receivable (note 2.5):
Interest income on net de\ufb01ned bene\ufb01t surplus
(2.1)
(1.0)
Total amount recognised in the Consolidated income statement
0.2
3.7
Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
De\ufb01ned bene\ufb01t obligation at 1 January
181.1
320.9
Current service cost
2.3
4.7
Interest cost
8.0
5.7
Actuarial losses/(gains)
21.8
(123.6)
Bene\ufb01ts paid
(11.3)
(26.6)
De\ufb01ned bene\ufb01t obligation at 31 December
201.9
181.1
The actuarial losses of \u00a321.8 million (2022: gains of \u00a3123.6 million) reflect losses of \u00a30.3 million (2022: gains of \u00a3133.3 million) arising from changes in \ufb01nancial assumptions, losses of \u00a322.4 million (2022: \u00a39.9 million) arising from scheme experience and gains of \u00a30.9 million (2022: \u00a30.2 million) arising from changes in demographic assumptions. The losses due to changes in \ufb01nancial assumptions principally reflect the increase in the present value of the Scheme\u2019s liabilities arising as a result of the movement in discount rate assumption to 4.6% p.a. (2022: 4.8% p.a.) following a decrease in corporate bond yields. This was partly offset by a slight decrease in overall long-term inflationary assumptions, reflecting market pricing, and a decrease in the real salary assumption adopted relative to inflation. Changes in the fair value of plan assets are as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Fair value of plan assets at 1 January
219.6
369.8
Interest on plan assets
10 .1
6.7
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Employer contributions
8.9
17.7
Bene\ufb01ts paid
(11.3)
(26.6)
Fair value of plan assets at 31 December
220.3
219.6
Employer contributions included payments totalling \u00a34.3 million (2022: \u00a37.6 million) to reduce the actuarial de\ufb01cit related to the legacy DPG ESPS. There were contributions of \u00a30.2 million outstanding at the end of the year relating to the Drax 2019 Scheme (2022: \u00a33.2 million for both Schemes). The actual return on plan assets in the period was a gain of \u00a33.1 million (2022: loss of \u00a3141.3 million). Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a328.8 million (2022: \u00a324.4 million) were recognised in the Consolidated statement of comprehensive income. These are made up as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Actuarial (losses)/gains on de\ufb01ned bene\ufb01t obligation
(21.8)
123.6
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Total remeasurement losses recognised in other comprehensive income
(28.8)
(24.4)
The fair values of the major categories of plan assets were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Gilts
110.3
117. 2
Equities
24.1
6.5
Fixed interest bonds
5.0
4.8
Property
15.1
28.6
Investment funds
4.5
4.3
Cash and other assets
61.3
58.2
Fair value of total plan assets
220.3
219.6
(1)
(2)
(3)
(1) As at 31 December 2023, the Scheme\u2019s target long-term asset strategy was: (34%) in multi-asset funds (with the key underlying asset strategies being equities, listed real
assets and credit), direct lending (12%), hedge funds (3%), long-lease property (7%) and liability driven investing/cash (44%). There is a plan to transition the current asset
holding to the long-term strategy by April 2024, noting that the precise allocations between the different asset classes may be adjusted as market conditions change.
As 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 was (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 \u00a325.8 million (2022: \u00a329.9 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 Scheme\u2019s surplus. The following table provides an indication of the sensitivity of the net
pension surplus at 31 December 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 obligations, this
could result in a material change to the amount recognised.
Increase/(decrease) in net surplus
2023 2022
As at 31 December \u00a3m \u00a3m
Discount rate
\u2013 Increase
0.25%
7.9
8.0
\u2013 Decrease
0.25%
(8.2)
(8.5)
In\ufb02ation rate
\u2013 Increase
0.25%
(6.5)
(7.0)
\u2013 Decrease
0.25%
6.3
6.6
Life expectancy
\u2013 Increase
1 year
(7.2)
(6.2)
\u2013 Decrease
1 year
7.4
6.4
(1)
(1) The sensitivity of the Scheme\u2019s 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, these risks are mitigated by the Scheme being around 95% hedged
against movements in Government bonds and inflation of appropriate duration. This means from a discount rate perspective that
the Scheme is broadly only exposed to changes in credit spreads plus around 5% of changes in underlying gilt yields and, for inflation,
the Scheme\u2019s exposure is around 5% 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 Trustee and the Group must agree the contributions required (if any) such that
the Scheme is fully funded over time on the basis of suitably prudent assumptions.
The Group expects to make total contributions of \u00a31.9 million to the Scheme during the 12 months ending 31 December 2024.
The latest actuarial valuation of the Drax 2019 Scheme (which included the DPG ESPS) which was carried out as at 31 March 2022
resulted in a funding surplus of \u00a313.9 million and so no de\ufb01cit recovery plan was required.
The Group agreed to make additional contributions to the Drax 2019 Scheme from February 2023 to June 2023 and an additional
payment in 2026 to fully fund the Scheme on a low-risk basis, as agreed between the Group and Trustee at the time, through the
provision of a surety bond. At this point, the Scheme is expected to be self-suf\ufb01cient, 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 Scheme provide the sponsors of the Scheme with an unconditional right to a refund of surplus assets assuming
the gradual settlement of plan liabilities over time. Based on these rights, any net surplus in the Scheme is recognised in full in the
Consolidated balance sheet.
In June 2023, the UK High Court issued a ruling in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others
relating to the validity of certain historical pension changes. This case may have implications for other de\ufb01ned bene\ufb01t schemes in
the UK, although is subject to possible appeal in 2024. The Group are aware of this legal ruling and are monitoring developments.
The Group will assess whether there is any potential impact related to the Drax 2019 Scheme once the case is concluded and as
such no related quanti\ufb01cation has been determined.
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 section of the Remuneration Committee report on pages 144\u2013160.
Year ended 31 December
2023 2022
\u00a3000 \u00a3000
Short-term employee bene\ufb01ts
7,326
7,531
Share-based payments
4,047
3,964
Post-employment bene\ufb01ts
414
489
Total remuneration
11,787
11,984
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 18 (2022: 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-685": { "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
monthly number of employees in Operations (staff based at Pellet 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 144.
Staff costs (including Executive directors)
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Wages and salaries
240.4
201.8
Social security costs
22.3
21.6
De\ufb01ned bene\ufb01t pension service cost (note 6.3)
2.3
4.7
De\ufb01ned contribution pension cost (note 6.3)
21.4
16.7
Share-based payments (note 6.2)
13.8
9.6
Termination bene\ufb01ts
1.5
1.4
Total staff costs
301.7
255.8
Staff costs capitalised
(7.7)
(6.9)
Staff costs included in operating and administrative expenses (note 2.3)
294.0
248.9
Average monthly number of people employed (including Executive directors)
Year ended 31 December
2023 2022
(number) (number)
Operations (Pellet Production)
781
696
Operations (Generation)
675
685
Customers
892
866
Central corporate and commercial functions
1,072
880
Total average monthly number of people employed
3,420
3,127
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-636": { "value": "6.2 Share-based payments The Group operates \ufb01ve 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, One Drax Awards which are recognition and retention awards granted to certain employees below senior management, the Employee Stock Purchase Plan (ESPP) for all qualifying US and Canada-based employees, and the Save As You Earn (SAYE) scheme for all UK qualifying employees. 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 description of each scheme and the number of options outstanding at the reporting date. Accounting policy The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is accelerated at the point of cancellation. If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance with IFRS 2. Costs recognised in the Consolidated income statement in relation to share-based payments during the year were as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
LTIP (granted from 2020)
8.7
5.6
PSP (granted from 2017 to 2019)
\u2013
0.5
DSP (granted from 2017)
0.5
0.4
One Drax Awards
1.4
1.0
ESPP
0.1
\u2013
SAYE
3.1
2.1
Total share-based payment expense included within staff costs (note 6.1)
13.8
9.6
Movements in the number of share options outstanding at the reporting date for each scheme is shown below. The following schemes are bonus award schemes and therefore have no exercise price.
LTIP PSP DSP One Drax Awards
(number) (number) (number) (number)
At 1 January 2022
4,570,228
716,422
567,426
216,066
Granted
1,399,952
\u2013
71,399
143,439
Forfeited
(238,121)
(46,716)
(5,598)
(11,235)
Exercised
\u2013
(622,989)
(265,482)
(211,265)
Expired
(32,688)
(46,717)
\u2013
(258)
At 1 January 2023
5,699,371
\u2013
367,745
136,747
Granted
2,282,798
\u2013
101,657
262,526
Forfeited
(123,776)
\u2013
\u2013
(2,738)
Exercised
(2,750,860)
\u2013
(208,627)
(140,669)
Expired
(14,370)
\u2013
\u2013
\u2013
At 31 December 2023
5,
0
93,163
\u2013
260,775
255,866
The following schemes are share purchase schemes and therefore weighted average exercise prices are presented.
ESPP
SAYE
Three-year Five-year
weighted weighted
Weighted average average average
exercise price ESPP exercise price SAYE three-year exercise price SAYE \ufb01ve-year
(pence) (number) (pence) (number) (pence) (number)
At 1 January 2022
\u2013
\u2013
149
8,376,823
140
2,539,710
Granted
\u2013
\u2013
563
700,799
563
107,122
Forfeited
\u2013
\u2013
176
(222,311)
154
(80,928)
Exercised
\u2013
\u2013
206
(545,220)
188
(72,097)
Expired
\u2013
\u2013
304
(146,423)
254
(28,945)
At 1 January 2023
\u2013
\u2013
178
8 ,163,6 6 8
155
2,464,862
Granted
469
64,497
498
1
,9
9 6 ,117
498
19
7,
82 5
Forfeited
\u2013
\u2013
327
(46,063)
432
(8,228)
Exercised
\u2013
\u2013
127
(6,831,232)
219
(15,727)
Expired
\u2013
\u2013
509
(395,588)
496
(52,923)
At 31 December 2023
469
64,497
470
2,886,902
173
2,585,809
Key information about each active scheme for options granted and exercised in the current and prior year is presented below.
Year ended 31 December 2023
Scheme
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE \ufb01ve-year
Weighted average share price of options
exercised during the year at the date
of exercise (pence)
621
621
621
\u2013
554
604
Number of options exercisable at reporting
date
119,102
13,351
\u2013
\u2013
25,207
712
Range of exercise price of options Between Between
outstanding at reporting date (pence)
469
127 and 563 127 and 563
Weighted average remaining
contractual life (months)
17
14
3
2
22
20
Year ended 31 December 2022
Scheme
LTIP
PSP
DSP
One Drax Awards
SAYE three-year
SAYE \ufb01ve-year
Weighted average share price of options
exercised during the year at the date
of exercise (pence)
\u2013
711
729
729
729
722
Number of options exercisable at reporting
date
\u2013
\u2013
17,058
\u2013
605
\u2013
Range of exercise price of options Between Between
outstanding at reporting date (pence)
127
and 563
127 and 563
Weighted average remaining
contractual life (months)
13
\u2013
11
3
8
30
The fair value of share options is calculated using a Monte-Carlo simulation if the scheme vests subject to market conditions, or the Black-Scholes model otherwise. The Monte-Carlo simulation takes into account the estimated probability of different levels of vesting for share options with market based conditions and produces a probability-based fair value calculation. The key inputs to both the Monte-Carlo and Black-Scholes valuation models are the share price at the date of grant, exercise price where applicable, dividend yield on the underlying share, time to expiry of the option, expected volatility and risk-free interest rate. Expected volatility is determined by calculating the historical volatility of the Group\u2019s share price. The expected life used in the valuations is based on the length of the vesting period, adjusted, based on management\u2019s best estimate, for the effects of non- transferability, exercise restrictions and behavioural considerations. The risk-free interest rate is determined using the rate for the equivalent length zero-coupon UK Government bond for each scheme. Information about the valuation models used for options granted during the current and prior year, and relevant inputs to those models is set out in the tables below.
Year ended 31 December 2023
Scheme
LTIP
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE \ufb01ve-year
31 March 5 September 31 March 31 March 1 September 12 April 12 April
Grant date 2023 2023 2023 2023 2023 2023 2023
Monte- Monte- Black- Black- Black- Black- Black-
Valuation model used Carlo Carlo Scholes Scholes Scholes Scholes Scholes
Share price at grant date (pence)
608
545
608
608
547
641
641
Exercise price (pence)
\u2013
\u2013
\u2013
\u2013
469
498
498
Dividend yield
2.50%
2.50%
\u2013
3.94%
3.57%
4.10%
4.54%
Vesting period of options granted
3 years
3 years
3 years
1 year
6 months
3 years
5 years
Expected volatility
39.92%
39.92%
36.35%
37.25%
26.95%
36.35%
38.95%
Annual risk-free interest rate
3.56%
3.56%
4.94%
5.17%
4.97%
4.94%
4.62%
Weighted average fair value of options
granted at measurement date (pence)
481
481
608
585
110
205
220
Fair value of all options granted (\u00a3m)
9.4
1.5
0.6
1.5
0 .1
4.1
0.4
Year ended 31 December 2022
Scheme
LTIP
DSP
One Drax Awards
SAYE three-year
SAYE \ufb01ve-year
18 March 18 March 18 March 12 April 12 April
Grant date 2022 2022 2022 2022 2022
Valuation model used
Monte-
Black- Black- Black- Black-
Carlo Scholes Scholes Scholes Scholes
Share price at grant date (pence)
726
726
726
783
783
Exercise price (pence)
\u2013
\u2013
\u2013
563
563
Dividend yield
4.24%
\u2013
\u2013
2.85%
3.15%
Vesting period of options granted
3 years
3 years
1 year
3 years
5 years
Expected volatility
40.19%
4 0.19%
4 0.19%
40.98%
38.29%
Annual risk-free interest rate
1.20%
1.20%
1.20%
2.46%
2.38%
Weighted average fair value of options granted
at measurement date (pence)
697
726
726
293
291
Fair value of all options granted (\u00a3m)
9.8
0.5
1.0
2.1
0.3
LTIP The LTIP was introduced in 2020 for Executive directors and senior employees. This replaced the PSP scheme (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 50% of the shares 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 the remaining 50% of shares is conditional upon performance of cumulative Adjusted EPS (de\ufb01ned to be derived from Adjusted results) over three years. Additionally, each time a dividend is paid during the vesting period of the scheme, participants are entitled to receive further share options of equivalent value to the dividends, determined by the market value of shares on the ex-dividend date, which are formally granted on the vesting date for each scheme. The fair value of LTIP options is calculated with the support of external IFRS 2 specialists due to the TSR vesting condition being market based and therefore requiring a Monte-Carlo simulation. PSP The PSP was in place for Executive directors and senior employees from 2017 to 2019. 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 50% of shares was conditional upon whether the Group\u2019s TSR matched or outperformed an index (determined in accordance with the scheme rules) over three years and vesting of the remaining 50% of shares was conditional upon performance against the Group Scorecard (see page 151). The last of the outstanding PSP options expired during 2022. DSP The Group operates the DSP, under which Executive directors receive 40% of their annual bonus in share options. DSP awards are granted at nil cost and vest after three years subject to continued employment or \u201cgood leaver\u201d termination provisions. Each time a dividend is paid during the vesting period of the scheme, participants are entitled to receive further share options of equivalent value to the dividends, determined by the market value of shares on the ex-dividend date, which are formally granted on the vesting date for each scheme. As such, a dividend yield of 0% is input into the Black-Scholes calculation to reflect that the fair value of each share option is not reduced by dividends paid out over the vesting period. One Drax Awards One Drax Awards are granted 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 at the grant date. ESPP From September 2023, participation in the new ESPP scheme is offered to all US and Canada qualifying employees biannually. Under the ESPP, employees are granted the option to purchase shares at a 15% discount to the market price of Drax Group plc shares, based on the lower of the market price at the grant date and the market price at the vesting date. The options are exercisable at the end of six-month savings contracts, under which an employee selects a \ufb01xed percentage of their salary to be put towards the scheme. SAYE Participation in the SAYE scheme (Sharesave) is offered to all UK qualifying employees every April. Options are granted for employees to acquire shares at a discount of 20% to the market price of Drax Group plc shares, based on the average closing price for the \ufb01ve days immediately preceding 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 153 and 154 . ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-748": { "value": "Accounting policy The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is accelerated at the point of cancellation. If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance with IFRS 2. 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 schemes 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-765": { "value": "Accounting policy The LTIP, PSP, DSP, One Drax Awards, ESPP 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 vesting conditions are factored into the calculation of the fair value of options granted at the date of grant and are not subsequently remeasured. If share options are cancelled due to non-vesting conditions not being met, for example employees withdrawing (by choice) part way through the vesting period or not exercising their options in the exercise period after they vest, the charge for such options is accelerated at the point of cancellation. If share options are forfeited due to employees failing to meet continuing service conditions of a grant, or failing to meet non-market performance conditions, then these options do not attract a charge and any previously recognised charge is reversed, in accordance with IFRS 2. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-665": { "value": "
LTIP PSP DSP One Drax Awards
(number) (number) (number) (number)
At 1 January 2022
4,570,228
716,422
567,426
216,066
Granted
1,399,952
\u2013
71,399
143,439
Forfeited
(238,121)
(46,716)
(5,598)
(11,235)
Exercised
\u2013
(622,989)
(265,482)
(211,265)
Expired
(32,688)
(46,717)
\u2013
(258)
At 1 January 2023
5,699,371
\u2013
367,745
136,747
Granted
2,282,798
\u2013
101,657
262,526
Forfeited
(123,776)
\u2013
\u2013
(2,738)
Exercised
(2,750,860)
\u2013
(208,627)
(140,669)
Expired
(14,370)
\u2013
\u2013
\u2013
At 31 December 2023
5,
0
93,163
\u2013
260,775
255,866
The following schemes are share purchase schemes and therefore weighted average exercise prices are presented.
ESPP
SAYE
Three-year Five-year
weighted weighted
Weighted average average average
exercise price ESPP exercise price SAYE three-year exercise price SAYE \ufb01ve-year
(pence) (number) (pence) (number) (pence) (number)
At 1 January 2022
\u2013
\u2013
149
8,376,823
140
2,539,710
Granted
\u2013
\u2013
563
700,799
563
107,122
Forfeited
\u2013
\u2013
176
(222,311)
154
(80,928)
Exercised
\u2013
\u2013
206
(545,220)
188
(72,097)
Expired
\u2013
\u2013
304
(146,423)
254
(28,945)
At 1 January 2023
\u2013
\u2013
178
8 ,163,6 6 8
155
2,464,862
Granted
469
64,497
498
1
,9
9 6 ,117
498
19
7,
82 5
Forfeited
\u2013
\u2013
327
(46,063)
432
(8,228)
Exercised
\u2013
\u2013
127
(6,831,232)
219
(15,727)
Expired
\u2013
\u2013
509
(395,588)
496
(52,923)
At 31 December 2023
469
64,497
470
2,886,902
173
2,585,809
", "dimensions": { "concept": "ifrs-full:DisclosureOfNumberAndWeightedAverageExercisePricesOfShareOptionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-666": { "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
2023 2022
\u00a3m \u00a3m
Total included in staff costs (note 6.1)
21.4
16.7
As at 31 December 2023, contributions of \u00a30.4 million (2022: \u00a31.5 million) due in respect of the current reporting period had not been paid over to the schemes. This has been recognised within Trade and other payables and contract liabilities within the Consolidated balance sheet. 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-667": { "value": "
De\ufb01ned bene\ufb01t schemes
The Group currently operates one de\ufb01ned bene\ufb01t scheme, following the closure of the DPG ESPS in January 2023. Previously, any
pension surplus or obligation within each scheme was shown gross on the Consolidated balance sheet, as there was no legal right of
offset between the two schemes. On 31 January 2023, all assets and liabilities of the DPG ESPS were transferred to the Drax 2019
Scheme and are no longer segregated from the existing assets and liabilities of the Drax 2019 Scheme for funding purposes. Therefore
a combined net surplus will be presented going forward. The net pension surplus is as follows (shown separately for the two schemes
at the prior reporting date):
As at 31 December
2023 2022
\u00a3m \u00a3m
DPG ESPS
\u2013
32.4
Drax 2019
Scheme
18.4
6.1
Total net surplus recognised in the Consolidated balance sheet
18.4
38.5
The Drax 2019 Scheme is referred to as \u201cthe Scheme\u201d below. The DPG ESPS and the Drax 2019 Scheme are collectively referred to as
\u201cthe Schemes\u201d. At 31 December 2023, application of the accounting assumptions used in relation to the Scheme, which are described
in further detail below, continued to result in a net position of surplus assets over liabilities.
The 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
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.
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 continued to build up pension bene\ufb01ts. All members of the DPG
ESPS transferred to the Scheme during 2023.
The Scheme is a de\ufb01ned bene\ufb01t \ufb01nal salary plan, where employees are entitled to retirement bene\ufb01ts based on \ufb01nal salary on
attainment of retirement age (or earlier withdrawal or death). Pensions are payable for life and updated in line with inflationary increases.
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 Trustee 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 Scheme 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 Scheme exposes the Group to actuarial and other risks, the most signi\ufb01cant of which are considered to be:
Investment risk
The Scheme\u2019s liabilities are calculated using a discount rate set with reference to corporate bond yields; if
assets underperform against this yield, this creates a de\ufb01cit. The Scheme holds a signi\ufb01cant proportion of
growth assets (diversi\ufb01ed growth funds, direct lending, credit, leveraged equities 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.
Discount rate risk
A decrease in corporate bond yields will increase the value placed upon the Scheme\u2019s liabilities, although
this will be partially offset by an increase in the value of the Scheme\u2019s bond holdings.
Longevity risk
The majority of the Scheme\u2019s 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 Scheme.
In\ufb02ation risk
The majority of the Scheme\u2019s obligations to pay bene\ufb01ts are linked to RPI 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 Scheme has a signi\ufb01cant holding in liability-driven investments to protect against in\ufb02ation risk.
Credit risk
Around 95% of the Scheme\u2019s overall funded liabilities are currently hedged against interest rates and in\ufb02ation
using liability-driven investments. The Scheme hedges interest rate risks on a statutory and long-term funding
basis (gilts driven) 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 Scheme\u2019s holding in
corporate bonds mitigates this risk to some extent.
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 Trustee ensures certain bene\ufb01ts are payable on death
before retirement.
A quali\ufb01ed third-party actuary, Aon, carried out the most recent funding valuation of the Drax 2019 Scheme as at 31 March 2022.
The valuation made allowance for the DPG ESPS assets and liabilities that were transferred into the Drax 2019 Scheme on
31 January 2023. The actuarial review at 31 December 2023 is based on the same membership and other data as this funding
valuation. The Scheme\u2019s Board accepted the advice of the actuary and approved the use of these assumptions for the purpose
of assessing the Scheme\u2019s costs.
The result of the latest funding valuation has been adjusted to 31 December 2023, taking into account experience over the period
since 31 March 2022, 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 across the current and prior year are set out below. Where absolute assumptions differed
between the Schemes in the prior year, reflecting differences in the expected duration of the Schemes\u2019 liabilities, a weighted average
is shown.
As at 31 December
2023 2022
% p.a. % p.a.
Discount rate
4.6
4.8
In\ufb02ation (RPI)
2.8
3.0
Rate of increase in pensions in payment and deferred pensions
2.7
2.8
Rate of increase in pensionable salaries
3.2
3.6
Whilst actual inflation has been high during 2023, long-term expectations as at 31 December 2023 are slightly lower than long-term
expectations as at 31 December 2022. The de\ufb01ned bene\ufb01t obligation for the Scheme as at 31 December 2023 allows for expected
bene\ufb01t increases that will be awarded in 2024, based on known 2023 indices.
Mortality assumptions are based on recent actual mortality experience of the Scheme\u2019s members and allow for expected future
changes in mortality rates. The assumptions are that a member aged 60 in 2023 will live, on average, for a further 25 years if they
are male (2022: 26 years) and for a further 27 years if they are female (2022: 28 years). Life expectancy at age 60 for male and female
non-pensioners currently aged 45 is assumed to be 26 and 28 years respectively (2022: 27 and 29 years respectively).
The DPG ESPS liabilities were transferred into the Drax 2019 Scheme in 2023 and the weighted average duration of the Drax 2019
Scheme (including DPG ESPS) at 31 December 2023 based on the IAS 19 position was 16 years. The weighted average duration of
the DPG ESPS and the Drax 2019 Scheme at 31 December 2022 based on the IAS 19 position was 18 years and 21 years respectively.
The Drax 2019 Scheme de\ufb01ned bene\ufb01t obligation includes bene\ufb01ts for current employees of the Group (28%), former employees
of the Group who are yet to retire (10%) and retired pensioners (62%).
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
2023 2022
\u00a3m \u00a3m
Fair value of plan assets
220.3
219.6
De\ufb01ned bene\ufb01t obligation
(201.9)
(181.1)
Net surplus recognised in the Consolidated balance sheet
18.4
38.5
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
2023 2022
\u00a3m \u00a3m
Included in staff costs (note 6.1):
Current service cost
2.3
4.7
Included in interest receivable (note 2.5):
Interest income on net de\ufb01ned bene\ufb01t surplus
(2.1)
(1.0)
Total amount recognised in the Consolidated income statement
0.2
3.7
Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
De\ufb01ned bene\ufb01t obligation at 1 January
181.1
320.9
Current service cost
2.3
4.7
Interest cost
8.0
5.7
Actuarial losses/(gains)
21.8
(123.6)
Bene\ufb01ts paid
(11.3)
(26.6)
De\ufb01ned bene\ufb01t obligation at 31 December
201.9
181.1
The actuarial losses of \u00a321.8 million (2022: gains of \u00a3123.6 million) reflect losses of \u00a30.3 million (2022: gains of \u00a3133.3 million) arising
from changes in \ufb01nancial assumptions, losses of \u00a322.4 million (2022: \u00a39.9 million) arising from scheme experience and gains of
\u00a30.9 million (2022: \u00a30.2 million) arising from changes in demographic assumptions.
The losses due to changes in \ufb01nancial assumptions principally reflect the increase in the present value of the Scheme\u2019s liabilities
arising as a result of the movement in discount rate assumption to 4.6% p.a. (2022: 4.8% p.a.) following a decrease in corporate bond
yields. This was partly offset by a slight decrease in overall long-term inflationary assumptions, reflecting market pricing, and a
decrease in the real salary assumption adopted relative to inflation.
Changes in the fair value of plan assets are as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Fair value of plan assets at 1 January
219.6
369.8
Interest on plan assets
10 .1
6.7
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Employer contributions
8.9
17.7
Bene\ufb01ts paid
(11.3)
(26.6)
Fair value of plan assets at 31 December
220.3
219.6
Employer contributions included payments totalling \u00a34.3 million (2022: \u00a37.6 million) to reduce the actuarial de\ufb01cit related to the
legacy DPG ESPS. There were contributions of \u00a30.2 million outstanding at the end of the year relating to the Drax 2019 Scheme
(2022: \u00a33.2 million for both Schemes).
The actual return on plan assets in the period was a gain of \u00a33.1 million (2022: loss of \u00a3141.3 million).
Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a328.8 million (2022: \u00a324.4 million) were recognised in the
Consolidated statement of comprehensive income. These are made up as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Actuarial (losses)/gains on de\ufb01ned bene\ufb01t obligation
(21.8)
123.6
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Total remeasurement losses recognised in other comprehensive income
(28.8)
(24.4)
The fair values of the major categories of plan assets were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Gilts
110.3
117. 2
Equities
24.1
6.5
Fixed interest bonds
5.0
4.8
Property
15.1
28.6
Investment funds
4.5
4.3
Cash and other assets
61.3
58.2
Fair value of total plan assets
220.3
219.6
(1) (2) (3) (1) As at 31 December 2023, the Scheme\u2019s target long-term asset strategy was: (34%) in multi-asset funds (with the key underlying asset strategies being equities, listed real assets and credit), direct lending (12%), hedge funds (3%), long-lease property (7%) and liability driven investing/cash (44%). There is a plan to transition the current asset holding to the long-term strategy by April 2024, noting that the precise allocations between the different asset classes may be adjusted as market conditions change. As 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 was (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 \u00a325.8 million (2022: \u00a329.9 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 Scheme\u2019s surplus. The following table provides an indication of the sensitivity of the net pension surplus at 31 December 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 obligations, this could result in a material change to the amount recognised.
Increase/(decrease) in net surplus
2023 2022
As at 31 December \u00a3m \u00a3m
Discount rate
\u2013 Increase
0.25%
7.9
8.0
\u2013 Decrease
0.25%
(8.2)
(8.5)
In\ufb02ation rate
\u2013 Increase
0.25%
(6.5)
(7.0)
\u2013 Decrease
0.25%
6.3
6.6
Life expectancy
\u2013 Increase
1 year
(7.2)
(6.2)
\u2013 Decrease
1 year
7.4
6.4
(1) (1) The sensitivity of the Scheme\u2019s 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, these risks are mitigated by the Scheme being around 95% hedged against movements in Government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Scheme is broadly only exposed to changes in credit spreads plus around 5% of changes in underlying gilt yields and, for inflation, the Scheme\u2019s exposure is around 5% 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 Trustee and the Group must agree the contributions required (if any) such that the Scheme is fully funded over time on the basis of suitably prudent assumptions. The Group expects to make total contributions of \u00a31.9 million to the Scheme during the 12 months ending 31 December 2024. The latest actuarial valuation of the Drax 2019 Scheme (which included the DPG ESPS) which was carried out as at 31 March 2022 resulted in a funding surplus of \u00a313.9 million and so no de\ufb01cit recovery plan was required. The Group agreed to make additional contributions to the Drax 2019 Scheme from February 2023 to June 2023 and an additional payment in 2026 to fully fund the Scheme on a low-risk basis, as agreed between the Group and Trustee at the time, through the provision of a surety bond. At this point, the Scheme is expected to be self-suf\ufb01cient, 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 Scheme provide the sponsors of the Scheme with an unconditional right to a refund of surplus assets assuming the gradual settlement of plan liabilities over time. Based on these rights, any net surplus in the Scheme is recognised in full in the Consolidated balance sheet. In June 2023, the UK High Court issued a ruling in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others relating to the validity of certain historical pension changes. This case may have implications for other de\ufb01ned bene\ufb01t schemes in the UK, although is subject to possible appeal in 2024. The Group are aware of this legal ruling and are monitoring developments. The Group will assess whether there is any potential impact related to the Drax 2019 Scheme once the case is concluded and as such no related quanti\ufb01cation has been determined. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-695": { "value": "Changes in the present value of the de\ufb01ned bene\ufb01t obligation of the Schemes is as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
De\ufb01ned bene\ufb01t obligation at 1 January
181.1
320.9
Current service cost
2.3
4.7
Interest cost
8.0
5.7
Actuarial losses/(gains)
21.8
(123.6)
Bene\ufb01ts paid
(11.3)
(26.6)
De\ufb01ned bene\ufb01t obligation at 31 December
201.9
181.1
The actuarial losses of \u00a321.8 million (2022: gains of \u00a3123.6 million) reflect losses of \u00a30.3 million (2022: gains of \u00a3133.3 million) arising from changes in \ufb01nancial assumptions, losses of \u00a322.4 million (2022: \u00a39.9 million) arising from scheme experience and gains of \u00a30.9 million (2022: \u00a30.2 million) arising from changes in demographic assumptions. The losses due to changes in \ufb01nancial assumptions principally reflect the increase in the present value of the Scheme\u2019s liabilities arising as a result of the movement in discount rate assumption to 4.6% p.a. (2022: 4.8% p.a.) following a decrease in corporate bond yields. This was partly offset by a slight decrease in overall long-term inflationary assumptions, reflecting market pricing, and a decrease in the real salary assumption adopted relative to inflation. Changes in the fair value of plan assets are as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Fair value of plan assets at 1 January
219.6
369.8
Interest on plan assets
10 .1
6.7
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Employer contributions
8.9
17.7
Bene\ufb01ts paid
(11.3)
(26.6)
Fair value of plan assets at 31 December
220.3
219.6
Employer contributions included payments totalling \u00a34.3 million (2022: \u00a37.6 million) to reduce the actuarial de\ufb01cit related to the legacy DPG ESPS. There were contributions of \u00a30.2 million outstanding at the end of the year relating to the Drax 2019 Scheme (2022: \u00a33.2 million for both Schemes). The actual return on plan assets in the period was a gain of \u00a33.1 million (2022: loss of \u00a3141.3 million). Remeasurement losses on the de\ufb01ned bene\ufb01t pension scheme of \u00a328.8 million (2022: \u00a324.4 million) were recognised in the Consolidated statement of comprehensive income. These are made up as follows:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Actuarial (losses)/gains on de\ufb01ned bene\ufb01t obligation
(21.8)
123.6
Remeasurement losses on fair value of plan assets
(7.0)
(148.0)
Total remeasurement losses recognised in other comprehensive income
(28.8)
(24.4)
The fair values of the major categories of plan assets were as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Gilts
110.3
117. 2
Equities
24.1
6.5
Fixed interest bonds
5.0
4.8
Property
15.1
28.6
Investment funds
4.5
4.3
Cash and other assets
61.3
58.2
Fair value of total plan assets
220.3
219.6
(1) (2) (3) (1) As at 31 December 2023, the Scheme\u2019s target long-term asset strategy was: (34%) in multi-asset funds (with the key underlying asset strategies being equities, listed real assets and credit), direct lending (12%), hedge funds (3%), long-lease property (7%) and liability driven investing/cash (44%). There is a plan to transition the current asset holding to the long-term strategy by April 2024, noting that the precise allocations between the different asset classes may be adjusted as market conditions change. As 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 was (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 \u00a325.8 million (2022: \u00a329.9 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 Scheme\u2019s surplus. The following table provides an indication of the sensitivity of the net pension surplus at 31 December 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 obligations, this could result in a material change to the amount recognised. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNetDefinedBenefitLiabilityAssetExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-686": { "value": "The following table provides an indication of the sensitivity of the net pension surplus at 31 December 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 obligations, this could result in a material change to the amount recognised.
Increase/(decrease) in net surplus
2023 2022
As at 31 December \u00a3m \u00a3m
Discount rate
\u2013 Increase
0.25%
7.9
8.0
\u2013 Decrease
0.25%
(8.2)
(8.5)
In\ufb02ation rate
\u2013 Increase
0.25%
(6.5)
(7.0)
\u2013 Decrease
0.25%
6.3
6.6
Life expectancy
\u2013 Increase
1 year
(7.2)
(6.2)
\u2013 Decrease
1 year
7.4
6.4
(1) (1) The sensitivity of the Scheme\u2019s 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, these risks are mitigated by the Scheme being around 95% hedged against movements in Government bonds and inflation of appropriate duration. This means from a discount rate perspective that the Scheme is broadly only exposed to changes in credit spreads plus around 5% of changes in underlying gilt yields and, for inflation, the Scheme\u2019s exposure is around 5% of any actual changes. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSensitivityAnalysisForActuarialAssumptionsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-598": { "value": "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 signi\ufb01cant 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 lease liabilities, 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
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
Section 7: Risk management Carrying amount Fair value Financial Financial Fair value- Mandatorily assets at liabilities at hedging at F V T PL- amortised amortised instruments others FVOCI cost cost Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Commodity contracts 322.8 84.0 \u2013 \u2013 \u2013 406.8 \u2013 406.8 \u2013 406.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 2 97.1 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 Trade and other receivables \u2013 \u2013 98.4 \u2013 \u2013 98.4 \u2013 98.4 \u2013 98.4 Cash and cash equivalents \u2013 116.4 \u2013 \u2013 \u2013 116.4 \u2013 116.4 \u2013 116.4 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 973.5 \u2013 973.5 Cash and cash equivalents \u2013 \u2013 \u2013 121.6 \u2013 121.6 Financial liabilities measured at fair value Commodity contracts (577.2) (296.5) \u2013 \u2013 \u2013 (873.7) \u2013 (873.7) \u2013 (873.7) 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) \u2013 (307.3) 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) (2) (2) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. (2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no impact on the total trade and other receivables and cash and cash equivalents amounts presented. 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 commodity which may or may not be settled through physical delivery of the commodity, as well as weather-related contracts. \u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, swaps, 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 the UK Retail Price Index (RPI) or the UK Consumer Price Index (CPI). Fair value measurement \u2022 Commodity contracts \u2013 the fair value of open commodity contracts that do not qualify for the own-use exemption, or are otherwise within the scope of IFRS 9, is calculated by reference to forward market prices at the reporting date. \u2022 Foreign currency exchange contracts \u2013 the fair value of 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. 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. The assessment of fair value is derived in part by reference to a market price or rate for the instrument in question. The Group bases its assessment of market prices or rates upon forward curves that are largely derived from readily obtainable prices or rates published 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 nature of the derivative \ufb01nancial instruments the Group holds, minor differences in the inputs, assumptions or methodologies used can result in appropriate, but 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 for each derivative contract. 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), or where different forward curves are available. Where such instruments extend beyond the liquid portion of the forward curve, the level of estimation increases as the number of observable transactions decreases. However, given the maturity pro\ufb01le of the Group\u2019s contracts, liquid forward market price curves are usually available for the duration of the contracts. The fair value of derivatives is not, however, considered a key source of estimation uncertainty as reasonably possible changes in assumptions are not expected to result in a materially different value within the next \ufb01nancial year. Also, whilst there is a signi\ufb01cant risk that the carrying amount of derivative assets and liabilities will change materially within the next \ufb01nancial year, as a result of movements in market prices or rates, the Group is not expecting to change its methodology or input sources in the next \ufb01nancial year. Any such changes are not as a result of assumptions or other sources of estimation uncertainty as at 31 December 2023 and therefore do not meet the de\ufb01nition of a key source of estimation uncertainty as de\ufb01ned by IAS 1. 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 USD loan notes, the EUR loan notes, and the 2020 UK infrastructure private placement facilities (see note 4.2) 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, foreign currency exchange contracts, interest rate swaps, cross-currency contracts and inflation swaps are largely determined by comparison between observable, liquid, forward market prices or rates, and the trade price or rate; therefore, these contracts are categorised as Level 2. Credit risk is not a signi\ufb01cant input to the fair value calculations. 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. No external specialists have been utilised for the valuation of the current or prior year derivative \ufb01nancial instruments. 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 contingent consideration receivable by the Group relates to the sale of the CCGT generation portfolio in 2021. The gross nominal value of \u00a329.0 million 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 of the contingent consideration has been categorised as Level 3 based on the inputs to the valuation techniques used .
Signi\ufb01cant unobservable inputs and range Relationship between signi\ufb01cant unobservable input
Valuation approach of inputs (probability weighted) and fair value measurement
Contingent The fair value of the contingent Forecasted future Capacity Market The fair value measurement would
consideration consideration is determined using a clearing prices: increase/(decrease) with:
discounted cash \ufb02ow model. The \u00a32.47/kW \u2013 \u00a377.20/kW
\u2022
higher/(lower) forecasted Capacity
valuation approach is based on a (\u00a342.66/kW) Market clearing prices causing a
calculation of the probability of the higher/(lower) probability of the
option to develop the Damhead (2022: \u00a37.00/kW \u2013 \u00a364.64/kW) option over the Damhead Creek 2
Creek 2 land being exercised. (2022: (\u00a335.91/kW)) land being exercised.
This probability is calculated using a Estimated bid price at which
\u2022
lower/(higher) estimated bid price
range of forecasts for future Damhead Creek 2 is to be entered required for the Damhead Creek 2
Capacity Market auctions and the into the Capacity Market auction: development to proceed causing a
assumption that the option to higher/(lower) probability of the
develop the land would be exercised \u00a367.5 0/kW option over the Damhead Creek 2
if the Capacity Market price were to (2022: \u00a340.00/kW) land being exercised.
clear above a certain level, providing
suf\ufb01cient certainty on the
economics of the development.
During the year, inputs to the fair value calculation have been updated to reflect increases in both forecasted future Capacity Market clearing prices and the estimated bid price at which Damhead Creek 2 is expected to be entered into the Capacity Market auction. Due to increased expectations relating to the cost to develop the project, the estimated bid price has increased from \u00a340.00/kW to \u00a367.50/kW. This, alongside the impact of updating the calculation with recent forecasts of future Capacity Market clearing prices, has resulted in an \u00a318.2 million decrease to the fair value of the contingent consideration. As the change in fair value reflects the reversal of a previous credit recorded within exceptional items, and the current year decrease in fair value is above the Group\u2019s threshold to be considered exceptional, the \u00a318.2 million has been excluded from Adjusted results and presented as an exceptional item included within other gains or losses in the Consolidated income statement (see note 2.7). A reconciliation of the contingent consideration is detailed below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Balance at 1 January
27.4
27.7
Net change in fair value (unrealised)
(18.2)
(0.3)
Balance at 31 December
9.2
27.4
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 Increase
\u00a3m \u00a3m
As at 31 December 2023
Forecasted future Capacity Market clearing prices (10%)
(9.2)
7.0
Estimated bid price (10%)
7. 0
(4 .1)
Impact on pro\ufb01t before tax
Decrease Increase
\u00a3m \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)
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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s energy supply contracts, are excluded from fair value mark-to-market accounting. 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 (see 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 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. 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. Derivative balances are classi\ufb01ed in the Consolidated balance sheet as current or non-current based on the \ufb01nal maturity date of the contracts. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
Restated
2023 2022
\u00a3m \u00a3m
Non-current derivative \ufb01nancial instrument assets
293.6
361.0
Current derivative \ufb01nancial instrument assets
368.4
396.9
Total derivative \ufb01nancial instrument assets
662.0
757.9
Non-current derivative \ufb01nancial instrument liabilities
(306.6)
(674.7)
Current derivative \ufb01nancial instrument liabilities
(231.6)
(590.0)
Total derivative \ufb01nancial instrument liabilities
(538.2)
(1,264.7)
Total net derivative \ufb01nancial instruments
123.8
(506.8)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at fair value through pro\ufb01t or loss (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/(losses) recognised
2023 2022
\u00a3m \u00a3m
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
revenue
70.7
(441.4)
(Losses)/gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
cost of sales
(127.0)
32.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges
(0.3)
(0.4)
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
foreign exchange (losses)/gains
4.9
(3.8)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting
(51.7)
(413.0)
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 and the impact of discounting. 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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting, or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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 94). The Financial Risk Management Committee identi\ufb01es, evaluates and manages \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, 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 as at 31 December. The analysis assumes all other variables were held constant. Financial and commodity markets saw signi\ufb01cant volatility and high prices in 2022. During 2023 the high prices seen in the prior year have generally reversed, but in the most part prices are still above historical averages. See the Principal risks and uncertainties section on page 94 for further details on UK energy market conditions. As a result of these fluctuating market conditions, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, have seen large reversals of the amounts recognised in the prior year. Sensitivities for a 10% change in prices have been included in the current and prior year. The impact of smaller and larger price changes can be 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 other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Power
\u2013
\u2013
34.9
(34.9)
Carbon
2.8
(2.8)
(0.2)
0.2
Gas
11.1
(11.1)
\u2013
\u2013
Oil
(7.9)
7.9
\u2013
\u2013
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. 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. 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, after taking account of the volume held back for operational risk management purposes. 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 commodity contracts to be economic hedges. If either the contracts cannot be readily net settled or if the Group is able to demonstrate these contracts were entered into and continue to be held for the purpose of receipt or delivery of the non-\ufb01nancial item in accordance with the Group\u2019s expected purchase, sale or usage requirements and the own-use exemption applies, then these contracts are not within the scope of IFRS 9. For other contracts that are within the scope of IFRS 9 the Group applies hedge accounting were possible. If the contracts are within the scope of IFRS 9 and hedge accounting is not applied 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows.
31 December 2023
Change in fair Balance in the
value of hedging hedge reserve for
instrument Balance in the hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
5,580,931
129.4
413.3
402.3
(58.8)
257.4
\u2013
Purchase of carbon
emissions allowances
62,000
37.4
1.4
0.4
\u2013
0.3
(0.7)
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item
the reporting recognised in Line item transferred to due to the \ufb02ows in the income
period used Hedging gains the income in the income the cost or hedged being no longer statement/
for measuring recognised in statement statement carrying value of item affecting expected to balance sheet
ineffectiveness OCI in the period in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013gains/(losses) \u2013 gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Commodity contracts
Sale of power
(413.3)
413.3
\u2013
Revenue
\u2013
183.4
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
(1.4)
1.4
\u2013
sales
\u2013
1.6
\u2013
sales
31 December 2022 Restated
Change in fair Balance in
value of hedging the hedge reserve
instrument Balance in the for hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013 gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
2,135,90
9
218.0
(534.4)
322.8
(576.2)
(19 0.1)
\u2013
Purchase of carbon
emissions allowances
148,000
77.5
(4.2)
\u2013
(1.0)
(0.8)
(1.9)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the fair values of assets and liabilities recognised in the Consolidated balance sheet, but not the overall net asset position. See the offsetting section on page 178 for further details on this restatement. 31 December 2022 Change in fair Amount value of hedged Hedge Amount reclassi\ufb01ed due item during ineffectiveness Amount reclassi\ufb01ed to the hedged Line item in the reporting recognised in Line item in the transferred to due to the future cash \ufb02ows the income period used Hedging losses the income income the cost or hedged being no longer statement/ for measuring recognised in OCI statement statement carrying value item affecting expected to balance sheet ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses reclassi\ufb01cation/ \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m transfer Commodity contracts Sale of power 534.4 (534.4) \u2013 Revenue \u2013 459.8 \u2013 Revenue Purchase of carbon Cost of Cost of emissions allowances 4.2 (4.2) \u2013 sales \u2013 0.1 \u2013 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), euros (EUR) or Canadian dollars (CAD), and the foreign currency debt is also denominated in USD, EUR and CAD (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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at 31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their related hedges. 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. 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. 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, EUR and CAD (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward contracts, to manage exchange risk on foreign currency debt.
Hedge accounting
The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps.
Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments.
Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign
exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk.
A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022 Change in fair Amount value of hedged Hedge Amount Amount reclassi\ufb01ed due item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income period used recognised in the income income carrying value hedged being no longer statement/ for measuring OCI statement statement of a non- item affecting expected to balance sheet ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/ \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation Foreign currency purchase contracts Purchases in foreign Cost of currency \u2013 USD (187. 2) 187. 2 \u2013 sales (34.2) \u2013 \u2013 Inventories Purchases in foreign Cost of currency \u2013 EUR (17.9) 17.9 \u2013 sales 5.9 \u2013 \u2013 Inventories Purchases in foreign Cost of currency \u2013 CAD (0.4) 0.4 \u2013 sales 9.2 \u2013 \u2013 Inventories Foreign currency denominated debt Interest Interest payable payable and and Interest and principal similar similar repayments \u2013 USD (47.5) 47.5 \u2013 charges \u2013 (9.2) \u2013 charges Foreign Foreign exchange exchange (losses)/ (losses)/ \u2013 gains \u2013 (44.7) \u2013 gains Interest Interest payable payable and and Interest and principal similar similar repayments \u2013 EUR 3.1 ( 3.1) \u2013 charges \u2013 2.6 \u2013 charges Foreign Foreign exchange exchange (losses)/ (losses)/ \u2013 gains \u2013 (17.3) \u2013 gains 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 revolving credit facility (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 2019 UK infrastructure private placement facility. For the 2020 UK infrastructure private placement facility, the Group has \ufb01xed the interest rate payable on the \u00a398 million GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated \u20ac95 million tranche of the 2020 UK infrastructure private placement facility, through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in note 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 2023, 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. In January 2024, the Group entered into a floating-to-\ufb01xed cross-currency swap to \ufb01x the sterling value of interest payments on the CAD denominated term loan. 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. Certain Group borrowings are at \ufb01xed rates, including the USD and EUR bonds, and are therefore not exposed to interest rate risk. 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 benchmark reform The only interest rate benchmark to which the Group is still exposed to, that is subject to interest rate benchmark reform, is the Canadian Dollar Offered Rate (CDOR). The Group has a C$200 million term loan facility that is linked to a floating-rate CDOR benchmark. During the year the Group has extended the facility to a maturity date of January 2026. As part of the extension, the Group agreed with lenders to transition the floating-rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. \u2018Phase 2\u2019 of the amendments requires that, for \ufb01nancial instruments measured using amortised cost measurement (that is, \ufb01nancial instruments classi\ufb01ed as amortised cost and debt \ufb01nancial assets classi\ufb01ed as FVOCI), changes to the basis for determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate. No immediate gain or loss is recognised. The expedient is only applicable to changes that are required by interest rate benchmark reform, which is the case if, and only if, the change is necessary as a direct consequence of interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis (that is, the basis immediately preceding the change). The following table contains details of all of the \ufb01nancial instruments that the Group holds at 31 December 2023 which reference CDOR and have not yet transitioned to the CORRA interest rate benchmark:
Hedge
Pre-transition Nominal value accounting
Non-derivative \ufb01nancial instrument benchmark rate
C$
Maturity date
applied
Transition progress
New benchmark rate
Agreed transition to CORRA from
the start of the \ufb01rst interest period
CAD term facility
CDOR
200.0
2026
Unhedged
post 31 December 2023
CORRA
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 what the impact on the current years pro\ufb01t after tax and other components of equity would have been for a reasonably possible increase or decrease in interest rates. For interest rate derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Variable rate debt \u2013 unhedged
(1.2)
1.2
\u2013
\u2013
Variable rate debt \u2013 hedged
(4.2)
4.2
\u2013
\u2013
Interest rate swaps
4.2
(4.2)
8.1
(8.1)
Net impact
(1.2)
1.2
8.1
(8.1)
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)
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 \ufb02oating-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 \ufb02oating-to-\ufb01xed interest rate swaps as hedging instruments under cash \ufb02ow 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 valuations. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a \ufb02oor of 0% for the benchmark interest rate. The Group also has CAD denominated debt that has a variable rate based on CDOR. At 31 December 2023, no swaps were in place to hedge the interest risk on the CAD denominated debt. Therefore, in relation to this debt a change in interest rate would have 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 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 \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 2023
Change in fair Balance in the hedge
value of hedging reserve for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional for measuring recognised in recognised in hedges net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure \u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
559.8
1.06%
(33.0)
22.7
\u2013
18.9
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item in the
the reporting Hedging losses recognised in transferred to due to the \ufb02ows being income
period used recognised in the income Line item in the the cost or hedged no longer statement/
for measuring OCI statement income statement carrying value of item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest
payable payable
Variable rate GBP and similar and similar
debt
33.0
(33.0)
\u2013
charges
\u2013
16.0
\u2013
 charges
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging Balance in the for hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
\u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
558.8
1.06%
39.9
37.5
\u2013
31.7
\u2013
Exposure
31 December 2022
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged Line item
item during Hedging ineffectiveness transferred to reclassi\ufb01ed future cash in the
the reporting gains recognised in the cost or due to the \ufb02ows income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest payable
Variable rate payable and and similar
GBP debt
(39.9)
39.9
\u2013
similar charges
\u2013
(3.1)
\u2013
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 or decrease in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
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 business 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. Such facilities are not included within the Group\u2019s de\ufb01nition of Net debt, as outlined in note 2.7. The following tables set out details of the expected maturity pro\ufb01le of the undiscounted, contractual payments 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 2023
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Term loans, gross value
153.9
154.9
271.6
278.8
87.0
946.2
Loan notes, gross value
\u2013
31.7
635.3
\u2013
\u2013
6 67.0
Borrowings, contractual maturity
153.9
186.6
906.9
278.8
87.0
1,613.2
Trade and other payables
763.8
150.7
3.2
1.5
\u2013
919.2
Lease liabilities
8.6
24.8
28.6
52.6
57. 0
171.6
926.3
362.1
938.7
332.9
144.0
2,704.0
Trade and other payables of \u00a3919.2 million (2022: \u00a31,065.9 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to deliver ROCs and employee bene\ufb01t related accruals.
As at 31 December 2022
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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
1,002.1
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
1,067.0
216.9
2,869.0
The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.79% (2022: 4.14%). The following tables set out details of the expected maturity pro\ufb01le of contractual payments of derivative \ufb01nancial liabilities. 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 based on the trade value rather than the mark-to-market value, the gross cash flows have been presented. Certain commodity contracts are expected to be gross settled through delivery or receipt of the commodity and a subsequent cash settlement of the trade value. Vanilla foreign currency exchange contracts are expected to be gross settled through delivery of one currency and receipt of another. 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 2023
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
795.3
79.3
1.6
876.2
Foreign currency exchange contracts
952.4
497.1
39 4.1
1,843.6
Cross-currency contracts
763.7
2.5
31.2
797.4
In\ufb02ation contracts
81.6
85.2
107. 5
274.3
2,593.0
66 4 .1
534.4
3,791.5
As at 31 December 2022
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
1,328.8
173.8
4.6
1,507.2
Foreign currency exchange contracts
921.4
45.4
47. 8
1,014.6
Cross-currency contracts
776.3
2.5
3.8
782.6
In\ufb02ation contracts
67.3
83.1
203.8
354.2
3,093.8
304.8
260.0
3,658.6
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. The maximum exposure to credit risk at the reporting date is the carrying value of each class of \ufb01nancial assets
disclosed in note 7.1.
Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a359.4 million
(2022: \u00a360.9 million) and expected credit losses on accrued income of \u00a39.4 million (2022: \u00a37.6 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, payment terms, 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. 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 smaller 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 industry 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.
The Group had cash and cash equivalents of \u00a3379.5 million at 31 December 2023 (2022: \u00a3238.0 million). Cash and cash equivalents
are subject to the impairment requirements of IFRS 9. The identi\ufb01ed impairment loss, based on the 12-month expected credit loss
basis, was immaterial. Cash and cash equivalents are held with banks with external credit ratings between AAA and A.
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. Credit risk is a factor in the determination of fair value. The carrying amount of these
\ufb01nancial assets, disclosed in note 7.1, represents the Group\u2019s maximum credit risk exposure. Some derivative contracts are fully cash
collateralised, thereby minimising credit risk. At 31 December 2023 the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil)
covering certain derivative assets and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments covering certain
derivative liabilities. The credit rating of counterparties to which the \u00a398.9 million of cash collateral had been posted was A\u2013.
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 wide 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 92 for details of scenario analysis performed on
covenant restrictions within the Group\u2019s \ufb01nancing facilities.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
1,425.3
1,440.9
Cash and cash equivalents (note 4.1)
(379.5)
(238.0)
Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries
0.3
0.7
Impact of hedging instruments
37. 8
2.4
Net debt (note 2.7)
1,083.9
1,206.0
Total shareholders\u2019 equity attributable to owners of the parent company, excluding hedge and cost of
hedging reserves
1,744.9
1,422.7
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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the
hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated
in the hedge reserve is transferred and included within the initial cost of the asset.
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
Foreign
Commodity currency Interest In\ufb02ation
price risk exchange risk rate risk rate risk Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
(138.2)
(39.3)
4.2
(4.1)
(17 7.4)
(Losses)/gains 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 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 (losses)/gains
\u2013
(62.0)
\u2013
\u2013
(62.0)
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
39.5
39.5
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(19.1)
\u2013
\u2013
(19.1)
Related deferred tax, net (note 2.6)
24.1
(39.2)
(9.3)
23.6
(0.8)
At 1 January 2023
(192.8)
83.7
31.7
(74.6)
(152.0)
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instrument recognised in OCI
414.7
(115.0)
(33.0)
(0.2)
266.5
Reclassi\ufb01ed from equity as the hedged item has affected
pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in cost of sales
1.6
\u2013
\u2013
\u2013
1.6
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in revenue
183.4
\u2013
\u2013
16.6
200.0
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in interest payable and similar charges
\u2013
(0.3)
16.0
\u2013
15.7
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in foreign exchange (losses)/gains
\u2013
29.5
\u2013
\u2013
29.5
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
9.3
9.3
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(43.4)
\u2013
\u2013
(43.4)
Related deferred tax, net (note 2.6)
(149.9)
32.3
4.2
(6.4)
(119.8)
At 31 December 2023
257.0
(13.2)
18.9
(55.3)
207.4
The expected release pro\ufb01le from equity of post-tax hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity risk
199.4
56.0
1.6
257.0
Foreign currency exchange risk
(4.9)
(6 .1)
(2.2)
(13.2)
Interest rate risk
11.5
6.3
1.1
18.9
In\ufb02ation risk
(19.4)
(15.2)
(20.7)
(55.3)
186.6
41.0
(20.2)
207.4
At 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \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)
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 hedging the purchase of inventory denominated
in foreign currencies 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 transferred
from equity and included within the initial cost of a non-\ufb01nancial asset:
Cost of hedging
2023 2022
\u00a3m \u00a3m
At 1 January
40.1
78.5
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instruments recognised in the Consolidated statement of
comprehensive income
7.5
(19.0)
Transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
(36.0)
(28.8)
Related deferred tax, net (note 2.6)
7.1
9.4
At 31 December
18.7
4 0.1
The expected release pro\ufb01le from equity of post-tax cost of hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
16.6
4.3
(2.2)
18.7
As at 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
21.7
13.0
5.4
4 0.1
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 or receivable. The table below shows the impact of \ufb01nancial assets and liabilities that are offset in the Consolidated balance sheet, and it also shows the impact if the carrying amounts that are subject to these master netting agreements were also to be offset in certain circumstances, such as a bankruptcy:
As at 31 December 2023
Net amounts of
Gross amounts \ufb01nancial Related
of \ufb01nancial instruments \ufb01nancial Related cash
Gross amounts instruments offset presented instruments collateral assets/
of \ufb01nancial in the balance in the that are (liabilities) that are
instruments sheet balance sheet not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
888.5
(226.5)
662.0
(220.9)
(20.3)
420.8
Trade and other receivables and
contract assets
1,088.5
(111.6)
976.9
(4.9)
(95.9)
8 76 .1
Financial liabilities
Derivative \ufb01nancial instruments
(764.7)
226.5
(538.2)
215.3
95.9
(2 27.1)
Trade and other payables and contract
liabilities
(1,651.2)
111.6
(1,539.6)
10.5
20.3
(1,508.8)
As at 31 December 2022
Net amounts
of \ufb01nancial
Gross amounts instruments Related
of \ufb01nancial presented \ufb01nancial Related cash
Gross amounts instruments in the instruments collateral assets/
of \ufb01nancial offset in the balance sheet that are (liabilities) that are
instruments balance sheet Restated not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
1,218.0
(4 6 0.1)
757.9
(608.6)
\u2013
149.3
Trade and other receivables and
contract assets
1,398.8
(171.8)
1, 227.0
(31.8)
(230.6)
964.6
Financial liabilities
Derivative \ufb01nancial instruments
(1,724.8)
4 60.1
(1,264.7)
619.6
230.6
(414.4)
Trade and other payables and
contract liabilities
(1,699.7)
171.8
(1,527.9)
20.7
\u2013
(1,507.2)
The amounts at 31 December 2022 have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The above collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3. 7.6 Contingencies Contingent assets are potential future in\ufb02ows 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 out\ufb02ows 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. Contingent liabilities Ofgem investigation On 31 May 2023, Ofgem announced the opening of an investigation into Drax Power Limited\u2019s annual biomass pro\ufb01ling reporting under the Renewables Obligation scheme. Ofgem\u2019s announcement stated that the opening of an investigation does not imply any \ufb01nding of non-compliance. Ofgem separately con\ufb01rmed that they have not established any non-compliance that would affect the issuance of ROCs to Drax Power Limited, and therefore the associated \ufb01nancial bene\ufb01t. Like all energy generators, the Company receives regular requests from Ofgem. We continue to cooperate fully throughout the investigation and have con\ufb01dence in our compliance with the Renewables Obligation scheme criteria. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the stage of the process and the uncertainty in future outcome. Ofgem NIS declaration As noted in the Audit Committee report on page 132, Drax Power Station is required to maintain a de\ufb01ned level of both physical and cyber resilience, as outlined within the Network and Information Systems Regulations (NIS Regulations). The Group submitted a report to Ofgem in January 2024 con\ufb01rming that Drax Power Station had not fully achieved the level required by the deadline of 31 December 2023, but had a plan to address this during 2024. Ofgem will consider this matter in due course and decide 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. 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 biomass and contracts for the construction of assets.
As at 31 December
2023 2022
\u00a3m \u00a3m
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013
Property, plant and equipment
221.6
267.9
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013
Intangible assets
\u2013
0.2
Future commitments to purchase ROCs
303.2
331.9
Future commitments to purchase biomass under \ufb01xed and variable priced contracts
3,092.5
3,250.0
Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts
439.7
242.5
Commitments for future capital expenditure have decreased due to signi\ufb01cant progression in the construction of the OCGTs during 2023. Future commitments to purchase biomass include long-term contracts, a majority of which match the period out to the end of UK Government subsidies. Future commitments to purchase \ufb01bre have increased due to a combination of increasing \ufb01bre costs and increased production volumes. The contractual maturities of the future commitments to purchase biomass are as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Within one year
799.0
829.5
Within one to \ufb01ve years
1,867.8
2,378.2
After \ufb01ve years
425.7
42.3
3,092.5
3,250.0
Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily for the delivery of biomass pellets for use in electricity generation at Drax Power Station. To the extent that these contracts relate to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements as they are not within the scope of IFRS 9, and are not, therefore, 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:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-637": { "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 signi\ufb01cant 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 lease liabilities, 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
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
(1)
Carrying amount
Fair value
Financial Financial
Restated Fair value- Mandatorily assets at liabilities at
At 31 December 2022 hedging at F V T PL- amortised amortised
\u00a3m instruments
others
FVOCI
 cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
322.8
84.0
\u2013
\u2013
\u2013
406.8
\u2013
406.8
\u2013
406.8
Foreign currency
exchange contracts
166.5
130.6
\u2013
\u2013
\u2013
297.1
\u2013
2 97.1
\u2013
2 97.1
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
Trade and other receivables
\u2013
\u2013
98.4
\u2013
\u2013
98.4
\u2013
98.4
\u2013
98.4
Cash and cash equivalents
\u2013
116.4
\u2013
\u2013
\u2013
116.4
\u2013
116.4
\u2013
116.4
Financial assets not measured at fair value
Trade and other
receivables
\u2013
\u2013
\u2013
973.5
\u2013
973.5
Cash and cash
equivalents
\u2013
\u2013
\u2013
121.6
\u2013
121.6
Financial liabilities measured at fair value
Commodity contracts
(577.2)
(296.5)
\u2013
\u2013
\u2013
(873.7)
\u2013
(873.7)
\u2013
(873.7)
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)
\u2013
(307.3)
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)
(2)
(2)
(1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted
the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain
unchanged. See the offsetting section on page 178 for further details on this restatement.
(2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no
impact on the total trade and other receivables and cash and cash equivalents amounts presented.
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 commodity which may or may not be settled through
physical delivery of the commodity, as well as weather-related contracts.
\u2022 Foreign currency exchange contracts \u2013 currency related contracts including forwards, swaps, 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 the UK Retail Price
Index (RPI) or the UK Consumer Price Index (CPI).
Fair value measurement
\u2022 Commodity contracts \u2013 the fair value of open commodity contracts that do not qualify for the own-use exemption, or are otherwise
within the scope of IFRS 9, is calculated by reference to forward market prices at the reporting date.
\u2022 Foreign currency exchange contracts \u2013 the fair value of 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. 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.
The assessment of fair value is derived in part by reference to a market price or rate for the instrument in question. The Group bases
its assessment of market prices or rates upon forward curves that are largely derived from readily obtainable prices or rates published
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 nature of the derivative \ufb01nancial instruments the Group holds, minor differences in the inputs, assumptions
or methodologies used can result in appropriate, but 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 for each derivative contract.
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), or where
different forward curves are available. Where such instruments extend beyond the liquid portion of the forward curve, the level of
estimation increases as the number of observable transactions decreases. However, given the maturity pro\ufb01le of the Group\u2019s
contracts, liquid forward market price curves are usually available for the duration of the contracts. The fair value of derivatives is not,
however, considered a key source of estimation uncertainty as reasonably possible changes in assumptions are not expected to result
in a materially different value within the next \ufb01nancial year.
Also, whilst there is a signi\ufb01cant risk that the carrying amount of derivative assets and liabilities will change materially within the
next \ufb01nancial year, as a result of movements in market prices or rates, the Group is not expecting to change its methodology or input
sources in the next \ufb01nancial year. Any such changes are not as a result of assumptions or other sources of estimation uncertainty
as at 31 December 2023 and therefore do not meet the de\ufb01nition of a key source of estimation uncertainty as de\ufb01ned by IAS 1.
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 USD loan notes, the EUR loan notes,
and the 2020 UK infrastructure private placement facilities (see note 4.2) 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, foreign currency exchange contracts, interest rate swaps, cross-currency contracts and
inflation swaps are largely determined by comparison between observable, liquid, forward market prices or rates, and the trade price
or rate; therefore, these contracts are categorised as Level 2. Credit risk is not a signi\ufb01cant input to the fair value calculations.
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. No external specialists have been utilised for the valuation of the current or prior year derivative \ufb01nancial
instruments. 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 contingent consideration receivable by the Group relates to the sale of the CCGT generation portfolio in 2021. The gross nominal
value of \u00a329.0 million 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 of the contingent consideration has been categorised as Level 3 based
on the inputs to the valuation techniques used .
Signi\ufb01cant unobservable inputs and range Relationship between signi\ufb01cant unobservable input
Valuation approach of inputs (probability weighted) and fair value measurement
Contingent The fair value of the contingent Forecasted future Capacity Market The fair value measurement would
consideration consideration is determined using a clearing prices: increase/(decrease) with:
discounted cash \ufb02ow model. The \u00a32.47/kW \u2013 \u00a377.20/kW
\u2022
higher/(lower) forecasted Capacity
valuation approach is based on a (\u00a342.66/kW) Market clearing prices causing a
calculation of the probability of the higher/(lower) probability of the
option to develop the Damhead (2022: \u00a37.00/kW \u2013 \u00a364.64/kW) option over the Damhead Creek 2
Creek 2 land being exercised. (2022: (\u00a335.91/kW)) land being exercised.
This probability is calculated using a Estimated bid price at which
\u2022
lower/(higher) estimated bid price
range of forecasts for future Damhead Creek 2 is to be entered required for the Damhead Creek 2
Capacity Market auctions and the into the Capacity Market auction: development to proceed causing a
assumption that the option to higher/(lower) probability of the
develop the land would be exercised \u00a367.5 0/kW option over the Damhead Creek 2
if the Capacity Market price were to (2022: \u00a340.00/kW) land being exercised.
clear above a certain level, providing
suf\ufb01cient certainty on the
economics of the development.
During the year, inputs to the fair value calculation have been updated to reflect increases in both forecasted future Capacity Market
clearing prices and the estimated bid price at which Damhead Creek 2 is expected to be entered into the Capacity Market auction.
Due to increased expectations relating to the cost to develop the project, the estimated bid price has increased from \u00a340.00/kW to
\u00a367.50/kW. This, alongside the impact of updating the calculation with recent forecasts of future Capacity Market clearing prices,
has resulted in an \u00a318.2 million decrease to the fair value of the contingent consideration.
As the change in fair value reflects the reversal of a previous credit recorded within exceptional items, and the current year decrease
in fair value is above the Group\u2019s threshold to be considered exceptional, the \u00a318.2 million has been excluded from Adjusted results
and presented as an exceptional item included within other gains or losses in the Consolidated income statement (see note 2.7).
A reconciliation of the contingent consideration is detailed below:
Year ended 31 December
2023 2022
\u00a3m \u00a3m
Balance at 1 January
27.4
27.7
Net change in fair value (unrealised)
(18.2)
(0.3)
Balance at 31 December
9.2
27.4
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 Increase
\u00a3m \u00a3m
As at 31 December 2023
Forecasted future Capacity Market clearing prices (10%)
(9.2)
7.0
Estimated bid price (10%)
7. 0
(4 .1)
Impact on pro\ufb01t before tax
Decrease Increase
\u00a3m \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)
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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an
effective hedge under IFRS 9 (see note 7.2).
The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase,
sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s
energy supply contracts, are excluded from fair value mark-to-market accounting.
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 (see 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 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. 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.
Derivative balances are classi\ufb01ed in the Consolidated balance sheet as current or non-current based on the \ufb01nal maturity date of the contracts. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
Restated
2023 2022
\u00a3m \u00a3m
Non-current derivative \ufb01nancial instrument assets
293.6
361.0
Current derivative \ufb01nancial instrument assets
368.4
396.9
Total derivative \ufb01nancial instrument assets
662.0
757.9
Non-current derivative \ufb01nancial instrument liabilities
(306.6)
(674.7)
Current derivative \ufb01nancial instrument liabilities
(231.6)
(590.0)
Total derivative \ufb01nancial instrument liabilities
(538.2)
(1,264.7)
Total net derivative \ufb01nancial instruments
123.8
(506.8)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at fair value through pro\ufb01t or loss (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/(losses) recognised
2023 2022
\u00a3m \u00a3m
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
revenue
70.7
(441.4)
(Losses)/gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
cost of sales
(127.0)
32.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges
(0.3)
(0.4)
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
foreign exchange (losses)/gains
4.9
(3.8)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting
(51.7)
(413.0)
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 and the impact of discounting. 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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting, or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-610": { "value": "
Carrying amount
Fair value
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
Carrying amount Fair value Financial Financial Fair value- Mandatorily assets at liabilities at hedging at F V T PL- amortised amortised instruments others FVOCI cost cost Total Level 1 Level 2 Level 3 Total Financial assets measured at fair value Commodity contracts 322.8 84.0 \u2013 \u2013 \u2013 406.8 \u2013 406.8 \u2013 406.8 Foreign currency exchange contracts 166.5 130.6 \u2013 \u2013 \u2013 297.1 \u2013 2 97.1 \u2013 2 97.1 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 Trade and other receivables \u2013 \u2013 98.4 \u2013 \u2013 98.4 \u2013 98.4 \u2013 98.4 Cash and cash equivalents \u2013 116.4 \u2013 \u2013 \u2013 116.4 \u2013 116.4 \u2013 116.4 Financial assets not measured at fair value Trade and other receivables \u2013 \u2013 \u2013 973.5 \u2013 973.5 Cash and cash equivalents \u2013 \u2013 \u2013 121.6 \u2013 121.6 Financial liabilities measured at fair value Commodity contracts (577.2) (296.5) \u2013 \u2013 \u2013 (873.7) \u2013 (873.7) \u2013 (873.7) 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) \u2013 (307.3) 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) (2) (2) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. (2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no impact on the total trade and other receivables and cash and cash equivalents amounts presented. The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at fair value through pro\ufb01t or loss (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/(losses) recognised
2023 2022
\u00a3m \u00a3m
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
revenue
70.7
(441.4)
(Losses)/gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
cost of sales
(127.0)
32.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges
(0.3)
(0.4)
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
foreign exchange (losses)/gains
4.9
(3.8)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting
(51.7)
(413.0)
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-696": { "value": "
Carrying amount
Fair value
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
(1)
Carrying amount
Fair value
Financial Financial
Restated Fair value- Mandatorily assets at liabilities at
At 31 December 2022 hedging at F V T PL- amortised amortised
\u00a3m instruments
others
FVOCI
 cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
322.8
84.0
\u2013
\u2013
\u2013
406.8
\u2013
406.8
\u2013
406.8
Foreign currency
exchange contracts
166.5
130.6
\u2013
\u2013
\u2013
297.1
\u2013
2 97.1
\u2013
2 97.1
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
Trade and other receivables
\u2013
\u2013
98.4
\u2013
\u2013
98.4
\u2013
98.4
\u2013
98.4
Cash and cash equivalents
\u2013
116.4
\u2013
\u2013
\u2013
116.4
\u2013
116.4
\u2013
116.4
Financial assets not measured at fair value
Trade and other
receivables
\u2013
\u2013
\u2013
973.5
\u2013
973.5
Cash and cash
equivalents
\u2013
\u2013
\u2013
121.6
\u2013
121.6
Financial liabilities measured at fair value
Commodity contracts
(577.2)
(296.5)
\u2013
\u2013
\u2013
(873.7)
\u2013
(873.7)
\u2013
(873.7)
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)
\u2013
(307.3)
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)
(2) (2) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. (2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no impact on the total trade and other receivables and cash and cash equivalents amounts presented. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-712": { "value": "
Carrying amount
Fair value
Financial Financial
Fair value- Mandatorily assets at liabilities at
At 31 December 2023 hedging at FV TPL- amortised amortised
\u00a3m instruments
others
FVOCI
cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
402.7
125.4
\u2013
\u2013
\u2013
528 .1
\u2013
528 .1
\u2013
528 .1
Foreign currency
exchange contracts
37.7
70.8
\u2013
\u2013
\u2013
108.5
\u2013
108.5
\u2013
108.5
Interest rate and cross-
currency contracts
25.4
\u2013
\u2013
\u2013
\u2013
25.4
\u2013
25.4
\u2013
25.4
Contingent consideration
\u2013
9.2
\u2013
\u2013
\u2013
9.2
\u2013
\u2013
9.2
9.2
Trade and other receivables
\u2013
\u2013
242.2
\u2013
\u2013
242.2
\u2013
242.2
\u2013
242.2
Cash and cash equivalents
\u2013
171.1
\u2013
\u2013
\u2013
171.1
\u2013
171.1
\u2013
171.1
Financial assets not measured at fair value
Trade and other receivables
\u2013
\u2013
\u2013
644.2
\u2013
644.2
Cash and cash equivalents
\u2013
\u2013
\u2013
208.4
\u2013
208.4
Financial liabilities measured at fair value
Commodity contracts
(58.8)
(134.4)
\u2013
\u2013
\u2013
(193.2)
\u2013
(193.2)
\u2013
(193.2)
Foreign currency
exchange contracts
(23.7)
(35.8)
\u2013
\u2013
\u2013
(59.5)
\u2013
(59.5)
\u2013
(59.5)
Interest rate and cross-
currency contracts
( 35.1)
\u2013
\u2013
\u2013
\u2013
( 35.1)
\u2013
(35.1)
\u2013
( 35.1)
In\ufb02ation rate contracts
(250.4)
\u2013
\u2013
\u2013
\u2013
(250.4)
\u2013
(250.4)
\u2013
(250.4)
Financial liabilities not measured at fair value
Secured bank loans
\u2013
\u2013
\u2013
\u2013
(698 .1)
(698.1)
\u2013
(704.8)
\u2013
(704.8)
Unsecured bank loans
\u2013
\u2013
\u2013
\u2013
(120.0)
(120.0)
\u2013
(120.0)
\u2013
(120.0)
Secured loan notes
\u2013
\u2013
\u2013
\u2013
(6 07.2)
(6 07.2)
(596.4)
\u2013
\u2013
(596.4)
Lease liabilities
\u2013
\u2013
\u2013
\u2013
(135.8)
(135.8)
Trade and other payables
\u2013
\u2013
\u2013
\u2013
(919.2)
(919.2)
(1)
Carrying amount
Fair value
Financial Financial
Restated Fair value- Mandatorily assets at liabilities at
At 31 December 2022 hedging at F V T PL- amortised amortised
\u00a3m instruments
others
FVOCI
 cost
cost
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value
Commodity contracts
322.8
84.0
\u2013
\u2013
\u2013
406.8
\u2013
406.8
\u2013
406.8
Foreign currency
exchange contracts
166.5
130.6
\u2013
\u2013
\u2013
297.1
\u2013
2 97.1
\u2013
2 97.1
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
Trade and other receivables
\u2013
\u2013
98.4
\u2013
\u2013
98.4
\u2013
98.4
\u2013
98.4
Cash and cash equivalents
\u2013
116.4
\u2013
\u2013
\u2013
116.4
\u2013
116.4
\u2013
116.4
Financial assets not measured at fair value
Trade and other
receivables
\u2013
\u2013
\u2013
973.5
\u2013
973.5
Cash and cash
equivalents
\u2013
\u2013
\u2013
121.6
\u2013
121.6
Financial liabilities measured at fair value
Commodity contracts
(577.2)
(296.5)
\u2013
\u2013
\u2013
(873.7)
\u2013
(873.7)
\u2013
(873.7)
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)
\u2013
(307.3)
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)
(2) (2) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. (2) Comparative amounts have been re-presented to show certain trade and other receivables as FVOCI and certain cash and cash equivalents as FVTPL. This has had no impact on the total trade and other receivables and cash and cash equivalents amounts presented. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-697": { "value": "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 Increase
\u00a3m \u00a3m
As at 31 December 2023
Forecasted future Capacity Market clearing prices (10%)
(9.2)
7.0
Estimated bid price (10%)
7. 0
(4 .1)
Impact on pro\ufb01t before tax
Decrease Increase
\u00a3m \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)
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 as at 31 December. The analysis assumes all other variables were held constant. Financial and commodity markets saw signi\ufb01cant volatility and high prices in 2022. During 2023 the high prices seen in the prior year have generally reversed, but in the most part prices are still above historical averages. See the Principal risks and uncertainties section on page 94 for further details on UK energy market conditions. As a result of these fluctuating market conditions, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, have seen large reversals of the amounts recognised in the prior year. Sensitivities for a 10% change in prices have been included in the current and prior year. The impact of smaller and larger price changes can be 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 other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Power
\u2013
\u2013
34.9
(34.9)
Carbon
2.8
(2.8)
(0.2)
0.2
Gas
11.1
(11.1)
\u2013
\u2013
Oil
(7.9)
7.9
\u2013
\u2013
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. 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. 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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at 31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their related hedges. 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. 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. 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 what the impact on the current years pro\ufb01t after tax and other components of equity would have been for a reasonably possible increase or decrease in interest rates. For interest rate derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Variable rate debt \u2013 unhedged
(1.2)
1.2
\u2013
\u2013
Variable rate debt \u2013 hedged
(4.2)
4.2
\u2013
\u2013
Interest rate swaps
4.2
(4.2)
8.1
(8.1)
Net impact
(1.2)
1.2
8.1
(8.1)
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)
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 \ufb02oating-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 \ufb02oating-to-\ufb01xed interest rate swaps as hedging instruments under cash \ufb02ow 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 valuations. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a \ufb02oor of 0% for the benchmark interest rate. The Group also has CAD denominated debt that has a variable rate based on CDOR. At 31 December 2023, no swaps were in place to hedge the interest risk on the CAD denominated debt. Therefore, in relation to this debt a change in interest rate would have an impact on pro\ufb01t after tax but not on other components of equity.
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 or decrease
in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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.
", "dimensions": { "concept": "ifrs-full:SensitivityAnalysisForEachTypeOfMarketRisk", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-724": { "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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s energy supply contracts, are excluded from fair value mark-to-market accounting. 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 (see 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 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. 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. Derivative balances are classi\ufb01ed in the Consolidated balance sheet as current or non-current based on the \ufb01nal maturity date of the contracts. The derivative \ufb01nancial instruments recognised in the Consolidated balance sheet at the reporting date are:
As at 31 December
Restated
2023 2022
\u00a3m \u00a3m
Non-current derivative \ufb01nancial instrument assets
293.6
361.0
Current derivative \ufb01nancial instrument assets
368.4
396.9
Total derivative \ufb01nancial instrument assets
662.0
757.9
Non-current derivative \ufb01nancial instrument liabilities
(306.6)
(674.7)
Current derivative \ufb01nancial instrument liabilities
(231.6)
(590.0)
Total derivative \ufb01nancial instrument liabilities
(538.2)
(1,264.7)
Total net derivative \ufb01nancial instruments
123.8
(506.8)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The gains and losses recognised in the period relating to derivative \ufb01nancial instruments mandatorily measured at fair value through pro\ufb01t or loss (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/(losses) recognised
2023 2022
\u00a3m \u00a3m
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
revenue
70.7
(441.4)
(Losses)/gains on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
cost of sales
(127.0)
32.6
Losses on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in interest
payable and similar charges
(0.3)
(0.4)
Gains/(losses) on derivative \ufb01nancial instruments not qualifying for hedge accounting \u2013 recognised in
foreign exchange (losses)/gains
4.9
(3.8)
Total losses on derivative \ufb01nancial instruments not qualifying for hedge accounting
(51.7)
(413.0)
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 and the impact of discounting. 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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting, or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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 94). The Financial Risk Management Committee identi\ufb01es, evaluates and manages \ufb01nancial risks in close co-ordination with the Group\u2019s trading and treasury functions under policies approved by the Board of directors. 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows.
31 December 2023
Change in fair Balance in the
value of hedging hedge reserve for
instrument Balance in the hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
5,580,931
129.4
413.3
402.3
(58.8)
257.4
\u2013
Purchase of carbon
emissions allowances
62,000
37.4
1.4
0.4
\u2013
0.3
(0.7)
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item
the reporting recognised in Line item transferred to due to the \ufb02ows in the income
period used Hedging gains the income in the income the cost or hedged being no longer statement/
for measuring recognised in statement statement carrying value of item affecting expected to balance sheet
ineffectiveness OCI in the period in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013gains/(losses) \u2013 gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Commodity contracts
Sale of power
(413.3)
413.3
\u2013
Revenue
\u2013
183.4
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
(1.4)
1.4
\u2013
sales
\u2013
1.6
\u2013
sales
31 December 2022 Restated
Change in fair Balance in
value of hedging the hedge reserve
instrument Balance in the for hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013 gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
2,135,90
9
218.0
(534.4)
322.8
(576.2)
(19 0.1)
\u2013
Purchase of carbon
emissions allowances
148,000
77.5
(4.2)
\u2013
(1.0)
(0.8)
(1.9)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the fair values of assets and liabilities recognised in the Consolidated balance sheet, but not the overall net asset position. See the offsetting section on page 178 for further details on this restatement.
31 December 2022
Change in fair Amount
value of hedged Hedge Amount reclassi\ufb01ed due
item during ineffectiveness Amount reclassi\ufb01ed to the hedged Line item in
the reporting recognised in Line item in the transferred to due to the future cash \ufb02ows the income
period used Hedging losses the income income the cost or hedged being no longer statement/
for measuring recognised in OCI statement statement carrying value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses reclassi\ufb01cation/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m transfer
Commodity contracts
Sale of power
534.4
(534.4)
\u2013
Revenue
\u2013
459.8
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
4.2
(4.2)
\u2013
sales
\u2013
0.1
\u2013
sales
Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022
Change in fair Amount
value of hedged Hedge Amount Amount reclassi\ufb01ed due
item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the
the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income
period used recognised in the income income carrying value hedged being no longer statement/
for measuring OCI statement statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost of
currency \u2013 USD
(187. 2)
187. 2
\u2013
sales
(34.2)
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 EUR
(17.9)
17.9
\u2013
sales
5.9
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 CAD
(0.4)
0.4
\u2013
sales
9.2
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
(47.5)
47.5
\u2013
charges
\u2013
(9.2)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(44.7)
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
3.1
( 3.1)
\u2013
charges
\u2013
2.6
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(17.3)
\u2013
gains
Hedge accounting The Group designates its \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 2023
Change in fair Balance in the hedge
value of hedging reserve for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional for measuring recognised in recognised in hedges net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure \u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
559.8
1.06%
(33.0)
22.7
\u2013
18.9
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item in the
the reporting Hedging losses recognised in transferred to due to the \ufb02ows being income
period used recognised in the income Line item in the the cost or hedged no longer statement/
for measuring OCI statement income statement carrying value of item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest
payable payable
Variable rate GBP and similar and similar
debt
33.0
(33.0)
\u2013
charges
\u2013
16.0
\u2013
 charges
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging Balance in the for hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
\u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
558.8
1.06%
39.9
37.5
\u2013
31.7
\u2013
Exposure
31 December 2022
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged Line item
item during Hedging ineffectiveness transferred to reclassi\ufb01ed future cash in the
the reporting gains recognised in the cost or due to the \ufb02ows income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest payable
Variable rate payable and and similar
GBP debt
(39.9)
39.9
\u2013
similar charges
\u2013
(3.1)
\u2013
charges
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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
Revenue
", "dimensions": { "concept": "ifrs-full:DisclosureOfHedgeAccountingExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-749": { "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 within the Consolidated statement of changes in equity, dependent upon whether the contract in question quali\ufb01es as an effective hedge under IFRS 9 (see note 7.2). The own-use exemption applies to certain contracts for physical commodities entered into and held for the Group\u2019s own purchase, sale or usage requirements. The Group\u2019s own-use contracts, such as certain power purchase agreements (PPAs) and the Group\u2019s energy supply contracts, are excluded from fair value mark-to-market accounting. 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 (see 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 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. 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 and the impact of discounting. 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. No gains or losses are recognised at the point of 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 rebased derivative contracts is included within Total results. No amounts are recognised in Adjusted results at the point of rebasing. On rebased derivative contracts which do not qualify for hedge accounting, or where hedge accounting is ineffective, the total gain or loss, including the cash received on rebasing, 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:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-606": { "value": "
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 94). The Financial Risk Management
Committee identi\ufb01es, evaluates and manages \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, 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 as at 31 December. The analysis assumes all other variables were held constant. Financial and commodity markets saw signi\ufb01cant volatility and high prices in 2022. During 2023 the high prices seen in the prior year have generally reversed, but in the most part prices are still above historical averages. See the Principal risks and uncertainties section on page 94 for further details on UK energy market conditions. As a result of these fluctuating market conditions, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, have seen large reversals of the amounts recognised in the prior year. Sensitivities for a 10% change in prices have been included in the current and prior year. The impact of smaller and larger price changes can be 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 other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Power
\u2013
\u2013
34.9
(34.9)
Carbon
2.8
(2.8)
(0.2)
0.2
Gas
11.1
(11.1)
\u2013
\u2013
Oil
(7.9)
7.9
\u2013
\u2013
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. 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. 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, after taking account of the volume held back for operational risk management purposes. 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 commodity contracts to be economic hedges. If either the contracts cannot be readily net settled or if the Group is able to demonstrate these contracts were entered into and continue to be held for the purpose of receipt or delivery of the non-\ufb01nancial item in accordance with the Group\u2019s expected purchase, sale or usage requirements and the own-use exemption applies, then these contracts are not within the scope of IFRS 9. For other contracts that are within the scope of IFRS 9 the Group applies hedge accounting were possible. If the contracts are within the scope of IFRS 9 and hedge accounting is not applied 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows.
31 December 2023
Change in fair Balance in the
value of hedging hedge reserve for
instrument Balance in the hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
5,580,931
129.4
413.3
402.3
(58.8)
257.4
\u2013
Purchase of carbon
emissions allowances
62,000
37.4
1.4
0.4
\u2013
0.3
(0.7)
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item
the reporting recognised in Line item transferred to due to the \ufb02ows in the income
period used Hedging gains the income in the income the cost or hedged being no longer statement/
for measuring recognised in statement statement carrying value of item affecting expected to balance sheet
ineffectiveness OCI in the period in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013gains/(losses) \u2013 gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Commodity contracts
Sale of power
(413.3)
413.3
\u2013
Revenue
\u2013
183.4
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
(1.4)
1.4
\u2013
sales
\u2013
1.6
\u2013
sales
31 December 2022 Restated
Change in fair Balance in
value of hedging the hedge reserve
instrument Balance in the for hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013 gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
2,135,90
9
218.0
(534.4)
322.8
(576.2)
(19 0.1)
\u2013
Purchase of carbon
emissions allowances
148,000
77.5
(4.2)
\u2013
(1.0)
(0.8)
(1.9)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the fair values of assets and liabilities recognised in the Consolidated balance sheet, but not the overall net asset position. See the offsetting section on page 178 for further details on this restatement.
31 December 2022
Change in fair Amount
value of hedged Hedge Amount reclassi\ufb01ed due
item during ineffectiveness Amount reclassi\ufb01ed to the hedged Line item in
the reporting recognised in Line item in the transferred to due to the future cash \ufb02ows the income
period used Hedging losses the income income the cost or hedged being no longer statement/
for measuring recognised in OCI statement statement carrying value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses reclassi\ufb01cation/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m transfer
Commodity contracts
Sale of power
534.4
(534.4)
\u2013
Revenue
\u2013
459.8
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
4.2
(4.2)
\u2013
sales
\u2013
0.1
\u2013
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), euros (EUR) or Canadian dollars (CAD), and the foreign currency debt is also denominated in USD, EUR and CAD (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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at 31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their related hedges. 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. 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. 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, EUR and CAD (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward contracts, to manage exchange risk on foreign currency debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022
Change in fair Amount
value of hedged Hedge Amount Amount reclassi\ufb01ed due
item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the
the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income
period used recognised in the income income carrying value hedged being no longer statement/
for measuring OCI statement statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost of
currency \u2013 USD
(187. 2)
187. 2
\u2013
sales
(34.2)
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 EUR
(17.9)
17.9
\u2013
sales
5.9
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 CAD
(0.4)
0.4
\u2013
sales
9.2
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
(47.5)
47.5
\u2013
charges
\u2013
(9.2)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(44.7)
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
3.1
( 3.1)
\u2013
charges
\u2013
2.6
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(17.3)
\u2013
gains
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 revolving
credit facility (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 2019 UK infrastructure private placement facility. For the 2020 UK infrastructure
private placement facility, the Group has \ufb01xed the interest rate payable on the \u00a398 million GBP denominated facilities through
floating-to-\ufb01xed SONIA interest rate swaps.
The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated \u20ac95 million tranche of the 2020 UK
infrastructure private placement facility, through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest
rate swaps. As detailed in note 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 2023, 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. In January 2024, the Group entered into a floating-to-\ufb01xed cross-currency swap to \ufb01x the sterling value of
interest payments on the CAD denominated term loan.
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.
Certain Group borrowings are at \ufb01xed rates, including the USD and EUR bonds, and are therefore not exposed to interest rate risk.
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 benchmark reform The only interest rate benchmark to which the Group is still exposed to, that is subject to interest rate benchmark reform, is the Canadian Dollar Offered Rate (CDOR). The Group has a C$200 million term loan facility that is linked to a floating-rate CDOR benchmark. During the year the Group has extended the facility to a maturity date of January 2026. As part of the extension, the Group agreed with lenders to transition the floating-rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. \u2018Phase 2\u2019 of the amendments requires that, for \ufb01nancial instruments measured using amortised cost measurement (that is, \ufb01nancial instruments classi\ufb01ed as amortised cost and debt \ufb01nancial assets classi\ufb01ed as FVOCI), changes to the basis for determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate. No immediate gain or loss is recognised. The expedient is only applicable to changes that are required by interest rate benchmark reform, which is the case if, and only if, the change is necessary as a direct consequence of interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis (that is, the basis immediately preceding the change). The following table contains details of all of the \ufb01nancial instruments that the Group holds at 31 December 2023 which reference CDOR and have not yet transitioned to the CORRA interest rate benchmark:
Hedge
Pre-transition Nominal value accounting
Non-derivative \ufb01nancial instrument benchmark rate
C$
Maturity date
applied
Transition progress
New benchmark rate
Agreed transition to CORRA from
the start of the \ufb01rst interest period
CAD term facility
CDOR
200.0
2026
Unhedged
post 31 December 2023
CORRA
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 what the impact on the current years pro\ufb01t after tax and other components of equity would have been for a reasonably possible increase or decrease in interest rates. For interest rate derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Variable rate debt \u2013 unhedged
(1.2)
1.2
\u2013
\u2013
Variable rate debt \u2013 hedged
(4.2)
4.2
\u2013
\u2013
Interest rate swaps
4.2
(4.2)
8.1
(8.1)
Net impact
(1.2)
1.2
8.1
(8.1)
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)
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 \ufb02oating-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 \ufb02oating-to-\ufb01xed interest rate swaps as hedging instruments under cash \ufb02ow 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 valuations. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a \ufb02oor of 0% for the benchmark interest rate. The Group also has CAD denominated debt that has a variable rate based on CDOR. At 31 December 2023, no swaps were in place to hedge the interest risk on the CAD denominated debt. Therefore, in relation to this debt a change in interest rate would have 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 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 \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 2023
Change in fair Balance in the hedge
value of hedging reserve for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional for measuring recognised in recognised in hedges net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure \u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
559.8
1.06%
(33.0)
22.7
\u2013
18.9
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item in the
the reporting Hedging losses recognised in transferred to due to the \ufb02ows being income
period used recognised in the income Line item in the the cost or hedged no longer statement/
for measuring OCI statement income statement carrying value of item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest
payable payable
Variable rate GBP and similar and similar
debt
33.0
(33.0)
\u2013
charges
\u2013
16.0
\u2013
 charges
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging Balance in the for hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
\u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
558.8
1.06%
39.9
37.5
\u2013
31.7
\u2013
Exposure
31 December 2022
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged Line item
item during Hedging ineffectiveness transferred to reclassi\ufb01ed future cash in the
the reporting gains recognised in the cost or due to the \ufb02ows income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest payable
Variable rate payable and and similar
GBP debt
(39.9)
39.9
\u2013
similar charges
\u2013
(3.1)
\u2013
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 or decrease in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
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 business 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. Such facilities are not included within the Group\u2019s de\ufb01nition of Net debt, as outlined in note 2.7. The following tables set out details of the expected maturity pro\ufb01le of the undiscounted, contractual payments 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 2023
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Term loans, gross value
153.9
154.9
271.6
278.8
87.0
946.2
Loan notes, gross value
\u2013
31.7
635.3
\u2013
\u2013
6 67.0
Borrowings, contractual maturity
153.9
186.6
906.9
278.8
87.0
1,613.2
Trade and other payables
763.8
150.7
3.2
1.5
\u2013
919.2
Lease liabilities
8.6
24.8
28.6
52.6
57. 0
171.6
926.3
362.1
938.7
332.9
144.0
2,704.0
Trade and other payables of \u00a3919.2 million (2022: \u00a31,065.9 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to deliver ROCs and employee bene\ufb01t related accruals.
As at 31 December 2022
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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
1,002.1
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
1,067.0
216.9
2,869.0
The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.79% (2022: 4.14%). The following tables set out details of the expected maturity pro\ufb01le of contractual payments of derivative \ufb01nancial liabilities. 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 based on the trade value rather than the mark-to-market value, the gross cash flows have been presented. Certain commodity contracts are expected to be gross settled through delivery or receipt of the commodity and a subsequent cash settlement of the trade value. Vanilla foreign currency exchange contracts are expected to be gross settled through delivery of one currency and receipt of another. 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 2023
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
795.3
79.3
1.6
876.2
Foreign currency exchange contracts
952.4
497.1
39 4.1
1,843.6
Cross-currency contracts
763.7
2.5
31.2
797.4
In\ufb02ation contracts
81.6
85.2
107. 5
274.3
2,593.0
66 4 .1
534.4
3,791.5
As at 31 December 2022
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
1,328.8
173.8
4.6
1,507.2
Foreign currency exchange contracts
921.4
45.4
47. 8
1,014.6
Cross-currency contracts
776.3
2.5
3.8
782.6
In\ufb02ation contracts
67.3
83.1
203.8
354.2
3,093.8
304.8
260.0
3,658.6
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. The maximum exposure to credit risk at the reporting date is the carrying value of each class of \ufb01nancial assets disclosed in note 7.1. Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a359.4 million (2022: \u00a360.9 million) and expected credit losses on accrued income of \u00a39.4 million (2022: \u00a37.6 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, payment terms, 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. 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 smaller 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 industry 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. The Group had cash and cash equivalents of \u00a3379.5 million at 31 December 2023 (2022: \u00a3238.0 million). Cash and cash equivalents are subject to the impairment requirements of IFRS 9. The identi\ufb01ed impairment loss, based on the 12-month expected credit loss basis, was immaterial. Cash and cash equivalents are held with banks with external credit ratings between AAA and A. 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. Credit risk is a factor in the determination of fair value. The carrying amount of these \ufb01nancial assets, disclosed in note 7.1, represents the Group\u2019s maximum credit risk exposure. Some derivative contracts are fully cash collateralised, thereby minimising credit risk. At 31 December 2023 the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) covering certain derivative assets and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments covering certain derivative liabilities. The credit rating of counterparties to which the \u00a398.9 million of cash collateral had been posted was A\u2013. 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 wide 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 92 for details of scenario analysis performed on covenant restrictions within the Group\u2019s \ufb01nancing facilities.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
1,425.3
1,440.9
Cash and cash equivalents (note 4.1)
(379.5)
(238.0)
Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries
0.3
0.7
Impact of hedging instruments
37. 8
2.4
Net debt (note 2.7)
1,083.9
1,206.0
Total shareholders\u2019 equity attributable to owners of the parent company, excluding hedge and cost of
hedging reserves
1,744.9
1,422.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-713": { "value": "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 94). The Financial Risk Management Committee identi\ufb01es, evaluates and manages \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, 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 as at 31 December. The analysis assumes all other variables were held constant. Financial and commodity markets saw signi\ufb01cant volatility and high prices in 2022. During 2023 the high prices seen in the prior year have generally reversed, but in the most part prices are still above historical averages. See the Principal risks and uncertainties section on page 94 for further details on UK energy market conditions. As a result of these fluctuating market conditions, the valuation of the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, have seen large reversals of the amounts recognised in the prior year. Sensitivities for a 10% change in prices have been included in the current and prior year. The impact of smaller and larger price changes can be 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 other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Power
\u2013
\u2013
34.9
(34.9)
Carbon
2.8
(2.8)
(0.2)
0.2
Gas
11.1
(11.1)
\u2013
\u2013
Oil
(7.9)
7.9
\u2013
\u2013
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. 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. 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, after taking account of the volume held back for operational risk management purposes. 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 commodity contracts to be economic hedges. If either the contracts cannot be readily net settled or if the Group is able to demonstrate these contracts were entered into and continue to be held for the purpose of receipt or delivery of the non-\ufb01nancial item in accordance with the Group\u2019s expected purchase, sale or usage requirements and the own-use exemption applies, then these contracts are not within the scope of IFRS 9. For other contracts that are within the scope of IFRS 9 the Group applies hedge accounting were possible. If the contracts are within the scope of IFRS 9 and hedge accounting is not applied 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows.
31 December 2023
Change in fair Balance in the
value of hedging hedge reserve for
instrument Balance in the hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
5,580,931
129.4
413.3
402.3
(58.8)
257.4
\u2013
Purchase of carbon
emissions allowances
62,000
37.4
1.4
0.4
\u2013
0.3
(0.7)
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item
the reporting recognised in Line item transferred to due to the \ufb02ows in the income
period used Hedging gains the income in the income the cost or hedged being no longer statement/
for measuring recognised in statement statement carrying value of item affecting expected to balance sheet
ineffectiveness OCI in the period in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013gains/(losses) \u2013 gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Commodity contracts
Sale of power
(413.3)
413.3
\u2013
Revenue
\u2013
183.4
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
(1.4)
1.4
\u2013
sales
\u2013
1.6
\u2013
sales
31 December 2022 Restated
Change in fair Balance in
value of hedging the hedge reserve
instrument Balance in the for hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013 gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
2,135,90
9
218.0
(534.4)
322.8
(576.2)
(19 0.1)
\u2013
Purchase of carbon
emissions allowances
148,000
77.5
(4.2)
\u2013
(1.0)
(0.8)
(1.9)
(1) (1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the fair values of assets and liabilities recognised in the Consolidated balance sheet, but not the overall net asset position. See the offsetting section on page 178 for further details on this restatement. 31 December 2022 Change in fair Amount value of hedged Hedge Amount reclassi\ufb01ed due item during ineffectiveness Amount reclassi\ufb01ed to the hedged Line item in the reporting recognised in Line item in the transferred to due to the future cash \ufb02ows the income period used Hedging losses the income income the cost or hedged being no longer statement/ for measuring recognised in OCI statement statement carrying value item affecting expected to balance sheet ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses reclassi\ufb01cation/ \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m transfer Commodity contracts Sale of power 534.4 (534.4) \u2013 Revenue \u2013 459.8 \u2013 Revenue Purchase of carbon Cost of Cost of emissions allowances 4.2 (4.2) \u2013 sales \u2013 0.1 \u2013 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), euros (EUR) or Canadian dollars (CAD), and the foreign currency debt is also denominated in USD, EUR and CAD (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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at 31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their related hedges. 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. 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. 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, EUR and CAD (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward contracts, to manage exchange risk on foreign currency debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022
Change in fair Amount
value of hedged Hedge Amount Amount reclassi\ufb01ed due
item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the
the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income
period used recognised in the income income carrying value hedged being no longer statement/
for measuring OCI statement statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost of
currency \u2013 USD
(187. 2)
187. 2
\u2013
sales
(34.2)
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 EUR
(17.9)
17.9
\u2013
sales
5.9
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 CAD
(0.4)
0.4
\u2013
sales
9.2
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
(47.5)
47.5
\u2013
charges
\u2013
(9.2)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(44.7)
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
3.1
( 3.1)
\u2013
charges
\u2013
2.6
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(17.3)
\u2013
gains
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 revolving credit facility (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 2019 UK infrastructure private placement facility. For the 2020 UK infrastructure private placement facility, the Group has \ufb01xed the interest rate payable on the \u00a398 million GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated \u20ac95 million tranche of the 2020 UK infrastructure private placement facility, through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in note 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 2023, 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. In January 2024, the Group entered into a floating-to-\ufb01xed cross-currency swap to \ufb01x the sterling value of interest payments on the CAD denominated term loan. 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. Certain Group borrowings are at \ufb01xed rates, including the USD and EUR bonds, and are therefore not exposed to interest rate risk. 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 benchmark reform The only interest rate benchmark to which the Group is still exposed to, that is subject to interest rate benchmark reform, is the Canadian Dollar Offered Rate (CDOR). The Group has a C$200 million term loan facility that is linked to a floating-rate CDOR benchmark. During the year the Group has extended the facility to a maturity date of January 2026. As part of the extension, the Group agreed with lenders to transition the floating-rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association (ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged. This amendment will become active in the \ufb01rst interest period starting in January 2024. \u2018Phase 2\u2019 of the amendments requires that, for \ufb01nancial instruments measured using amortised cost measurement (that is, \ufb01nancial instruments classi\ufb01ed as amortised cost and debt \ufb01nancial assets classi\ufb01ed as FVOCI), changes to the basis for determining the contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate. No immediate gain or loss is recognised. The expedient is only applicable to changes that are required by interest rate benchmark reform, which is the case if, and only if, the change is necessary as a direct consequence of interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis (that is, the basis immediately preceding the change). The following table contains details of all of the \ufb01nancial instruments that the Group holds at 31 December 2023 which reference CDOR and have not yet transitioned to the CORRA interest rate benchmark:
Hedge
Pre-transition Nominal value accounting
Non-derivative \ufb01nancial instrument benchmark rate
C$
Maturity date
applied
Transition progress
New benchmark rate
Agreed transition to CORRA from
the start of the \ufb01rst interest period
CAD term facility
CDOR
200.0
2026
Unhedged
post 31 December 2023
CORRA
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 what the impact on the current years pro\ufb01t after tax and other components of equity would have been for a reasonably possible increase or decrease in interest rates. For interest rate derivatives designated into hedge relationships the analysis includes the impact of recycling amounts from the hedge reserve. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Variable rate debt \u2013 unhedged
(1.2)
1.2
\u2013
\u2013
Variable rate debt \u2013 hedged
(4.2)
4.2
\u2013
\u2013
Interest rate swaps
4.2
(4.2)
8.1
(8.1)
Net impact
(1.2)
1.2
8.1
(8.1)
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)
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 \ufb02oating-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 \ufb02oating-to-\ufb01xed interest rate swaps as hedging instruments under cash \ufb02ow 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 valuations. Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a \ufb02oor of 0% for the benchmark interest rate. The Group also has CAD denominated debt that has a variable rate based on CDOR. At 31 December 2023, no swaps were in place to hedge the interest risk on the CAD denominated debt. Therefore, in relation to this debt a change in interest rate would have 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 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 \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 2023
Change in fair Balance in the hedge
value of hedging reserve for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional for measuring recognised in recognised in hedges net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure \u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
559.8
1.06%
(33.0)
22.7
\u2013
18.9
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item in the
the reporting Hedging losses recognised in transferred to due to the \ufb02ows being income
period used recognised in the income Line item in the the cost or hedged no longer statement/
for measuring OCI statement income statement carrying value of item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest
payable payable
Variable rate GBP and similar and similar
debt
33.0
(33.0)
\u2013
charges
\u2013
16.0
\u2013
 charges
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging Balance in the for hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
\u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
558.8
1.06%
39.9
37.5
\u2013
31.7
\u2013
Exposure
31 December 2022
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged Line item
item during Hedging ineffectiveness transferred to reclassi\ufb01ed future cash in the
the reporting gains recognised in the cost or due to the \ufb02ows income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest payable
Variable rate payable and and similar
GBP debt
(39.9)
39.9
\u2013
similar charges
\u2013
(3.1)
\u2013
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 or decrease in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
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 business 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. Such facilities are not included within the Group\u2019s de\ufb01nition of Net debt, as outlined in note 2.7. The following tables set out details of the expected maturity pro\ufb01le of the undiscounted, contractual payments 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 2023
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Term loans, gross value
153.9
154.9
271.6
278.8
87.0
946.2
Loan notes, gross value
\u2013
31.7
635.3
\u2013
\u2013
6 67.0
Borrowings, contractual maturity
153.9
186.6
906.9
278.8
87.0
1,613.2
Trade and other payables
763.8
150.7
3.2
1.5
\u2013
919.2
Lease liabilities
8.6
24.8
28.6
52.6
57. 0
171.6
926.3
362.1
938.7
332.9
144.0
2,704.0
Trade and other payables of \u00a3919.2 million (2022: \u00a31,065.9 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to deliver ROCs and employee bene\ufb01t related accruals.
As at 31 December 2022
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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
1,002.1
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
1,067.0
216.9
2,869.0
The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.79% (2022: 4.14%). The following tables set out details of the expected maturity pro\ufb01le of contractual payments of derivative \ufb01nancial liabilities. 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 based on the trade value rather than the mark-to-market value, the gross cash flows have been presented. Certain commodity contracts are expected to be gross settled through delivery or receipt of the commodity and a subsequent cash settlement of the trade value. Vanilla foreign currency exchange contracts are expected to be gross settled through delivery of one currency and receipt of another. 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 2023
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
795.3
79.3
1.6
876.2
Foreign currency exchange contracts
952.4
497.1
39 4.1
1,843.6
Cross-currency contracts
763.7
2.5
31.2
797.4
In\ufb02ation contracts
81.6
85.2
107. 5
274.3
2,593.0
66 4 .1
534.4
3,791.5
As at 31 December 2022
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
1,328.8
173.8
4.6
1,507.2
Foreign currency exchange contracts
921.4
45.4
47. 8
1,014.6
Cross-currency contracts
776.3
2.5
3.8
782.6
In\ufb02ation contracts
67.3
83.1
203.8
354.2
3,093.8
304.8
260.0
3,658.6
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. The maximum exposure to credit risk at the reporting date is the carrying value of each class of \ufb01nancial assets disclosed in note 7.1. Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a359.4 million (2022: \u00a360.9 million) and expected credit losses on accrued income of \u00a39.4 million (2022: \u00a37.6 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, payment terms, 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. 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 smaller 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 industry 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. The Group had cash and cash equivalents of \u00a3379.5 million at 31 December 2023 (2022: \u00a3238.0 million). Cash and cash equivalents are subject to the impairment requirements of IFRS 9. The identi\ufb01ed impairment loss, based on the 12-month expected credit loss basis, was immaterial. Cash and cash equivalents are held with banks with external credit ratings between AAA and A. 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. Credit risk is a factor in the determination of fair value. The carrying amount of these \ufb01nancial assets, disclosed in note 7.1, represents the Group\u2019s maximum credit risk exposure. Some derivative contracts are fully cash collateralised, thereby minimising credit risk. At 31 December 2023 the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) covering certain derivative assets and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments covering certain derivative liabilities. The credit rating of counterparties to which the \u00a398.9 million of cash collateral had been posted was A\u2013. 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 wide 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 92 for details of scenario analysis performed on covenant restrictions within the Group\u2019s \ufb01nancing facilities.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
1,425.3
1,440.9
Cash and cash equivalents (note 4.1)
(379.5)
(238.0)
Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries
0.3
0.7
Impact of hedging instruments
37. 8
2.4
Net debt (note 2.7)
1,083.9
1,206.0
Total shareholders\u2019 equity attributable to owners of the parent company, excluding hedge and cost of
hedging reserves
1,744.9
1,422.7
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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated in the hedge reserve is transferred and included within the initial cost of the asset. 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
Foreign
Commodity currency Interest In\ufb02ation
price risk exchange risk rate risk rate risk Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
(138.2)
(39.3)
4.2
(4.1)
(17 7.4)
(Losses)/gains 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 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 (losses)/gains
\u2013
(62.0)
\u2013
\u2013
(62.0)
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
39.5
39.5
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(19.1)
\u2013
\u2013
(19.1)
Related deferred tax, net (note 2.6)
24.1
(39.2)
(9.3)
23.6
(0.8)
At 1 January 2023
(192.8)
83.7
31.7
(74.6)
(152.0)
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instrument recognised in OCI
414.7
(115.0)
(33.0)
(0.2)
266.5
Reclassi\ufb01ed from equity as the hedged item has affected
pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in cost of sales
1.6
\u2013
\u2013
\u2013
1.6
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in revenue
183.4
\u2013
\u2013
16.6
200.0
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in interest payable and similar charges
\u2013
(0.3)
16.0
\u2013
15.7
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in foreign exchange (losses)/gains
\u2013
29.5
\u2013
\u2013
29.5
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
9.3
9.3
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(43.4)
\u2013
\u2013
(43.4)
Related deferred tax, net (note 2.6)
(149.9)
32.3
4.2
(6.4)
(119.8)
At 31 December 2023
257.0
(13.2)
18.9
(55.3)
207.4
The expected release pro\ufb01le from equity of post-tax hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity risk
199.4
56.0
1.6
257.0
Foreign currency exchange risk
(4.9)
(6 .1)
(2.2)
(13.2)
Interest rate risk
11.5
6.3
1.1
18.9
In\ufb02ation risk
(19.4)
(15.2)
(20.7)
(55.3)
186.6
41.0
(20.2)
207.4
At 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \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)
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 hedging the purchase of inventory denominated in foreign currencies 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 transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
Cost of hedging
2023 2022
\u00a3m \u00a3m
At 1 January
40.1
78.5
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instruments recognised in the Consolidated statement of
comprehensive income
7.5
(19.0)
Transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
(36.0)
(28.8)
Related deferred tax, net (note 2.6)
7.1
9.4
At 31 December
18.7
4 0.1
The expected release pro\ufb01le from equity of post-tax cost of hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
16.6
4.3
(2.2)
18.7
As at 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
21.7
13.0
5.4
4 0.1
", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-638": { "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, 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 as at 31 December. The analysis
assumes all other variables were held constant.
Financial and commodity markets saw signi\ufb01cant volatility and high prices in 2022. During 2023 the high prices seen in the prior year
have generally reversed, but in the most part prices are still above historical averages. See the Principal risks and uncertainties section
on page 94 for further details on UK energy market conditions. As a result of these fluctuating market conditions, the valuation of
the Group\u2019s derivative \ufb01nancial instruments, in particular power, gas, foreign currency contracts, inflation and oil, have seen large
reversals of the amounts recognised in the prior year.
Sensitivities for a 10% change in prices have been included in the current and prior year. The impact of smaller and larger price
changes can be 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 other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Power
\u2013
\u2013
34.9
(34.9)
Carbon
2.8
(2.8)
(0.2)
0.2
Gas
11.1
(11.1)
\u2013
\u2013
Oil
(7.9)
7.9
\u2013
\u2013
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. 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.
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, after taking
account of the volume held back for operational risk management purposes. 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 commodity contracts to be economic hedges. If either the contracts cannot be readily net settled or
if the Group is able to demonstrate these contracts were entered into and continue to be held for the purpose of receipt or delivery
of the non-\ufb01nancial item in accordance with the Group\u2019s expected purchase, sale or usage requirements and the own-use exemption
applies, then these contracts are not within the scope of IFRS 9. For other contracts that are within the scope of IFRS 9 the Group
applies hedge accounting were possible. If the contracts are within the scope of IFRS 9 and hedge accounting is not applied 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 hedges in the current or prior year. 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 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 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 contracts that are used to protect the value of future cash flows.
31 December 2023
Change in fair Balance in the
value of hedging hedge reserve for
instrument Balance in the hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
5,580,931
129.4
413.3
402.3
(58.8)
257.4
\u2013
Purchase of carbon
emissions allowances
62,000
37.4
1.4
0.4
\u2013
0.3
(0.7)
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item
the reporting recognised in Line item transferred to due to the \ufb02ows in the income
period used Hedging gains the income in the income the cost or hedged being no longer statement/
for measuring recognised in statement statement carrying value of item affecting expected to balance sheet
ineffectiveness OCI in the period in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013gains/(losses) \u2013 gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Commodity contracts
Sale of power
(413.3)
413.3
\u2013
Revenue
\u2013
183.4
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
(1.4)
1.4
\u2013
sales
\u2013
1.6
\u2013
sales
31 December 2022 Restated
Change in fair Balance in
value of hedging the hedge reserve
instrument Balance in the for hedging
during hedge reserve relationships for
the reporting for continuing which hedge
Notional period used Fair value Fair value hedges accounting is
value of Weighted for measuring recognised in recognised in net of deferred no longer applied
contracts average ineffectiveness balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
(MWh, \ufb01xed price \u2013 gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure allowances) \u00a3 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
Sale of power
2,135,90
9
218.0
(534.4)
322.8
(576.2)
(19 0.1)
\u2013
Purchase of carbon
emissions allowances
148,000
77.5
(4.2)
\u2013
(1.0)
(0.8)
(1.9)
(1)
(1) Comparative amounts have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted
the fair values of assets and liabilities recognised in the Consolidated balance sheet, but not the overall net asset position. See the offsetting section on page 178 for
further details on this restatement.
31 December 2022
Change in fair Amount
value of hedged Hedge Amount reclassi\ufb01ed due
item during ineffectiveness Amount reclassi\ufb01ed to the hedged Line item in
the reporting recognised in Line item in the transferred to due to the future cash \ufb02ows the income
period used Hedging losses the income income the cost or hedged being no longer statement/
for measuring recognised in OCI statement statement carrying value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses reclassi\ufb01cation/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m transfer
Commodity contracts
Sale of power
534.4
(534.4)
\u2013
Revenue
\u2013
459.8
\u2013
Revenue
Purchase of carbon Cost of Cost of
emissions allowances
4.2
(4.2)
\u2013
sales
\u2013
0.1
\u2013
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), euros (EUR) or Canadian dollars
(CAD), and the foreign currency debt is also denominated in USD, EUR and CAD (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 sensitivity analysis below shows the impact of a change in foreign exchange rates as at
31 December on outstanding monetary items denominated in foreign currency and the valuation of foreign currency derivative
instruments. For foreign currency derivatives designated into hedge relationships the analysis includes the impact of recycling
amounts from the hedge reserve if as part of the sensitivity the item they are hedging impacts pro\ufb01t or loss. The analysis assumes
all other variables were held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
USD
84.5
(53.5)
125.3
(100.8)
EUR
15.9
(13.2)
3.9
(3.6)
CAD
0.3
\u2013
4.8
(4.0)
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2022
USD
41.7
(59.0)
102.6
(83.9)
EUR
12.2
(20.5)
11.8
(9.6)
CAD
(6.2)
9.9
7. 8
(13.0)
Prior year foreign currency sensitivities have been re-presented to fully reflect the foreign currency impact on borrowings and their
related hedges.
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. 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.
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, EUR and CAD
(see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward
contracts, to manage exchange risk on foreign currency debt.
Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows.
31 December 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional Weighted for measuring recognised in recognised in net of deferred no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure ($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency
purchase contracts
Purchases in foreign
currency \u2013 USD
2 ,126.9
$1.29
(68.0)
35.6
(21.5)
( 7.3)
\u2013
Purchases in foreign
currency \u2013 EUR
47.0
\u20ac 1.15
(3.3)
\u2013
\u2013
0.2
\u2013
Purchases in foreign
currency \u2013 CAD
116.6
C$1.68
(8.7)
2.1
(2.1)
(1.3)
\u2013
Foreign currency
denominated debt
Interest and principal $1.36/
repayments \u2013 USD
500.0
6.13%
(23.0)
2.7
(21.1)
(2.4)
\u2013
\u20ac1.10/
4.57%/
Interest and principal 3M SONIA +
repayments \u2013 EUR
376.5
137.2b p s
(11.8)
\u2013
(14.0)
(2.6)
\u2013
Principal repayments \u2013 CAD
200.0
C$1.68
(0.2)
\u2013
(0 .1)
0.2
\u2013
xposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged
item during ineffectiveness transferred to reclassi\ufb01ed future cash Line item in the
the reporting recognised in the cost or due to the \ufb02ows income
period used Hedging losses the income Line item in the carrying hedged being no longer statement/
for measuring recognised in OCI statement income statement value item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes of a non- pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge \ufb01nancial asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost
currency \u2013 USD
68.0
(68.0)
\u2013
of sales
(42.5)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 EUR
3.3
(3.3)
\u2013
of sales
(0.9)
\u2013
\u2013
Inventories
Purchases in foreign Cost
currency \u2013 CAD
8.8
(8.8)
\u2013
of sales
\u2013
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
28.9
(22.9)
\u2013
charges
\u2013
(3.3)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
22.0
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
13.7
(11.8)
\u2013
charges
\u2013
3.0
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
7. 5
\u2013
gains
Foreign Foreign
exchange exchange
Principal repayments (losses)/ (losses)/
\u2013 CAD
0.2
(0.2)
\u2013
gains
\u2013
\u2013
\u2013
gains
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional Weighted for measuring recognised in recognised in hedges net of no longer applied
value of average ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax
contracts \ufb01xed/variable gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
($m, \u20acm, C$m) rate \u00a3m \u00a3m \u00a3m \u00a3m \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
\u20ac1.16
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 $1.36/
repayments \u2013 USD
500.0
4.90%
47.5
12.3
(6.2)
0.8
\u2013
\u20ac1.10/
4.55%/3M
Interest and principal SONIA +
repayments \u2013 EUR
376.5
137.2bps
( 3.1)
4.2
(8.1)
(1.6)
\u2013
31 December 2022
Change in fair Amount
value of hedged Hedge Amount Amount reclassi\ufb01ed due
item during Hedging ineffectiveness transferred to reclassi\ufb01ed to the hedged Line item in the
the reporting gains/(losses) recognised in Line item in the the cost or due to the future cash \ufb02ows income
period used recognised in the income income carrying value hedged being no longer statement/
for measuring OCI statement statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Foreign currency
purchase contracts
Purchases in foreign Cost of
currency \u2013 USD
(187. 2)
187. 2
\u2013
sales
(34.2)
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 EUR
(17.9)
17.9
\u2013
sales
5.9
\u2013
\u2013
Inventories
Purchases in foreign Cost of
currency \u2013 CAD
(0.4)
0.4
\u2013
sales
9.2
\u2013
\u2013
Inventories
Foreign currency
denominated debt Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 USD
(47.5)
47.5
\u2013
charges
\u2013
(9.2)
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(44.7)
\u2013
gains
Interest Interest
payable payable
and and
Interest and principal similar similar
repayments \u2013 EUR
3.1
( 3.1)
\u2013
charges
\u2013
2.6
\u2013
 charges
Foreign Foreign
exchange exchange
(losses)/ (losses)/
\u2013
gains
\u2013
(17.3)
\u2013
gains
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 revolving credit facility (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 2019 UK infrastructure private placement facility. For the 2020 UK infrastructure private placement facility, the Group has \ufb01xed the interest rate payable on the \u00a398 million GBP denominated facilities through floating-to-\ufb01xed SONIA interest rate swaps. The Group has also \ufb01xed the interest rate payable on the variable rate EUR denominated \u20ac95 million tranche of the 2020 UK infrastructure private placement facility, through Euro Interbank Offered Rate (EURIBOR) floating-to-\ufb01xed cross-currency interest rate swaps. As detailed in note 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 2023, 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. In January 2024, the Group entered into a floating-to-\ufb01xed cross-currency swap to \ufb01x the sterling value of interest payments on the CAD denominated term loan. 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. Certain Group borrowings are at \ufb01xed rates, including the USD and EUR bonds, and are therefore not exposed to interest rate risk. 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 benchmark reform
The only interest rate benchmark to which the Group is still exposed to, that is subject to interest rate benchmark reform, is the
Canadian Dollar Offered Rate (CDOR). The Group has a C$200 million term loan facility that is linked to a floating-rate CDOR
benchmark. During the year the Group has extended the facility to a maturity date of January 2026. As part of the extension,
the Group agreed with lenders to transition the floating-rate to the Canadian Overnight Repo Rate Average (CORRA) plus a credit
adjustment spread (CAS). The CAS per the amended agreement is consistent with the International Swaps and Derivatives Association
(ISDA) spread adjustments as calculated and published by Bloomberg. The base margin rate of the loan remained unchanged.
This amendment will become active in the \ufb01rst interest period starting in January 2024.
\u2018Phase 2\u2019 of the amendments requires that, for \ufb01nancial instruments measured using amortised cost measurement (that is, \ufb01nancial
instruments classi\ufb01ed as amortised cost and debt \ufb01nancial assets classi\ufb01ed as FVOCI), changes to the basis for determining the
contractual cash flows required by interest rate benchmark reform are reflected by adjusting their effective interest rate. No
immediate gain or loss is recognised. The expedient is only applicable to changes that are required by interest rate benchmark reform,
which is the case if, and only if, the change is necessary as a direct consequence of interest rate benchmark reform and the new basis
for determining the contractual cash flows is economically equivalent to the previous basis (that is, the basis immediately preceding
the change).
The following table contains details of all of the \ufb01nancial instruments that the Group holds at 31 December 2023 which reference
CDOR and have not yet transitioned to the CORRA interest rate benchmark:
Hedge
Pre-transition Nominal value accounting
Non-derivative \ufb01nancial instrument benchmark rate
C$
Maturity date
applied
Transition progress
New benchmark rate
Agreed transition to CORRA from
the start of the \ufb01rst interest period
CAD term facility
CDOR
200.0
2026
Unhedged
post 31 December 2023
CORRA
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 what the impact on the current years pro\ufb01t after tax and other components of equity would have been for a
reasonably possible increase or decrease in interest rates. For interest rate derivatives designated into hedge relationships the analysis
includes the impact of recycling amounts from the hedge reserve. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
Variable rate debt \u2013 unhedged
(1.2)
1.2
\u2013
\u2013
Variable rate debt \u2013 hedged
(4.2)
4.2
\u2013
\u2013
Interest rate swaps
4.2
(4.2)
8.1
(8.1)
Net impact
(1.2)
1.2
8.1
(8.1)
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)
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 \ufb02oating-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 \ufb02oating-to-\ufb01xed interest rate swaps as hedging instruments under cash \ufb02ow 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
valuations.
Certain amounts of the Group\u2019s variable rate debt and interest rate swaps have a \ufb02oor of 0% for the benchmark interest rate. The
Group also has CAD denominated debt that has a variable rate based on CDOR. At 31 December 2023, no swaps were in place to
hedge the interest risk on the CAD denominated debt. Therefore, in relation to this debt a change in interest rate would have 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 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 \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate 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 2023
Change in fair Balance in the hedge
value of hedging reserve for hedging
instrument during Balance in the relationships for
the reporting hedge reserve which hedge
period used Fair value Fair value for continuing accounting is
Notional for measuring recognised in recognised in hedges net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure \u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
559.8
1.06%
(33.0)
22.7
\u2013
18.9
\u2013
Exposure
31 December 2023
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount to the hedged
item during ineffectiveness Amount reclassi\ufb01ed future cash Line item in the
the reporting Hedging losses recognised in transferred to due to the \ufb02ows being income
period used recognised in the income Line item in the the cost or hedged no longer statement/
for measuring OCI statement income statement carrying value of item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes a non-\ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest
payable payable
Variable rate GBP and similar and similar
debt
33.0
(33.0)
\u2013
charges
\u2013
16.0
\u2013
 charges
Exposure
31 December 2022
Balance in the
Change in fair hedge reserve
value of hedging Balance in the for hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 deferred tax \u2013 net of deferred tax \u2013
contracts average gains/(losses) assets liabilities (debit)/credit (debit)/credit
\u00a3m % \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Interest rate
Variable rate GBP debt
558.8
1.06%
39.9
37.5
\u2013
31.7
\u2013
Exposure
31 December 2022
Amount
Change in fair reclassi\ufb01ed due
value of hedged Hedge Amount Amount to the hedged Line item
item during Hedging ineffectiveness transferred to reclassi\ufb01ed future cash in the
the reporting gains recognised in the cost or due to the \ufb02ows income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness \u2013 in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
\u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Interest rate Interest Interest payable
Variable rate payable and and similar
GBP debt
(39.9)
39.9
\u2013
similar charges
\u2013
(3.1)
\u2013
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 or decrease in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
Revenue
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-766": { "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 hedges in the current or prior year. 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. 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, EUR and CAD (see note 4.2). The Group utilises derivative contracts, including cross-currency interest rate swaps and foreign exchange forward contracts, to manage exchange risk on foreign currency debt. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD 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 tranche of the 2020 UK infrastructure private placement facility (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, foreign currency basis spread, and credit risk. A reconciliation of reserves and the time period when the hedge will affect pro\ufb01t or loss, or will be transferred 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 or 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 \ufb01x the sterling value of future cash flows. Hedge accounting The Group designates its \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate hedges are differences in the critical terms, differences in repricing dates and credit risk. 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no longer expected to occur. 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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated in the hedge reserve is transferred and included within the initial cost of the asset. 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 hedging the purchase of inventory denominated in foreign currencies 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-759": { "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. Hedge accounting The Group designates certain foreign currency exchange contracts as hedging instruments, predominantly forwards and swaps. Gains and losses on 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 when foreign exchange gains or losses are recognised on the interest payments. Gains and losses that are effective at hedging the foreign exchange risk on the USD, EUR and CAD principal are released to foreign exchange gains or losses to offset gains and losses on retranslating the USD, EUR and CAD denominated hedged borrowings. The Group designates its \ufb02oating-to-\ufb01xed SONIA interest rate swaps and the \ufb02oating-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 2019 UK infrastructure private placement facility and the \u00a398 million GBP denominated tranche of the 2020 UK infrastructure private placement facility. The cross-currency interest rate swaps are hedges of both interest rate risk and foreign currency risk relating to the variable rate \u20ac95 million EUR denominated tranche of the 2020 UK infrastructure private placement facility. As such this has been separated into synthetic \ufb02oating-to-\ufb02oating cross-currency interest rate swaps and synthetic \ufb02oating- to-\ufb01xed GBP interest rate swaps. The synthetic \ufb02oating-to-\ufb02oating 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 \u00a386.8 million. The synthetic \ufb02oating-to-\ufb01xed GBP interest rate then swaps the variable interest rate for a \ufb01xed GBP interest rate. Details of the \ufb02oating-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 related hedged borrowings. The main sources of ineffectiveness relating to interest rate hedges are differences in the critical terms, differences in repricing dates and credit risk. 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated in the hedge reserve is transferred and included within the initial cost of the asset. 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 hedging the purchase of inventory denominated in foreign currencies 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-668": { "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 or decrease in inflation rates as at 31 December. The analysis assumes all other variables are held constant.
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
At 31 December 2023
UK CPI in\ufb02ation swaps
\u2013
\u2013
(31.3)
26.6
UK RPI in\ufb02ation swaps
(5.6)
5.5
(24.3)
23.9
Impact on other components
Impact on pro\ufb01t after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
\u00a3m \u00a3m \u00a3m \u00a3m
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
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. Inflation risk management The Group has a risk management policy in place relating to inflation risk. The Group policy permits 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 this inflation risk. 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 pro\ufb01t or loss or if the hedged item is no 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 2023, as a result of a decrease in the forecast CfD generation, the Group recycled \u00a39.3 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 also recognised \u00a310.7 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 2023
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
In\ufb02ation
In\ufb02ation linked sales
30.4
CPI \u2013 2.72%
3.3
\u2013
(19.7)
(15.3)
13.6
contracts \u2013 CPI
440.0
RPI \u2013 3.46%
(14 .2)
\u2013
(230.7)
(53.6)
\u2013
31 December 2023
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during Hedging ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting gains recognised in cost or due to the \ufb02ows the income
period used recognised in the income Line item in the carrying value hedged being no longer statement/
for measuring OCI in the statement income statement of a non- item affecting expected to balance sheet
ineffectiveness period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
In\ufb02ation
In\ufb02ation linked sales
(3.3)
3.3
\u2013
Revenue
\u2013
(0.9)
\u2013
Revenue
contracts \u2013 CPI
3.5
(3.5)
(10.7)
Revenue
\u2013
17. 5
9.3
Revenue
31 December 2022
Balance in the
Change in fair hedge reserve for
value of hedging Balance in the hedging
instrument during hedge reserve relationships for
the reporting for continuing which hedge
period used Fair value Fair value hedges accounting is
Notional for measuring recognised in recognised in net of deferred no longer applied
value of Weighted ineffectiveness \u2013 balance sheet \u2013 balance sheet \u2013 tax \u2013 net of deferred tax
contracts average gains/(losses) assets liabilities (debit)/credit \u2013 (debit)/credit
Exposure \u00a3m \ufb01xed rate \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Inflation
Inflation linked sales contracts \u2013
30.4
CPI \u2013 2.72%
(13.3)
\u2013
(23.8)
(18 .1)
14.6
CPI
440.0
RPI \u2013 3.45%
(144.0)
\u2013
(283.5)
( 71.1)
\u2013
31 December 2022
Amount
Change in fair Amount reclassi\ufb01ed due
value of hedged Hedge transferred to Amount to the hedged
item during ineffectiveness the reclassi\ufb01ed future cash Line item in
the reporting Hedging losses recognised in cost or due to the \ufb02ows the income
period used recognised the income Line item in the carrying value hedged being no longer statement/
for measuring in OCI statement income statement of a non- item affecting expected to balance sheet
ineffectiveness in the period \u2013 in the period \u2013 that includes \ufb01nancial pro\ufb01t or loss \u2013 occur \u2013 affected by the
\u2013 gains/(losses) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure \u00a3m \u00a3m \u00a3m ineffectiveness \u00a3m \u00a3m \u00a3m reclassi\ufb01cation
Inflation
Inflation linked sales
13.3
(13.3)
\u2013
Revenue
\u2013
(2.0)
(3.5)
Revenue
contracts \u2013 CPI
125.5
(125.5)
(18.5)
Revenue
\u2013
7.2
43.0
Revenue
", "dimensions": { "concept": "draxgroupplc:DisclosureOfInflationRisk", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-639": { "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 business 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. Such facilities are not included within the Group\u2019s de\ufb01nition of Net debt, as outlined
in note 2.7.
The following tables set out details of the expected maturity pro\ufb01le of the undiscounted, contractual payments 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 2023
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Term loans, gross value
153.9
154.9
271.6
278.8
87.0
946.2
Loan notes, gross value
\u2013
31.7
635.3
\u2013
\u2013
6 67.0
Borrowings, contractual maturity
153.9
186.6
906.9
278.8
87.0
1,613.2
Trade and other payables
763.8
150.7
3.2
1.5
\u2013
919.2
Lease liabilities
8.6
24.8
28.6
52.6
57. 0
171.6
926.3
362.1
938.7
332.9
144.0
2,704.0
Trade and other payables of \u00a3919.2 million (2022: \u00a31,065.9 million) excludes non-\ufb01nancial liabilities such as the Group\u2019s obligation to
deliver ROCs and employee bene\ufb01t related accruals.
As at 31 December 2022
Within 3 months\u2013
3 months 1 year 1\u20132 years 2\u20135 years >5 years Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \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
1,002.1
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
1,067.0
216.9
2,869.0
The weighted average interest rate payable at the reporting date on the Group\u2019s borrowings was 4.79% (2022: 4.14%).
The following tables set out details of the expected maturity pro\ufb01le of contractual payments of derivative \ufb01nancial liabilities. 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 based on the trade value rather than the mark-to-market value, the gross
cash flows have been presented. Certain commodity contracts are expected to be gross settled through delivery or receipt of the
commodity and a subsequent cash settlement of the trade value. Vanilla foreign currency exchange contracts are expected to be
gross settled through delivery of one currency and receipt of another. 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 2023
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
795.3
79.3
1.6
876.2
Foreign currency exchange contracts
952.4
497.1
39 4.1
1,843.6
Cross-currency contracts
763.7
2.5
31.2
797.4
In\ufb02ation contracts
81.6
85.2
107. 5
274.3
2,593.0
66 4 .1
534.4
3,791.5
As at 31 December 2022
Within
1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity contracts
1,328.8
173.8
4.6
1,507.2
Foreign currency exchange contracts
921.4
45.4
47. 8
1,014.6
Cross-currency contracts
776.3
2.5
3.8
782.6
In\ufb02ation contracts
67.3
83.1
203.8
354.2
3,093.8
304.8
260.0
3,658.6
", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-640": { "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. The maximum exposure to credit risk at the reporting date is the carrying value of each class of \ufb01nancial assets disclosed in note 7.1. Trade and other receivables are stated gross of the provision for expected credit losses on trade receivables of \u00a359.4 million (2022: \u00a360.9 million) and expected credit losses on accrued income of \u00a39.4 million (2022: \u00a37.6 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, payment terms, 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. 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 smaller 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 industry 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. The Group had cash and cash equivalents of \u00a3379.5 million at 31 December 2023 (2022: \u00a3238.0 million). Cash and cash equivalents are subject to the impairment requirements of IFRS 9. The identi\ufb01ed impairment loss, based on the 12-month expected credit loss basis, was immaterial. Cash and cash equivalents are held with banks with external credit ratings between AAA and A. 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. Credit risk is a factor in the determination of fair value. The carrying amount of these \ufb01nancial assets, disclosed in note 7.1, represents the Group\u2019s maximum credit risk exposure. Some derivative contracts are fully cash collateralised, thereby minimising credit risk. At 31 December 2023 the Group held \u00a320.3 million in cash collateral receipts (2022: \u00a3nil) covering certain derivative assets and had posted \u00a398.9 million (2022: \u00a3234.0 million) of cash collateral payments covering certain derivative liabilities. The credit rating of counterparties to which the \u00a398.9 million of cash collateral had been posted was A\u2013. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-641": { "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 wide 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 92 for details of scenario analysis performed on covenant restrictions within the Group\u2019s \ufb01nancing facilities.
As at 31 December
2023 2022
\u00a3m \u00a3m
Borrowings (note 4.2)
1,425.3
1,440.9
Cash and cash equivalents (note 4.1)
(379.5)
(238.0)
Non-controlling interests share of cash and cash equivalents in non-wholly owned subsidiaries
0.3
0.7
Impact of hedging instruments
37. 8
2.4
Net debt (note 2.7)
1,083.9
1,206.0
Total shareholders\u2019 equity attributable to owners of the parent company, excluding hedge and cost of
hedging reserves
1,744.9
1,422.7
", "dimensions": { "concept": "draxgroupplc:DisclosureOfCounterpartyRisk", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-687": { "value": "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. Amounts accumulated in the hedge reserve are reclassi\ufb01ed in the periods when the hedged item affects pro\ufb01t or loss. If the hedged item results in the recognition of a non-\ufb01nancial asset then the amount accumulated in the hedge reserve is transferred and included within the initial cost of the asset. 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
Foreign
Commodity currency Interest In\ufb02ation
price risk exchange risk rate risk rate risk Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
(138.2)
(39.3)
4.2
(4.1)
(17 7.4)
(Losses)/gains 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 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 (losses)/gains
\u2013
(62.0)
\u2013
\u2013
(62.0)
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
39.5
39.5
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(19.1)
\u2013
\u2013
(19.1)
Related deferred tax, net (note 2.6)
24.1
(39.2)
(9.3)
23.6
(0.8)
At 1 January 2023
(192.8)
83.7
31.7
(74.6)
(152.0)
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instrument recognised in OCI
414.7
(115.0)
(33.0)
(0.2)
266.5
Reclassi\ufb01ed from equity as the hedged item has affected
pro\ufb01t or loss:
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in cost of sales
1.6
\u2013
\u2013
\u2013
1.6
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in revenue
183.4
\u2013
\u2013
16.6
200.0
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in interest payable and similar charges
\u2013
(0.3)
16.0
\u2013
15.7
\u2013 Reclassi\ufb01ed to the Consolidated income statement \u2013 included
in foreign exchange (losses)/gains
\u2013
29.5
\u2013
\u2013
29.5
Reclassi\ufb01ed from equity as the hedged item is no longer expected
to occur:
\u2013 Reclassi\ufb01ed from equity \u2013 included in revenue
\u2013
\u2013
\u2013
9.3
9.3
Transferred from equity and included within the initial cost of a
non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
\u2013
(43.4)
\u2013
\u2013
(43.4)
Related deferred tax, net (note 2.6)
(149.9)
32.3
4.2
(6.4)
(119.8)
At 31 December 2023
257.0
(13.2)
18.9
(55.3)
207.4
The expected release pro\ufb01le from equity of post-tax hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Commodity risk
199.4
56.0
1.6
257.0
Foreign currency exchange risk
(4.9)
(6 .1)
(2.2)
(13.2)
Interest rate risk
11.5
6.3
1.1
18.9
In\ufb02ation risk
(19.4)
(15.2)
(20.7)
(55.3)
186.6
41.0
(20.2)
207.4
At 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \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)
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 hedging the purchase of inventory denominated in foreign currencies 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 transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
Cost of hedging
2023 2022
\u00a3m \u00a3m
At 1 January
40.1
78.5
Gains/(losses) recognised:
\u2013 Change in fair value of hedging instruments recognised in the Consolidated statement of
comprehensive income
7.5
(19.0)
Transferred from equity and included within the initial cost of a non-\ufb01nancial asset:
\u2013 Transferred to cost of inventories
(36.0)
(28.8)
Related deferred tax, net (note 2.6)
7.1
9.4
At 31 December
18.7
4 0.1
The expected release pro\ufb01le from equity of post-tax cost of hedging gains and losses is as follows:
As at 31 December 2023
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
16.6
4.3
(2.2)
18.7
As at 31 December 2022
Within 1 year 1\u20132 years >2 years Total
\u00a3m \u00a3m \u00a3m \u00a3m
Foreign currency exchange risk
21.7
13.0
5.4
4 0.1
", "dimensions": { "concept": "ifrs-full:DisclosureOfDetailedInformationAboutHedgesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-642": { "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 or receivable.
The table below shows the impact of \ufb01nancial assets and liabilities that are offset in the Consolidated balance sheet, and it also shows
the impact if the carrying amounts that are subject to these master netting agreements were also to be offset in certain
circumstances, such as a bankruptcy:
As at 31 December 2023
Net amounts of
Gross amounts \ufb01nancial Related
of \ufb01nancial instruments \ufb01nancial Related cash
Gross amounts instruments offset presented instruments collateral assets/
of \ufb01nancial in the balance in the that are (liabilities) that are
instruments sheet balance sheet not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
888.5
(226.5)
662.0
(220.9)
(20.3)
420.8
Trade and other receivables and
contract assets
1,088.5
(111.6)
976.9
(4.9)
(95.9)
8 76 .1
Financial liabilities
Derivative \ufb01nancial instruments
(764.7)
226.5
(538.2)
215.3
95.9
(2 27.1)
Trade and other payables and contract
liabilities
(1,651.2)
111.6
(1,539.6)
10.5
20.3
(1,508.8)
As at 31 December 2022
Net amounts
of \ufb01nancial
Gross amounts instruments Related
of \ufb01nancial presented \ufb01nancial Related cash
Gross amounts instruments in the instruments collateral assets/
of \ufb01nancial offset in the balance sheet that are (liabilities) that are
instruments balance sheet Restated not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
1,218.0
(4 6 0.1)
757.9
(608.6)
\u2013
149.3
Trade and other receivables and
contract assets
1,398.8
(171.8)
1, 227.0
(31.8)
(230.6)
964.6
Financial liabilities
Derivative \ufb01nancial instruments
(1,724.8)
4 60.1
(1,264.7)
619.6
230.6
(414.4)
Trade and other payables and
contract liabilities
(1,699.7)
171.8
(1,527.9)
20.7
\u2013
(1,507.2)
The amounts at 31 December 2022 have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically
settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated
balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page
178 for further details on this restatement.
The above 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-698": { "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 or receivable. The table below shows the impact of \ufb01nancial assets and liabilities that are offset in the Consolidated balance sheet, and it also shows the impact if the carrying amounts that are subject to these master netting agreements were also to be offset in certain circumstances, such as a bankruptcy:
As at 31 December 2023
Net amounts of
Gross amounts \ufb01nancial Related
of \ufb01nancial instruments \ufb01nancial Related cash
Gross amounts instruments offset presented instruments collateral assets/
of \ufb01nancial in the balance in the that are (liabilities) that are
instruments sheet balance sheet not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
888.5
(226.5)
662.0
(220.9)
(20.3)
420.8
Trade and other receivables and
contract assets
1,088.5
(111.6)
976.9
(4.9)
(95.9)
8 76 .1
Financial liabilities
Derivative \ufb01nancial instruments
(764.7)
226.5
(538.2)
215.3
95.9
(2 27.1)
Trade and other payables and contract
liabilities
(1,651.2)
111.6
(1,539.6)
10.5
20.3
(1,508.8)
As at 31 December 2022
Net amounts
of \ufb01nancial
Gross amounts instruments Related
of \ufb01nancial presented \ufb01nancial Related cash
Gross amounts instruments in the instruments collateral assets/
of \ufb01nancial offset in the balance sheet that are (liabilities) that are
instruments balance sheet Restated not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
1,218.0
(4 6 0.1)
757.9
(608.6)
\u2013
149.3
Trade and other receivables and
contract assets
1,398.8
(171.8)
1, 227.0
(31.8)
(230.6)
964.6
Financial liabilities
Derivative \ufb01nancial instruments
(1,724.8)
4 60.1
(1,264.7)
619.6
230.6
(414.4)
Trade and other payables and
contract liabilities
(1,699.7)
171.8
(1,527.9)
20.7
\u2013
(1,507.2)
The amounts at 31 December 2022 have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The above collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOffsettingOfFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-669": { "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 or receivable. The table below shows the impact of \ufb01nancial assets and liabilities that are offset in the Consolidated balance sheet, and it also shows the impact if the carrying amounts that are subject to these master netting agreements were also to be offset in certain circumstances, such as a bankruptcy:
As at 31 December 2023
Net amounts of
Gross amounts \ufb01nancial Related
of \ufb01nancial instruments \ufb01nancial Related cash
Gross amounts instruments offset presented instruments collateral assets/
of \ufb01nancial in the balance in the that are (liabilities) that are
instruments sheet balance sheet not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
888.5
(226.5)
662.0
(220.9)
(20.3)
420.8
Trade and other receivables and
contract assets
1,088.5
(111.6)
976.9
(4.9)
(95.9)
8 76 .1
Financial liabilities
Derivative \ufb01nancial instruments
(764.7)
226.5
(538.2)
215.3
95.9
(2 27.1)
Trade and other payables and contract
liabilities
(1,651.2)
111.6
(1,539.6)
10.5
20.3
(1,508.8)
As at 31 December 2022
Net amounts
of \ufb01nancial
Gross amounts instruments Related
of \ufb01nancial presented \ufb01nancial Related cash
Gross amounts instruments in the instruments collateral assets/
of \ufb01nancial offset in the balance sheet that are (liabilities) that are
instruments balance sheet Restated not offset not offset Net amount
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
Derivative \ufb01nancial instruments
1,218.0
(4 6 0.1)
757.9
(608.6)
\u2013
149.3
Trade and other receivables and
contract assets
1,398.8
(171.8)
1, 227.0
(31.8)
(230.6)
964.6
Financial liabilities
Derivative \ufb01nancial instruments
(1,724.8)
4 60.1
(1,264.7)
619.6
230.6
(414.4)
Trade and other payables and
contract liabilities
(1,699.7)
171.8
(1,527.9)
20.7
\u2013
(1,507.2)
The amounts at 31 December 2022 have been restated to reflect the Group\u2019s revised application of the offsetting criteria to physically settled derivative contracts. This has impacted the presentation of derivative assets and liabilities recognised in the Consolidated balance sheet. The valuation of derivatives and the overall net asset position remain unchanged. See the offsetting section on page 178 for further details on this restatement. The above collateral assets and liabilities are recorded in other receivables and other payables respectively, see note 4.3. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOffsettingOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-643": { "value": "
7.6 Contingencies
Contingent assets are potential future in\ufb02ows 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 out\ufb02ows 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.
Contingent liabilities
Ofgem investigation
On 31 May 2023, Ofgem announced the opening of an investigation into Drax Power Limited\u2019s annual biomass pro\ufb01ling reporting
under the Renewables Obligation scheme. Ofgem\u2019s announcement stated that the opening of an investigation does not imply any
\ufb01nding of non-compliance. Ofgem separately con\ufb01rmed that they have not established any non-compliance that would affect the
issuance of ROCs to Drax Power Limited, and therefore the associated \ufb01nancial bene\ufb01t.
Like all energy generators, the Company receives regular requests from Ofgem. We continue to cooperate fully throughout the
investigation and have con\ufb01dence in our compliance with the Renewables Obligation scheme criteria.
No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the stage of the process
and the uncertainty in future outcome.
Ofgem NIS declaration
As noted in the Audit Committee report on page 132, Drax Power Station is required to maintain a de\ufb01ned level of both physical
and cyber resilience, as outlined within the Network and Information Systems Regulations (NIS Regulations). The Group submitted
a report to Ofgem in January 2024 con\ufb01rming that Drax Power Station had not fully achieved the level required by the deadline of
31 December 2023, but had a plan to address this during 2024. Ofgem will consider this matter in due course and decide 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.
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 biomass and contracts for the construction of assets.
As at 31 December
2023 2022
\u00a3m \u00a3m
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013
Property, plant and equipment
221.6
267.9
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013
Intangible assets
\u2013
0.2
Future commitments to purchase ROCs
303.2
331.9
Future commitments to purchase biomass under \ufb01xed and variable priced contracts
3,092.5
3,250.0
Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts
439.7
242.5
Commitments for future capital expenditure have decreased due to signi\ufb01cant progression in the construction of the OCGTs during
2023. Future commitments to purchase biomass include long-term contracts, a majority of which match the period out to the end
of UK Government subsidies. Future commitments to purchase \ufb01bre have increased due to a combination of increasing \ufb01bre costs
and increased production volumes.
The contractual maturities of the future commitments to purchase biomass are as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Within one year
799.0
829.5
Within one to \ufb01ve years
1,867.8
2,378.2
After \ufb01ve years
425.7
42.3
3,092.5
3,250.0
Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily
for the delivery of biomass pellets for use in electricity generation at Drax Power Station. To the extent that these contracts relate
to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements as they are not within the scope
of IFRS 9, and are not, therefore, 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-699": { "value": "7.6 Contingencies Contingent assets are potential future in\ufb02ows 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 out\ufb02ows 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. Contingent liabilities Ofgem investigation On 31 May 2023, Ofgem announced the opening of an investigation into Drax Power Limited\u2019s annual biomass pro\ufb01ling reporting under the Renewables Obligation scheme. Ofgem\u2019s announcement stated that the opening of an investigation does not imply any \ufb01nding of non-compliance. Ofgem separately con\ufb01rmed that they have not established any non-compliance that would affect the issuance of ROCs to Drax Power Limited, and therefore the associated \ufb01nancial bene\ufb01t. Like all energy generators, the Company receives regular requests from Ofgem. We continue to cooperate fully throughout the investigation and have con\ufb01dence in our compliance with the Renewables Obligation scheme criteria. No amount has been provided in respect of this matter in the Consolidated \ufb01nancial statements, given the stage of the process and the uncertainty in future outcome. Ofgem NIS declaration As noted in the Audit Committee report on page 132, Drax Power Station is required to maintain a de\ufb01ned level of both physical and cyber resilience, as outlined within the Network and Information Systems Regulations (NIS Regulations). The Group submitted a report to Ofgem in January 2024 con\ufb01rming that Drax Power Station had not fully achieved the level required by the deadline of 31 December 2023, but had a plan to address this during 2024. Ofgem will consider this matter in due course and decide 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. ", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-760": { "value": "Contingent assets are potential future in\ufb02ows 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 out\ufb02ows 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-670": { "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 biomass and contracts for the construction of assets.
As at 31 December
2023 2022
\u00a3m \u00a3m
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013
Property, plant and equipment
221.6
267.9
Contracts placed for future capital expenditure not provided in the Consolidated \ufb01nancial statements \u2013
Intangible assets
\u2013
0.2
Future commitments to purchase ROCs
303.2
331.9
Future commitments to purchase biomass under \ufb01xed and variable priced contracts
3,092.5
3,250.0
Future commitments to purchase \ufb01bre under \ufb01xed and variable priced contracts
439.7
242.5
Commitments for future capital expenditure have decreased due to signi\ufb01cant progression in the construction of the OCGTs during 2023. Future commitments to purchase biomass include long-term contracts, a majority of which match the period out to the end of UK Government subsidies. Future commitments to purchase \ufb01bre have increased due to a combination of increasing \ufb01bre costs and increased production volumes. The contractual maturities of the future commitments to purchase biomass are as follows:
As at 31 December
2023 2022
\u00a3m \u00a3m
Within one year
799.0
829.5
Within one to \ufb01ve years
1,867.8
2,378.2
After \ufb01ve years
425.7
42.3
3,092.5
3,250.0
Commitments to purchase fuel reflect long-term forward purchase contracts with a variety of international suppliers, primarily for the delivery of biomass pellets for use in electricity generation at Drax Power Station. To the extent that these contracts relate to the purchase of biomass pellets, they are not reflected elsewhere in the \ufb01nancial statements as they are not within the scope of IFRS 9, and are not, therefore, 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-599": { "value": "Drax Group plc (the Company) is a public company, limited by shares, incorporated in the United Kingdom under the Companies Act 2006 , and registered in England and Wales. The Company and its subsidiaries (collectively, the Group) have three principal activities: \u2022 Production and subsequent sale of biomass pellets for use in electricity generation; \u2022 Electricity generation; and \u2022 Electricity and gas supply to non-domestic customers. The Group\u2019s activities are principally based within the UK, US and Canada", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-5": { "value": "Drax Group plc (the Company) is a public company, limited by shares", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-607": { "value": "Drax Group plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-611": { "value": "Drax Group plc", "dimensions": { "concept": "ifrs-full:NameOfUltimateParentOfGroup", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-6": { "value": "incorporated in the United Kingdom under the Companies Act 2006 ", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-3": { "value": "UK, US and Canada", "dimensions": { "concept": "ifrs-full:PrincipalPlaceOfBusiness", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-4": { "value": "Drax Power Station, Selby, North Yorkshire, YO8 8PH, United Kingdom", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-600": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-688": { "value": "
The following amendments became effective for the \ufb01rst time in 2023. The Group adopted the following from 1 January 2023:
\u2022 IFRS 17 \u2013 Insurance Contracts \u2013 effective from 1 January 2023
\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 Income Taxes \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction \u2013 effective from
1 January 2023
\u2022 IAS 12 (amended) \u2013 International Tax Reform \u2013 Pillar Two Model Rules \u2013 effective from 1 January 2023
The adoption of these amendments in the current year has not had a material impact on the Consolidated \ufb01nancial statements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfInitialApplicationOfStandardsOrInterpretations", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-689": { "value": "
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
(1)
\u2022 IAS 28 (amended) \u2013 Investments in Associates and Joint Ventures (2011) \u2013 effective date deferred inde\ufb01nitely
(1)
\u2022 IFRS 16 (amended) \u2013 Lease Liability in a Sale and Leaseback \u2013 effective from 1 January 2024
\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 7 (amended) and IFRS 7 (amended) \u2013 Supplier Finance Arrangements \u2013 effective from 1 January 2024
\u2022 IAS 21 (amended) \u2013 Lack of Exchangeability \u2013 effective from 1 January 2025
(1)
(1) Pending endorsement by the UK Endorsement Board (UKEB).
Adoption of these 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:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-700": { "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), that the Group has signi\ufb01cant influence over. 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 2023
Balances as at 31 December 2023
(1)
Management
Drax fee income Purchases Payable Receivable
Ownership \u00a3m \u00a3m \u00a3m \u00a3m
Houston Pellet Limited Partnership
HPLP
30%
0 .1
14.6
1.1
1.2
Transactions in the period to 31 December 2022
Balances as at 31 December 2022
Management
Drax fee income Purchases Payable Receivable
Ownership \u00a3m \u00a3m \u00a3m \u00a3m
Houston Pellet Limited Partnership
HPLP
30%
0.1
18.2
1.7
0.4
(1)
(1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing.
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 section
of the Remuneration Committee report on pages 144\u2013160.
Year ended 31 December
2023 2022
\u00a3000 \u00a3000
Short-term employee bene\ufb01ts
7,326
7,531
Share-based payments
4,047
3,964
Post-employment bene\ufb01ts
414
489
Total remuneration
11,787
11,984
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 18 (2022: 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-750": { "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), that the Group has signi\ufb01cant influence over. 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-644": { "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 2023
Balances as at 31 December 2023
(1)
Management
Drax fee income Purchases Payable Receivable
Ownership \u00a3m \u00a3m \u00a3m \u00a3m
Houston Pellet Limited Partnership
HPLP
30%
0 .1
14.6
1.1
1.2
Transactions in the period to 31 December 2022
Balances as at 31 December 2022
Management
Drax fee income Purchases Payable Receivable
Ownership \u00a3m \u00a3m \u00a3m \u00a3m
Houston Pellet Limited Partnership
HPLP
30%
0.1
18.2
1.7
0.4
(1) (1) The amounts payable to and receivable from HPLP are unsecured and non-interest bearing. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:549300YPSNTXR4ZHSR98", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-714": { "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 section of the Remuneration Committee report on pages 144\u2013160.
Year ended 31 December
2023 2022
\u00a3000 \u00a3000
Short-term employee bene\ufb01ts
7,326
7,531
Share-based payments
4,047
3,964
Post-employment bene\ufb01ts
414
489
Total remuneration
11,787
11,984
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 18 (2022: 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": "2023-01-01T00:00:00/2024-01-01T00:00:00" } } } }